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Cit Group Inc. – ‘10-Q’ for 9/30/21

On:  Friday, 11/5/21, at 4:03pm ET   ·   For:  9/30/21   ·   Accession #:  1564590-21-54887   ·   File #:  1-31369

Previous ‘10-Q’:  ‘10-Q’ on 7/30/21 for 6/30/21   ·   Latest ‘10-Q’:  This Filing   ·   26 References:   

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

11/05/21  Cit Group Inc.                    10-Q        9/30/21  110:47M                                    ActiveDisclosure/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   4.17M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     35K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     36K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     33K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     33K 
12: R1          Document and Entity Information                     HTML     88K 
13: R2          Condensed Consolidated Balance Sheets (Unaudited)   HTML    119K 
14: R3          Condensed Consolidated Balance Sheets (Unaudited)   HTML     61K 
                (Parenthetical)                                                  
15: R4          Condensed Consolidated Statements of Operations     HTML    133K 
                (Unaudited)                                                      
16: R5          Condensed Consolidated Statements of Comprehensive  HTML     60K 
                Income (Loss) (Unaudited)                                        
17: R6          Condensed Consolidated Statements of Stockholders'  HTML    102K 
                Equity (Unaudited)                                               
18: R7          Condensed Consolidated Statements of Stockholders'  HTML     36K 
                Equity (Unaudited) (Parenthetical)                               
19: R8          Condensed Consolidated Statements of Cash Flows     HTML    140K 
                (Unaudited)                                                      
20: R9          Condensed Consolidated Statements of Cash Flows     HTML     43K 
                (Unaudited) (Parenthetical)                                      
21: R10         Business and Summary of Significant Accounting      HTML     76K 
                Policies                                                         
22: R11         Acquisitions                                        HTML     35K 
23: R12         Loans                                               HTML   2.89M 
24: R13         Allowance For Credit Losses                         HTML    289K 
25: R14         Leases                                              HTML    108K 
26: R15         Investment Securities                               HTML    478K 
27: R16         Variable Interest Entities                          HTML     88K 
28: R17         Borrowings                                          HTML    111K 
29: R18         Derivative Financial Instruments                    HTML    326K 
30: R19         Fair Value                                          HTML    765K 
31: R20         Stockholders' Equity                                HTML    571K 
32: R21         Income Taxes                                        HTML     37K 
33: R22         Commitments                                         HTML     96K 
34: R23         Contingencies                                       HTML     39K 
35: R24         Business Segment Information                        HTML    356K 
36: R25         Business and Summary of Significant Accounting      HTML     82K 
                Policies (Policies)                                              
37: R26         Loans (Tables)                                      HTML   2.89M 
38: R27         Allowance For Credit Losses (Tables)                HTML    287K 
39: R28         Leases (Tables)                                     HTML    106K 
40: R29         Investment Securities (Tables)                      HTML    481K 
41: R30         Variable Interest Entities (Tables)                 HTML     89K 
42: R31         Borrowings (Tables)                                 HTML    111K 
43: R32         Derivative Financial Instruments (Tables)           HTML    334K 
44: R33         Fair Value (Tables)                                 HTML    756K 
45: R34         Stockholders' Equity (Tables)                       HTML    570K 
46: R35         Commitments (Tables)                                HTML     90K 
47: R36         Business Segment Information (Tables)               HTML    352K 
48: R37         Business and Summary of Significant Accounting      HTML     78K 
                Policies (Narrative) (Details)                                   
49: R38         Acquisitions (Narrative) (Details)                  HTML     86K 
50: R39         Loans (Schedule of Loans by Product) (Details)      HTML     43K 
51: R40         Loans (Schedule of Loans by Segment, Based on       HTML     46K 
                Obligor Location) (Details)                                      
52: R41         Loans (Components of Net Investment) (Details)      HTML     35K 
53: R42         Loans (Commercial Loans - By Risk Rating)           HTML    179K 
                (Details)                                                        
54: R43         Loans (Commercial Loans - By Risk Rating)           HTML     35K 
                (Parenthetical) (Details)                                        
55: R44         Loans (Narrative) (Details)                         HTML     45K 
56: R45         Loans (Schedule of Consumer Loans LTV               HTML     99K 
                Distributions) (Details)                                         
57: R46         Loans (Schedule of Consumer Loans LTV               HTML     35K 
                Distributions) (Parenthetical) (Details)                         
58: R47         Loans (Schedule of Consumer Loans Current FICO      HTML    102K 
                Score Distributions) (Details)                                   
59: R48         Loans (Loans - Delinquency Status) (Details)        HTML    104K 
60: R49         Loans (Loans on Non-accrual Status) (Details)       HTML     62K 
61: R50         Loans (Loans on Non-accrual Status)                 HTML     32K 
                (Parenthetical) (Details)                                        
62: R51         Loans (Schedule of Loans In Process of              HTML     32K 
                Foreclosure) (Details)                                           
63: R52         Loans (Summary of Recorded Investments of TDRs      HTML     42K 
                (Details)                                                        
64: R53         Loans (Summary of Recorded Investments of           HTML     36K 
                Modifications) (Details)                                         
65: R54         Allowance For Credit Losses (Schedule of Allowance  HTML    120K 
                for Credit Losses and Recorded Investment in                     
                Finance Receivables) (Details)                                   
66: R55         Allowance For Credit Losses (Schedule of Allowance  HTML     44K 
                for Credit Losses and Recorded Investment in                     
                Finance Receivables) (Parenthetical) (Details)                   
67: R56         Allowance For Credit Losses (Narrative) (Details)   HTML     40K 
68: R57         Leases (Narrative) (Details)                        HTML     45K 
69: R58         Leases (Schedule of Supplemental Balance Sheet and  HTML     39K 
                Cash Flow Information Related to Leases) (Details)               
70: R59         Leases (Schedule of Lease Income Related to         HTML     49K 
                Company's Operating and Finance Leases) (Details)                
71: R60         Leases (Schedule of Lease Income Related to         HTML     34K 
                Company's Operating and Finance Leases)                          
                (Parenthetical) (Details)                                        
72: R61         Investment Securities (Schedule of Carrying Value   HTML     38K 
                of Investment Securities) (Details)                              
73: R62         Investment Securities (Schedule of Carrying Value   HTML     34K 
                of Investment Securities) (Parenthetical)                        
                (Details)                                                        
74: R63         Investment Securities (Narrative) (Details)         HTML     42K 
75: R64         Investment Securities (Schedule of Interest and     HTML     38K 
                Dividend Income) (Details)                                       
76: R65         Investment Securities (Schedule of Realized Gains   HTML     40K 
                (Losses) and Proceeds from Sales of Debt                         
                Securities AFS) (Details)                                        
77: R66         Investment Securities (Amortized Cost and Fair      HTML     64K 
                Value of AFS and HTM Securities) (Details)                       
78: R67         Investment Securities (Schedule of Amortized Cost   HTML     92K 
                and Fair Value Maturities with Changes Recorded in               
                Net Income) (Details)                                            
79: R68         Investment Securities (Schedule of AFS and HTM -    HTML     61K 
                Estimated Unrealized Losses) (Details)                           
80: R69         Variable Interest Entities (Narrative) (Details)    HTML     32K 
81: R70         Variable Interest Entities (Assets and Liabilities  HTML     65K 
                in Unconsolidated VIEs) (Details)                                
82: R71         Borrowings (Schedule of Long-Term Borrowings)       HTML     51K 
                (Details)                                                        
83: R72         Borrowings (Narrative) (Details)                    HTML     90K 
84: R73         Borrowings (Schedule of FHLB Balances) (Details)    HTML     43K 
85: R74         Borrowings (Schedule of FHLB Balances)              HTML     35K 
                (Parenthetical) (Details)                                        
86: R75         Derivative Financial Instruments (Notional Amount   HTML     79K 
                and Fair Values of Derivative Financial                          
                Instruments) (Details)                                           
87: R76         Derivative Financial Instruments (Notional Amount   HTML     34K 
                and Fair Values of Derivative Financial                          
                Instruments) (Parenthetical) (Details)                           
88: R77         Derivative Financial Instruments (Gains (Losses)    HTML     40K 
                of Fair Value Hedges Recognized as Interest                      
                Expense) (Details)                                               
89: R78         Derivative Financial Instruments (Carrying Value    HTML     42K 
                of Hedged Items and Associated Cumulative Hedging                
                Adjustment Related to Fair Value Hedges) (Details)               
90: R79         Derivative Financial Instruments (Carrying Value    HTML     37K 
                of Hedged Items and Associated Cumulative Hedging                
                Adjustment Related to Fair Value Hedges)                         
                (Parenthetical) (Details)                                        
91: R80         Derivative Financial Instruments (Pre-tax Net       HTML     41K 
                Gains (Losses)) Relating to Derivatives Designated               
                as Net Investment Hedges) (Details)                              
92: R81         Derivative Financial Instruments (Gains (Losses)    HTML     43K 
                of Non-Qualifying Hedges Recognized as Other                     
                Non-interest Income) (Details)                                   
93: R82         Fair Value (Assets and Liabilities Measured at      HTML    102K 
                Fair Value on a Recurring Basis) (Details)                       
94: R83         Fair Value (Quantitative Information about Level 3  HTML     64K 
                Fair Value Measurements-Recurring) (Details)                     
95: R84         Fair Value (Changes in Estimated Fair Value for     HTML     61K 
                Financial Assets and Liabilities Measured on                     
                Recurring Basis) (Details)                                       
96: R85         Fair Value (Assets Measured at Fair Value on a      HTML     59K 
                Non-Recurring Basis) (Details)                                   
97: R86         Fair Value (Carrying and Estimated Fair Values of   HTML     71K 
                Financial Instruments) (Details)                                 
98: R87         Stockholder's Equity (Schedule of Common Stock      HTML     49K 
                Activity) (Details)                                              
99: R88         Stockholders' Equity (Components of Accumulated     HTML     48K 
                Other Comprehensive Income (Loss) ("Aoci"))                      
                (Details)                                                        
100: R89         Stockholders' Equity (Changes in Accumulated Other  HTML     70K  
                Comprehensive Income (Loss) by Component)                        
                (Details)                                                        
101: R90         Stockholders' Equity (Before- and After-Tax         HTML     73K  
                components of OCI) (Details)                                     
102: R91         Income Taxes (Narrative) (Details)                  HTML     32K  
103: R92         Commitments (Summary of Commitments) (Details)      HTML     54K  
104: R93         Commitments (Narrative) (Details)                   HTML     41K  
105: R94         Contingencies (Narrative) (Details)                 HTML     42K  
106: R95         Business Segment Information (Segment Pre-Tax       HTML    103K  
                Income (Loss)) (Details)                                         
108: XML         IDEA XML File -- Filing Summary                      XML    221K  
11: XML         XBRL Instance -- cit-10q_20210930_htm                XML  15.43M 
107: EXCEL       IDEA Workbook of Financial Reports                  XLSX    170K  
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 8: EX-101.DEF  XBRL Definitions -- cit-20210930_def                 XML   1.11M 
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10: EX-101.PRE  XBRL Presentations -- cit-20210930_pre               XML   1.58M 
 6: EX-101.SCH  XBRL Schema -- cit-20210930                          XSD    264K 
109: JSON        XBRL Instance as JSON Data -- MetaLinks              561±   862K  
110: ZIP         XBRL Zipped Folder -- 0001564590-21-054887-xbrl      Zip    531K

‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) ↑Top
 
11st Page  –  Filing Submission
"Table of Contents
"Financial Statements
"Condensed Consolidated Balance Sheets (Unaudited)
"Condensed Consolidated Statements of Operations (Unaudited)
"Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
"Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
"Condensed Consolidated Statements of Cash Flows (Unaudited)
"Notes to Condensed Consolidated Financial Statements (Unaudited)
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosures about Market Risk
"Controls and Procedures
"Legal Proceedings
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Mine Safety Disclosures
"Exhibits
"Signatures

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2020-09-30

Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM  i 10-Q

 

 i ☒

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 i ☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended  i September 30, 2021

 

 

 

 

 

Commission File Number:  i 001-31369

 i CIT GROUP INC.

 

(Exact name of Registrant as specified in its charter)

 

 

 i Delaware

(State or other jurisdiction of incorporation or organization)

 

 i 65-1051192

(IRS Employer Identification Number)

 

 

 

 i 11 West 42nd Street,  i New York,  i New York

(Address of Registrant’s principal executive offices)

 

 i 10036

(Zip Code)

 

 

 

( i 212)  i 461-5200

(Registrant’s telephone number)

 

 

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 i Common Stock, par value $0.01 per share

 i CIT

 i New York Stock Exchange
 i 

5.625% Non-Cumulative Perpetual Preferred Stock, Series B, par value $0.01 per share

 i CITPRB

 i New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 i Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      

 i Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ‘large accelerated filer,’ ‘accelerated filer’, ‘smaller reporting company’ and ‘emerging growth company’ in Rule 12b-2 of the Exchange Act.

 i Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

 i ☐

Emerging growth company

 i ☐

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  i ☐ No ☒

 

As of October 22, 2021, there were  i 99,169,700 shares of the registrant’s common stock outstanding.

 

 

 

 

Table of Contents

 

 


 

Table of Contents

 

 

 

CONTENTS

 

 

 

 

 

Part One — Financial Information:

 

 

 

 

 

Item 1.

 

Financial Statements

 

2

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

2

 

 

Condensed Consolidated Statements of Operations (Unaudited)

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

 

4

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

 

5

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

6

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

38

 

 

and

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

38

Item 4.

 

Controls and Procedures

 

77

 

 

 

 

 

Part Two — Other Information:

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

78

Item 1A.

 

Risk Factors

 

78

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

78

Item 4.

 

Mine Safety Disclosures

 

78

Item 6.

 

Exhibits

 

79

Signatures

 

81

 

 

 

 

Table of Contents

 

 

Part One — Financial Information

 

 

Item 1. Financial Statements

 

 

CIT GROUP INC. AND SUBSIDIARIES

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (dollars in millions — except share data)

 

 

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

Cash and due from banks, including restricted balances of $ i 34.2 at September 30, 2021 and $ i 41.7 at December 31, 2020 (see Note 8 for amounts pledged)

$

 i 169.7

 

 

$

 i 174.6

 

Interest bearing cash, including restricted balances of $ i 59.4 at September 30, 2021 and $ i 2.6 at December 31, 2020 (see Note 8 for amounts pledged)

 

 i 4,428.8

 

 

 

 i 3,837.1

 

Securities purchased under agreement to resell

 

 i 100.0

 

 

 

 i 150.0

 

Investment securities (see Notes 6 and 8 for amounts pledged)

 

 i 5,775.2

 

 

 

 i 6,889.0

 

Assets held for sale

 

 i 95.8

 

 

 

 i 721.2

 

Loans (see Note 8 for amounts pledged)

 

 i 33,461.0

 

 

 

 i 36,144.6

 

Allowance for credit losses

 

( i 790.4

)

 

 

( i 1,063.8

)

Total loans, net of allowance for credit losses

 

 i 32,670.6

 

 

 

 i 35,080.8

 

Operating lease equipment, net (see Note 8 for amounts pledged)

 

 i 7,937.5

 

 

 

 i 7,836.6

 

Bank-owned life insurance

 

 i 1,193.4

 

 

 

 i 1,168.8

 

Other assets, including $ i 268.5 at September 30, 2021 and $ i 431.6 at December 31, 2020 at fair value

 

 i 2,049.0

 

 

 

 i 2,248.5

 

Total Assets

$

 i 54,420.0

 

 

$

 i 58,106.6

 

Liabilities

 

 

 

 

 

 

 

Deposits

$

 i 40,237.3

 

 

$

 i 43,071.6

 

Credit balances of factoring clients

 

 i 1,556.6

 

 

 

 i 1,719.9

 

Other liabilities, including $ i 77.9 at September 30, 2021 and $ i 79.2 at December 31, 2020 at fair value

 

 i 2,203.9

 

 

 

 i 1,754.9

 

Borrowings, including $ i 1,147.0 at September 30, 2021 and $ i 500.0 at December 31, 2020 contractually due within twelve months

 

 i 4,247.6

 

 

 

 i 5,837.3

 

Total Liabilities

 

 i 48,245.4

 

 

 

 i 52,383.7

 

Stockholders’ Equity

 

 

 

 

 

 

 

Preferred Stock: $ i  i 0.01 /  par value,  i  i 100,000,000 /  shares authorized,  i  i  i  i 8,325,000 /  /  /  shares issued and outstanding at September 30, 2021 and December 31, 2020

 

 i 525.0

 

 

 

 i 525.0

 

Common Stock: $ i  i 0.01 /  par value,  i  i 600,000,000 /  shares authorized

 

 

 

 

 

 

 

Issued:  i 164,134,157 at September 30, 2021 and  i 163,309,861 at December 31, 2020

 

 i 1.6

 

 

 

 i 1.6

 

Outstanding:  i 99,167,023 at September 30, 2021 and  i 98,609,395 at December 31, 2020

 

 

 

 

 

 

 

Paid-in capital

 

 i 6,930.1

 

 

 

 i 6,892.0

 

Retained earnings

 

 i 2,011.0

 

 

 

 i 1,428.3

 

Accumulated other comprehensive income (loss)

 

( i 121.2

)

 

 

 i 35.7

 

Treasury stock:  i 64,967,134 shares at September 30, 2021 and  i 64,700,466 shares at December 31, 2020 at cost

 

( i 3,171.9

)

 

 

( i 3,159.7

)

Total Common Stockholders’ Equity

 

 i 5,649.6

 

 

 

 i 5,197.9

 

Total Equity

 

 i 6,174.6

 

 

 

 i 5,722.9

 

Total Liabilities and Equity

$

 i 54,420.0

 

 

$

 i 58,106.6

 

 

The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents

 

CIT GROUP INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (dollars in millions — except per share data)

 

 

 

Quarters Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

 i 341.9

 

 

$

 i 395.8

 

 

$

 i 1,061.6

 

 

$

 i 1,280.6

 

Other interest and dividends

 

 i 17.9

 

 

 

 i 27.5

 

 

 

 i 59.4

 

 

 

 i 103.2

 

Interest income

 

 i 359.8

 

 

 

 i 423.3

 

 

 

 i 1,121.0

 

 

 

 i 1,383.8

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 i 47.3

 

 

 

 i 103.2

 

 

 

 i 159.2

 

 

 

 i 398.1

 

Interest on borrowings

 

 i 55.7

 

 

 

 i 62.3

 

 

 

 i 170.2

 

 

 

 i 195.6

 

Interest expense

 

 i 103.0

 

 

 

 i 165.5

 

 

 

 i 329.4

 

 

 

 i 593.7

 

Net interest revenue

 

 i 256.8

 

 

 

 i 257.8

 

 

 

 i 791.6

 

 

 

 i 790.1

 

Provision for credit losses

 

( i 67.1

)

 

 

 i 63.3

 

 

 

( i 256.7

)

 

 

 i 800.8

 

Net interest revenue, after credit provision

 

 i 323.9

 

 

 

 i 194.5

 

 

 

 i 1,048.3

 

 

 

( i 10.7

)

Non-interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income on operating leases

 

 i 186.2

 

 

 

 i 201.3

 

 

 

 i 569.1

 

 

 

 i 612.0

 

Other non-interest income

 

 i 124.7

 

 

 

 i 146.0

 

 

 

 i 515.3

 

 

 

 i 379.2

 

Total non-interest income

 

 i 310.9

 

 

 

 i 347.3

 

 

 

 i 1,084.4

 

 

 

 i 991.2

 

Total revenue, net of interest expense and credit provision

 

 i 634.8

 

 

 

 i 541.8

 

 

 

 i 2,132.7

 

 

 

 i 980.5

 

Non-interest expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation on operating lease equipment

 

 i 85.1

 

 

 

 i 82.5

 

 

 

 i 252.6

 

 

 

 i 241.9

 

Maintenance and other operating lease expenses

 

 i 50.5

 

 

 

 i 48.6

 

 

 

 i 156.9

 

 

 

 i 158.3

 

Operating expenses

 

 i 268.2

 

 

 

 i 295.5

 

 

 

 i 793.4

 

 

 

 i 990.3

 

Goodwill impairment

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 344.7

 

(Gain) loss on debt extinguishment and deposit redemption

 

—

 

 

 

—

 

 

 

 i 0.1

 

 

 

( i 14.8

)

Total non-interest expenses

 

 i 403.8

 

 

 

 i 426.6

 

 

 

 i 1,203.0

 

 

 

 i 1,720.4

 

Income (loss) before provision (benefit) for income taxes

 

 i 231.0

 

 

 

 i 115.2

 

 

 

 i 929.7

 

 

 

( i 739.9

)

Provision (benefit) for income taxes

 

 i 55.5

 

 

 

 i 29.5

 

 

 

 i 223.5

 

 

 

( i 116.0

)

Net income (loss)

$

 i 175.5

 

 

$

 i 85.7

 

 

$

 i 706.2

 

 

$

( i 623.9

)

Preferred stock dividends

 

 i 2.8

 

 

 

 i 2.8

 

 

 

 i 17.9

 

 

 

 i 18.9

 

Net income (loss) available to common shareholders

$

 i 172.7

 

 

$

 i 82.9

 

 

$

 i 688.3

 

 

$

( i 642.8

)

Income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

 i 1.74

 

 

$

 i 0.84

 

 

$

 i 6.95

 

 

$

( i 6.54

)

Diluted

$

 i 1.72

 

 

$

 i 0.84

 

 

$

 i 6.89

 

 

$

( i 6.54

)

Average number of common shares (thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 i 99,168

 

 

 

 i 98,523

 

 

 

 i 99,031

 

 

 

 i 98,350

 

Diluted

 

 i 100,432

 

 

 

 i 98,556

 

 

 

 i 99,950

 

 

 

 i 98,350

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

Table of Contents

 

 

CIT GROUP INC. AND SUBSIDIARIES

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(dollars in millions)

 

 

 

 

 

Quarters Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss)

$

 i 175.5

 

 

$

 i 85.7

 

 

$

 i 706.2

 

 

$

( i 623.9

)

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 i 10.3

 

 

 

 i 0.6

 

 

 

 i 10.2

 

 

 

( i 0.4

)

Net unrealized (losses) gains on available for sale securities

 

( i 16.5

)

 

 

( i 20.1

)

 

 

( i 168.2

)

 

 

 i 95.9

 

Changes in benefit plans net gains and prior service (cost)/credit

 

 i 0.4

 

 

 

 i 0.1

 

 

 

 i 1.1

 

 

 

 i 3.0

 

Other comprehensive (loss) income, net of tax

$

( i 5.8

)

 

$

( i 19.4

)

 

$

( i 156.9

)

 

$

 i 98.5

 

Comprehensive income (loss)

$

 i 169.7

 

 

$

 i 66.3

 

 

$

 i 549.3

 

 

$

( i 525.4

)

The accompanying notes are an integral part of these consolidated financial statements.

 

4

Table of Contents

 

 

CIT GROUP INC. AND SUBSIDIARIES

 

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (dollars in millions)

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in Capital

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Treasury Stock, at Cost

 

 

Total Equity

 

June 30, 2021

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,922.5

 

 

$

 i 1,873.7

 

 

$

( i 115.4

)

 

$

( i 3,171.6

)

 

$

 i 6,035.8

 

Net income

 

—

 

 

 

—

 

 

—

 

 

 

 i 175.5

 

 

 

—

 

 

 

—

 

 

 

 i 175.5

 

Other comprehensive loss, net of tax

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 5.8

)

 

 

—

 

 

 

( i 5.8

)

Dividends paid ($ i 0.35 per common share and $ i 0.35 per preferred B share)

 

—

 

 

 

—

 

 

—

 

 

 

( i 38.2

)

 

 

—

 

 

 

—

 

 

 

( i 38.2

)

Amortization of stock compensation expenses

 

—

 

 

 

—

 

 

 

 i 6.7

 

 

 

—

 

 

 

—

 

 

 

( i 0.3

)

 

 

 i 6.4

 

Employee stock purchase plan

 

—

 

 

 

—

 

 

 

 i 0.9

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 0.9

 

September 30, 2021

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,930.1

 

 

$

 i 2,011.0

 

 

$

( i 121.2

)

 

$

( i 3,171.9

)

 

$

 i 6,174.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,885.5

 

 

$

 i 1,419.4

 

 

$

 i 65.8

 

 

$

( i 3,158.0

)

 

$

 i 5,739.3

 

Net income

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 85.7

 

 

 

—

 

 

 

—

 

 

 

 i 85.7

 

Other comprehensive loss, net of tax

—

 

 

—

 

 

—

 

 

—

 

 

 

( i 19.4

)

 

—

 

 

 

( i 19.4

)

Dividends paid ($ i 0.35 per common share and $ i 0.35 per preferred B share)

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 38.0

)

 

 

—

 

 

 

—

 

 

 

( i 38.0

)

Amortization of stock compensation expenses

 

—

 

 

 

—

 

 

 

( i 4.6

)

 

 

—

 

 

 

—

 

 

 

( i 0.2

)

 

 

( i 4.8

)

Employee stock purchase plan

 

—

 

 

 

—

 

 

 

 i 1.2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1.2

 

September 30, 2020

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,882.1

 

 

$

 i 1,467.1

 

 

$

 i 46.4

 

 

$

( i 3,158.2

)

 

$

 i 5,764.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,892.0

 

 

$

 i 1,428.3

 

 

$

 i 35.7

 

 

$

( i 3,159.7

)

 

$

 i 5,722.9

 

Net income

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 706.2

 

 

 

—

 

 

 

—

 

 

 

 i 706.2

 

Other comprehensive loss, net of tax

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 156.9

)

 

 

—

 

 

 

( i 156.9

)

Dividends paid ($ i 1.05 per common share and $ i 29.00 per preferred A share and $ i 1.05 per preferred B share)

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 123.5

)

 

 

—

 

 

 

—

 

 

 

( i 123.5

)

Amortization of stock compensation expenses

 

—

 

 

 

—

 

 

 

 i 35.2

 

 

 

—

 

 

 

—

 

 

 

( i 12.2

)

 

 

 i 23.0

 

Employee stock purchase plan

 

—

 

 

 

—

 

 

 

 i 2.9

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 2.9

 

September 30, 2021

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,930.1

 

 

$

 i 2,011.0

 

 

$

( i 121.2

)

 

$

( i 3,171.9

)

 

$

 i 6,174.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,853.7

 

 

$

 i 2,307.6

 

 

$

( i 52.1

)

 

$

( i 3,296.8

)

 

$

 i 6,339.0

 

Adoption of ASU 2016-13

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 82.4

)

 

 

—

 

 

 

—

 

 

 

( i 82.4

)

Net loss

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 623.9

)

 

 

—

 

 

 

—

 

 

 

( i 623.9

)

Other comprehensive income, net of tax

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 98.5

 

 

 

—

 

 

 

 i 98.5

 

Dividends paid ($ i 1.05 per common share and $ i 29.00 per preferred A share and $ i 1.18 per preferred B share)

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 124.1

)

 

 

—

 

 

 

—

 

 

 

( i 124.1

)

Issuance of common stock - acquisition

 

—

 

 

 

—

 

 

 

—

 

 

 

( i 10.1

)

 

 

—

 

 

 

 i 151.3

 

 

 

 i 141.2

 

Amortization of stock compensation expenses

 

—

 

 

 

—

 

 

 

 i 25.3

 

 

 

—

 

 

 

—

 

 

 

( i 12.7

)

 

 

 i 12.6

 

Employee stock purchase plan

 

—

 

 

 

—

 

 

 

 i 3.1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 3.1

 

September 30, 2020

$

 i 525.0

 

 

$

 i 1.6

 

 

$

 i 6,882.1

 

 

$

 i 1,467.1

 

 

$

 i 46.4

 

 

$

( i 3,158.2

)

 

$

 i 5,764.0

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

Table of Contents

 

 

 

CIT GROUP INC. AND SUBSIDIARIES

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (dollars in millions)

 

 

 

Nine Months Ended September 30,

 

2021

 

 

2020

 

 

Cash Flows from Operations

 

 

 

 

 

 

 

 

Net income (loss)

$

 i 706.2

 

 

$

( i 623.9

)

 

Adjustments to reconcile net income (loss) to net cash flows from operations:

 

 

 

 

 

 

 

 

(Benefit) provision for credit losses

 

( i 256.7

)

 

 

 i 800.8

 

 

Depreciation on operating lease equipment

 

 i 252.6

 

 

 

 i 241.9

 

 

Amortization of stock compensation expenses

 

 i 35.2

 

 

 

 i 25.3

 

 

Net gain on asset sales and impairments on assets held for sale

 

( i 284.6

)

 

 

( i 150.2

)

 

Loss on debt extinguishment and deposit redemption

 

 i 0.1

 

 

 

( i 14.8

)

 

Provision (benefit) for deferred income taxes

 

 i 193.4

 

 

 

( i 115.9

)

 

Increase in loans held for sale

 

( i 24.5

)

 

 

( i 25.4

)

 

Goodwill impairment

 

—

 

 

 

 i 344.7

 

 

Decrease (increase) in other assets

 

 i 240.0

 

 

 

( i 285.8

)

 

Decrease in other liabilities

 

( i 286.6

)

 

 

( i 44.9

)

 

Other operating activities

 

 i 72.2

 

 

 

 i 52.7

 

 

Net cash flows provided by operations

 

 i 647.3

 

 

 

 i 204.5

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Changes in loans, net

 

 i 2,009.2

 

 

 

( i 203.6

)

 

Purchases of investment securities and securities purchased under agreement to resell

 

( i 2,643.3

)

 

 

( i 4,147.8

)

 

Proceeds from sales and maturities of investment securities and securities purchased under agreement to resell

 

 i 4,185.7

 

 

 

 i 6,619.9

 

 

Proceeds from asset and receivable sales

 

 i 1,505.0

 

 

 

 i 494.5

 

 

Purchases of assets to be leased and other equipment

 

( i 550.9

)

 

 

( i 857.7

)

 

Proceeds from sale of OREO, net of repurchases

 

 i 1.6

 

 

 

 i 11.9

 

 

Purchase of bank owned life insurance

 

—

 

 

 

( i 100.0

)

 

Acquisition, net of cash received

 

—

 

 

 

( i 720.1

)

 

Other investing activities

 

 i 5.6

 

 

 

( i 67.4

)

 

Net cash flows provided by investing activities

 

 i 4,512.9

 

 

 

 i 1,029.7

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from the issuance of term debt and FHLB advances

 

 i 604.8

 

 

 

 i 2,204.8

 

 

Repayments of term debt and FHLB advances

 

( i 2,212.5

)

 

 

( i 1,675.9

)

 

Net (decrease) increase in deposits

 

( i 2,835.1

)

 

 

 i 2,581.6

 

 

Dividends paid

 

( i 123.5

)

 

 

( i 124.1

)

 

Other financing activities

 

( i 7.0

)

 

 

( i 199.1

)

 

Net cash flows (used in) provided by financing activities

 

( i 4,573.3

)

 

 

 i 2,787.3

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

( i 0.1

)

 

 

( i 1.5

)

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

 i 586.8

 

 

 

 i 4,020.0

 

 

Cash, cash equivalents and restricted cash beginning of period

 

 i 4,011.7

 

 

 

 i 2,685.6

 

 

Cash, cash equivalents and restricted cash end of period

$

 i 4,598.5

 

 

 

 i 6,705.6

 

 

Supplementary Cash Flow Disclosures

 

 

 

 

 

 

 

 

Interest paid

$

( i 355.0

)

 

 

( i 630.1

)

 

Federal, foreign, state and local income taxes (paid) refunded, net

 

( i 12.4

)

 

 

 i 72.1

 

 

Supplementary Non Cash Flow Disclosure

 

 

 

 

 

 

 

 

Transfer of assets from held for investment to held for sale

$

 i 495.5

 

 

 

 i 190.8

 

 

Transfer of assets from held for sale to held for investment

 

 i 11.2

 

 

 

 i 25.7

 

 

Transfers of assets to OREO

 

 i 4.3

 

 

 

 i 0.3

 

 

Commitments extended during the period on affordable housing investment credits

 

 i 80.4

 

 

 

 i 84.9

 

 

Issuance of common stock - acquisition

 

—

 

 

 

 i 141.2

 

 

 

The following tables shows a reconciliation of cash, cash equivalents and restricted cash on the Balance Sheet to that presented in the above Statements of Cash Flow.

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

Cash and due from banks, including restricted balances of $ i 34.2 and $ i 27.8 at September 30, 2021 and 2020, respectively

$

 i 169.7

 

 

$

 i 175.7

 

Interest-bearing cash, including restricted balances of $ i 59.4 and $ i 2.0 at September 30, 2021 and 2020, respectively

 

 i 4,428.8

 

 

 

 i 6,529.9

 

Total cash, cash equivalents, and restricted cash shown in the Statement of Cash Flows

$

 i 4,598.5

 

 

$

 i 6,705.6

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

6

 

 

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 i 

NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CIT Group Inc. is a bank holding company ("BHC") and a financial holding company ("FHC"). CIT Group Inc., together with its subsidiaries (collectively "we", "our", "CIT" or the "Company"), is regulated by the Board of Governors of the Federal Reserve System ("FRB") and the Federal Reserve Bank of New York ("FRBNY") under the U.S. Bank Holding Company Act of 1956, as amended. CIT was formed in 1908 and provides financing, leasing and advisory services, principally to middle-market companies in a wide variety of industries, primarily in North America.

We also provide banking and related services to commercial and individual customers through our banking subsidiary, CIT Bank, N.A. ("CIT Bank" or the "Bank"), which includes a regional branch network of approximately  i 80 branches and its online bank.  

CIT Bank is regulated by the Office of the Comptroller of the Currency of the U.S. Department of the Treasury ("OCC"). In addition, CIT Bank, as an insured depository institution, is supervised by the Federal Deposit Insurance Corporation (“FDIC”).

BASIS OF PRESENTATION

 i 

Basis of Financial Information

These consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial information and accordingly do not include all information and note disclosures required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, the financial statements in this Form 10-Q include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of CIT’s financial position, results of operations and cash flows in accordance with GAAP. These consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 Form 10-K").

The accounting and financial reporting policies of CIT conform to GAAP and the preparation of the consolidated financial statements is in conformity with GAAP, which requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates and assumptions. Some of the more significant estimates include: Allowance for Credit Losses (“ACL”) and the realizability of deferred tax assets. Additionally, where applicable, the policies conform to accounting and reporting guidelines prescribed by bank regulatory authorities.

 i 

Principles of Consolidation

The accompanying consolidated financial statements include financial information related to CIT and its majority-owned subsidiaries and those variable interest entities (“VIEs”) where the Company is the primary beneficiary (“PB”), if any.

In preparing the consolidated financial statements, inter-company accounts and transactions have been eliminated. Assets held in an agency or fiduciary capacity are not included in the consolidated financial statements.

The current period’s results of operations do not necessarily indicate the results that may be expected for any other interim period or for the full year as a whole.

 i 

Announcement of Definitive Merger Agreement

On October 16, 2020, First Citizens BancShares, Inc. ("First Citizens"), the parent company of First-Citizens Bank & Trust Company, and CIT, the parent company of CIT Bank, N.A., jointly announced that they had entered into a definitive agreement under which the companies will combine in an all-stock merger. On July 14, 2021, CIT and First Citizens jointly announced that the proposal to merge the two companies received regulatory approval from the FDIC. The merger had already received approval from the Office of the North Carolina Commissioner of Banks. Completion of the proposed merger remains subject to approval from the FRB, and the satisfaction or waiver of other customary closing conditions.

On September 30, 2021, CIT Group Inc. and First Citizens jointly announced that the two companies agreed to extend the merger agreement from  i October 15, 2021, to  i March 1, 2022.

 /  i 

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and Interagency Statement

On March 27, 2020, the CARES Act was signed into law. The CARES Act gives financial institutions temporary relief from the accounting and disclosure requirements related to troubled debt restructurings (“TDRs”) under ASC 310-40 and past due and non-accrual reporting in certain situations relating to the COVID-19 pandemic. With respect to past due and non-accrual loans, the CARES Act provides that financial institutions are not expected to designate loans with payment accommodations granted due to COVID-19 as past due or non-accrual if they were current on the date used to determine the borrower’s delinquency status for the purpose of providing the deferment.

 

 / 

7

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

Additionally, on April 7, 2020, a group of federal and state government banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) (the “Interagency Statement”) that offers some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. The Interagency Statement interprets, but does not suspend, ASC 310-40. Under the Interagency Statement, any loan modification that meets either of these practical expedients would not automatically be considered a TDR because the borrower is presumed not to be experiencing financial difficulty at the time of the loan modification.

CIT applies the TDR provisions of the CARES Act on a product-type basis, or on a loan-by-loan basis, for eligible loan modifications. For eligible loans for which the CARES Act is not applied, CIT follows the applicable guidance of the Interagency Statement. For payment deferrals granted to borrowers impacted by COVID-19, CIT has elected to continue to recognize interest income (at a modified effective rate) subject to consideration of whether the loan should be placed on non-accrual status. In addition, CIT monitors deferred amounts and establishes a credit loss reserve for the estimated amount of any balances that will not be recovered for COVID-19 loans.

After the initial payment deferral period granted due to COVID-19, on a case by case basis where requested, borrowers may be offered an additional deferral of up to  i 90 days pursuant to the CARES Act or Interagency Statement guidance outlined above. After the deferral period, amounts deferred must be repaid based on modified terms, including adding the unpaid amounts to the end of the contract term, spread throughout the remaining term, or other arrangements made on a case by case basis.

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic

On April 10, 2020, the FASB Staff issued a question-and-answer document (the “Lease Concessions Q&A”) on Topic 842: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. The Lease Concessions Q&A provides that entities may elect to apply or not apply the lease modification guidance in ASC 842, Leases, for lease concessions provided by lessors as a result of the COVID-19 pandemic. This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. CIT has elected not to apply the lease modification guidance in ASC 842 for such lease concessions as permitted by the Lease Concessions Q&A. We account for these lease concessions prospectively recognizing income on a straight-line basis for operating leases and a modified effective rate for finance leases.

SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are included in the Company's 2020 Form 10-K. There were no material changes to these policies during the nine months ended September 30, 2021.

 i 

Financial Accounting Standards Adopted as of January 1, 2021

The following pronouncements were issued by the Financial Accounting Standards Board (“FASB”) and adopted by CIT as of  i  i  i January 1, 2021 /  / . Refer to Note 1 – Business and Summary of Significant Accounting Policies in our 2020 Form 10-K for a detailed description of these pronouncements:  

 

•

ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The adoption of this standard did not have a material impact on CIT’s consolidated financial statements and disclosures.

 

•

ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762. The adoption of this standard did not have a material impact on CIT’s consolidated financial statements and disclosures.

 

•

ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. The adoption of this standard did not have a significant impact on CIT’s consolidated financial statements and disclosures.

 /  i 

Recent Accounting Pronouncements

The following accounting pronouncements were issued by the FASB but are not yet effective for CIT.

 

Standard

Summary of Guidance

Effect on CIT's Financial Statements

ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and subsequent related ASUs

Issued March 2020 with Updates through January 2021

•The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

•The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

•For contract modifications, the amendments provide the optional relief of accounting for the modification as a continuation of the existing contract without additional analysis. In addition, companies can consider embedded features to be clearly and closely related to the host contract without reassessment.

•For hedge accounting, entities can continue hedge accounting when certain critical terms of a hedging relationship change. Moreover, companies can perform some effectiveness assessments in ways that disregard certain potential sources of ineffectiveness.

•Entities may make a one-time election to sell and/or transfer debt securities classified as held-to-maturity (“HTM”), that both reference an eligible reference rate and were classified as HTM before January 1, 2020. This one-time election may be made at any time after March 12, 2020 but no later than December 31, 2022.

•The ASU applies prospectively to contract modifications and hedging relationships.

•ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

•An entity may elect to apply the amendments in this update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued.

•The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022.

•In the fourth quarter of 2020, CIT elected to apply the contract modification relief to the interest rate swap contracts for which the discount rate changed from the Federal Funds Rates to the Secured Overnight Financing Rate (“SOFR”) due to discounting transition by the Central Counterparties (i.e., Chicago Mercantile Exchange and LCH Clearnet). In addition, CIT elected to apply the hedge accounting relief to interest rate hedge swaps, which allows the Company to not consider a change in the interest rate used for the discounting of a derivative hedging instrument as a change to the critical terms of the hedging relationship.

•On October 23, 2020, the International Swaps and Derivatives Association ("ISDA") published the Interbank offered rate ("IBOR") Fallbacks Supplement and IBOR Fallbacks Protocol, effective January 25, 2021. The supplement incorporates the fallbacks into new covered IBOR derivatives referencing the 2006 ISDA Definitions unless the parties specifically agree to exclude them. CIT adhered to the protocol beginning in January 2021.

•The HTM one-time election was not applicable to CIT as the Company did not have any HTM debt securities as of January 1, 2020.

•CIT is currently evaluating the impact of the optional expedients on the Company’s consolidated financial statements and disclosures.

 

 

8

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CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

Issued August 2020

•The amendments in this update reduce the number of models used to account for convertible instruments, amend diluted earnings per share calculations for convertible instruments, amend the requirements for a contract (or embedded derivative) that is potentially settled in an entity’s own shares to be classified in equity, and expand disclosure requirements for convertible instruments.

•Effective for CIT as of January 1, 2022. Early adoption is permitted.

•This ASU is not expected to have a material impact on CIT’s consolidated statements and disclosures as the Company currently does not have any convertible instrument within the scope of this ASU.

ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

Issued May 2021

•The amendments in this update clarifies an issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU requires that such modifications or exchanges be treated as an exchange of the original instrument for a new instrument. An issuer should measure the effect of such modifications or exchanges based on analysis of the difference between the fair value of the modified instrument and the fair value of that instrument immediately before modification or exchange. Recognition of a modification or an exchange of a freestanding equity-classified written call option is then based upon the substance of the transaction.

•Effective for CIT as of January 1, 2022. Early adoption is permitted.

•This ASU is not expected to have a material impact on CIT’s consolidated statements and disclosures as the Company currently does not have any freestanding equity-classified written call options within the scope of this ASU.

9

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CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

ASU 2021-05, Leases, (Topic 842), Lessors - Certain Leases with Variable Lease Payments

 

Issued July 2021

•The amendments in this update improve lessor accounting for certain leases with variable lease payments so that lessors are no longer required to recognize a day-one selling loss upon lease commencement when specified criteria are met.  Specifically this ASU requires a lessor to classify a lease with variable payments that do not depend on a reference index or a rate as an operating lease if classifying the lease as a sales-type lease or a direct financing lease would result in the recognition of a day-one selling loss at lease commencement.  A day-one selling loss is not recognized under operating lease accounting.

•Effective for CIT as of January 1, 2022. Early adoption is permitted.

•This ASU is not expected to have a material impact on CIT’s consolidated statements and disclosures as the Company has not originated finance leases which required a day-one selling loss at lease commencement.  

 

 

 

 

 i 

 

NOTE 2 — ACQUISITIONS

 

On January 1, 2020, CIT Bank acquired Mutual of Omaha Bank (“MOB”), the savings bank subsidiary of Mutual of Omaha Insurance Company and Omaha Financial Holdings, Inc., for approximately $ i 1 billion in exchange for  i 100% of all outstanding shares of MOB common stock. The original consideration was comprised of approximately $ i 850 million in cash and approximately  i 3.1 million shares of CIT Group Inc. common stock (valued at approximately $ i 141 million based on the closing market price on December 31, 2019, the last trading price before the acquisition).

The acquisition enhances CIT’s deposit and commercial banking capabilities by adding a new channel of deposits related to homeowners’ associations (“HOA”) and enhances CIT’s middle-market commercial banking business through the addition of relationship banking teams and expanded product and technology solutions. The acquisition was accounted for as a business combination.

Assets acquired totaled approximately $ i 8.6 billion, including $ i 6.3 billion of loans, $ i 115.2 million of goodwill and $ i 102.6 million of intangible assets and included $ i 7.6 billion of assumed liabilities, including $ i 7.0 billion of deposits, and  i 25 bank branches. The assets acquired, liabilities assumed, and consideration exchanged were recorded at their estimated fair values.

Interest income, non-interest income and net loss of $ i 191.7 million, $ i 27.6 million and $ i 61.8 million, respectively, related to MOB were included in CIT’s Consolidated Statement of Operations for the nine months ended September 30, 2020. The MOB net loss included $ i 44.8 million of MOB day 1 provision for credit losses related to the non-PCD loans. Operating expenses for the nine months ended September 30, 2020 included $ i 49.6 million of merger and integration costs related to MOB. Operations of MOB were fully integrated during 2020.

 /  i 

NOTE 3 — LOANS

 i 

Unless otherwise noted, loans held for sale are not included in the amounts presented throughout this note.

Loans by Product (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

Commercial Loans

$

 i 26,055.9

 

 

$

 i 27,410.9

 

Financing Leases and Leverage Leases

 

 i 2,119.4

 

 

 

 i 2,318.0

 

Total commercial

 

 i 28,175.3

 

 

 

 i 29,728.9

 

Consumer Loans

 

 i 5,285.7

 

 

 

 i 6,415.7

 

Total loans

$

 i 33,461.0

 

 

$

 i 36,144.6

 
 /  / 

10

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CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 

 i 

The following table presents loans by segment, based on obligor location:

Loans (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Domestic

 

 

International

 

 

Total

 

 

Domestic

 

 

International

 

 

Total

 

Commercial Banking

$

 i 25,851.9

 

 

$

 i 1,365.2

 

 

$

 i 27,217.1

 

 

$

 i 27,323.4

 

 

$

 i 1,313.1

 

 

$

 i 28,636.5

 

Consumer Banking(1)

 

 i 6,243.9

 

 

 

—

 

 

 

 i 6,243.9

 

 

 

 i 7,508.1

 

 

 

—

 

 

 

 i 7,508.1

 

Total

$

 i 32,095.8

 

 

$

 i 1,365.2

 

 

$

 i 33,461.0

 

 

$

 i 34,831.5

 

 

$

 i 1,313.1

 

 

$

 i 36,144.6

 

(1)

The Consumer Banking segment includes certain commercial loans, primarily consisting of a portfolio of Small Business Administration ("SBA") loans and Community Development Lending loans. These loans are excluded from the Consumer loan balances and included in the Commercial loan balances in product related tables in this note.

 /  i 

The following table presents selected components of the net investment in loans:

Components of Net Investment (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Unearned income

$

( i 353.8

)

 

$

( i 373.9

)

Unamortized (discounts) premiums

 

( i 284.4

)

 

 

( i 434.4

)

Net unamortized deferred costs

 

 i 39.8

 

 

 

 i 35.8

 

 

 / 

Certain of the following tables present credit-related information at the “class” level. A class is generally a disaggregation of a portfolio segment. In determining the classes, CIT considered the loan characteristics and methods it applies in monitoring and assessing credit risk and performance.

Credit Quality Indicators

Management monitors credit quality of commercial loans and financing leases based upon risk rating classifications consistent with bank regulatory guidance and consumer loans based upon FICO scores and loan-to-value ratios (“LTV”).

The definitions of the commercial loan ratings are as follows:

•

Pass — loans in this category do not meet the criteria for classification in one of the categories below.

•

Special mention — loans in this category exhibit potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of a loan’s repayment prospects.

•

Classified — loans in this category range from: (1) loans that exhibit a well-defined weakness and are inadequately protected by the current sound worth and paying capacity of the borrower, and are characterized by the distinct possibility that some loss will be sustained if the deficiencies are not corrected to (2) loans with weaknesses that make collection or liquidation in full unlikely on the basis of current facts, conditions, and values. Classified loans can accrue interest or be placed on non-accrual depending on the Company’s evaluation of these factors.

Commercial criticized loans include loans with a rating of special mention or classified.

For consumer loans, we monitor credit quality utilizing current LTV of the underlying collateral to assess potential loss severity in the event of default and the borrower FICO scores to evaluate borrowers’ credit payment history. The Company examines LTV migration and stratifies LTV into categories to monitor risk in the loan classes. The Company periodically updates the property values of real estate collateral (for home equity and residential mortgages) to calculate current LTV ratios, adjusted based on the Case-Shiller Home Price Indices. A loan to a borrower with a low FICO score (less than 660) is considered to be of higher risk than a loan to a borrower with a higher FICO score. Generally, a loan to a borrower with a high LTV ratio and a low FICO score is at greater risk of default than a loan to a borrower that has both a high LTV ratio and a high FICO score.

11

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CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 i 

The following table summarizes commercial loans disaggregated by year of origination and by risk rating, while the consumer loan LTV ratios and FICO scores tables summarize loans by year of origination. These tables reflect the amortized cost basis of the respective commercial and consumer loans. Accrued interest receivable is not reported with the loan’s amortized cost basis and is reported in other assets.

Commercial Loans — Risk Rating by Class(1) (dollars in millions)

 

Term Loans by Origination Year

 

 

 

 

 

 

 

 

 

 

Revolving Loans Converted

 

 

 

 

 

Grade

2021

 

 

 

 

2020

 

 

 

 

2019

 

 

 

 

2018

 

 

 

 

2017

 

 

 

 

2016 & Prior

 

 

 

 

Revolving Loans

 

 

 

 

to Term Loans

 

 

Total

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

$

 i 4,518.2

 

 

 

 

$

 i 2,426.7

 

 

 

 

$

 i 1,984.6

 

 

 

 

$

 i 1,414.5

 

 

 

 

$

 i 460.9

 

 

 

 

$

 i 943.5

 

 

 

 

$

 i 2,486.0

 

 

 

 

$

 i 60.6

 

 

$

 i 14,295.0

 

Special Mention

 

 i 22.3

 

 

 

 

 

 i 69.4

 

 

 

 

 

 i 185.8

 

 

 

 

 

 i 146.7

 

 

 

 

 

 i 3.0

 

 

 

 

 

 i 72.4

 

 

 

 

 

 i 147.7

 

 

 

 

 

 i 0.5

 

 

 

 i 647.8

 

Classified-accrual

 

 i 35.7

 

 

 

 

 

 i 71.2

 

 

 

 

 

 i 237.0

 

 

 

 

 

 i 132.7

 

 

 

 

 

 i 108.4

 

 

 

 

 

 i 184.5

 

 

 

 

 

 i 158.8

 

 

 

 

 

 i 2.8

 

 

 

 i 931.1

 

Classified-non-accrual

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 1.3

 

 

 

 

 

 i 24.4

 

 

 

 

 

 i 10.8

 

 

 

 

 

 i 112.5

 

 

 

 

 

 i 76.3

 

 

 

 

 

—

 

 

 

 i 225.3

 

Total Commercial Finance

 

 i 4,576.2

 

 

 

 

 

 i 2,567.3

 

 

 

 

 

 i 2,408.7

 

 

 

 

 

 i 1,718.3

 

 

 

 

 

 i 583.1

 

 

 

 

 

 i 1,312.9

 

 

 

 

 

 i 2,868.8

 

 

 

 

 

 i 63.9

 

 

 

 i 16,099.2

 

Real Estate Finance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 457.0

 

 

 

 

 

 i 1,112.9

 

 

 

 

 

 i 1,824.6

 

 

 

 

 

 i 666.9

 

 

 

 

 

 i 335.6

 

 

 

 

 

 i 797.6

 

 

 

 

 

 i 2.8

 

 

 

 

 

—

 

 

 

 i 5,197.4

 

Special Mention

 

—

 

 

 

 

 

 i 87.1

 

 

 

 

 

 i 100.3

 

 

 

 

 

 i 79.5

 

 

 

 

 

 i 58.9

 

 

 

 

 

 i 13.3

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 339.1

 

Classified-accrual

 

—

 

 

 

 

 

 i 0.3

 

 

 

 

 

 i 411.5

 

 

 

 

 

 i 240.7

 

 

 

 

 

 i 96.4

 

 

 

 

 

 i 82.0

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 830.9

 

Classified-non-accrual

 

—

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 0.2

 

 

 

 

 

 i 1.9

 

 

 

 

 

 i 61.3

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 63.4

 

Total Real Estate Finance

 

 i 457.0

 

 

 

 

 

 i 1,200.3

 

 

 

 

 

 i 2,336.4

 

 

 

 

 

 i 987.3

 

 

 

 

 

 i 492.8

 

 

 

 

 

 i 954.2

 

 

 

 

 

 i 2.8

 

 

 

 

 

—

 

 

 

 i 6,430.8

 

Business Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 1,437.9

 

 

 

 

 

 i 1,263.1

 

 

 

 

 

 i 957.1

 

 

 

 

 

 i 465.2

 

 

 

 

 

 i 154.5

 

 

 

 

 

 i 33.0

 

 

 

 

 

 i 7.8

 

 

 

 

 

—

 

 

 

 i 4,318.6

 

Special Mention

 

 i 12.7

 

 

 

 

 

 i 25.2

 

 

 

 

 

 i 36.9

 

 

 

 

 

 i 18.7

 

 

 

 

 

 i 10.7

 

 

 

 

 

 i 2.9

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 107.1

 

Classified-accrual

 

 i 21.7

 

 

 

 

 

 i 33.3

 

 

 

 

 

 i 58.9

 

 

 

 

 

 i 31.4

 

 

 

 

 

 i 10.2

 

 

 

 

 

 i 1.4

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 156.9

 

Classified-non-accrual

 

 i 2.6

 

 

 

 

 

 i 9.5

 

 

 

 

 

 i 12.5

 

 

 

 

 

 i 10.5

 

 

 

 

 

 i 2.9

 

 

 

 

 

 i 2.8

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 40.8

 

Total Business Capital

 

 i 1,474.9

 

 

 

 

 

 i 1,331.1

 

 

 

 

 

 i 1,065.4

 

 

 

 

 

 i 525.8

 

 

 

 

 

 i 178.3

 

 

 

 

 

 i 40.1

 

 

 

 

 

 i 7.8

 

 

 

 

 

—

 

 

 

 i 4,623.4

 

Rail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 0.6

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 63.1

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 63.7

 

Total Rail

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 0.6

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 63.1

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 63.7

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 6,413.1

 

 

 

 

 

 i 4,802.7

 

 

 

 

 

 i 4,766.9

 

 

 

 

 

 i 2,546.6

 

 

 

 

 

 i 951.0

 

 

 

 

 

 i 1,837.2

 

 

 

 

 

 i 2,496.6

 

 

 

 

 

 i 60.6

 

 

 

 i 23,874.7

 

Special Mention

 

 i 35.0

 

 

 

 

 

 i 181.7

 

 

 

 

 

 i 323.0

 

 

 

 

 

 i 244.9

 

 

 

 

 

 i 72.6

 

 

 

 

 

 i 88.6

 

 

 

 

 

 i 147.7

 

 

 

 

 

 i 0.5

 

 

 

 i 1,094.0

 

Classified-accrual

 

 i 57.4

 

 

 

 

 

 i 104.8

 

 

 

 

 

 i 707.4

 

 

 

 

 

 i 404.8

 

 

 

 

 

 i 215.0

 

 

 

 

 

 i 267.9

 

 

 

 

 

 i 158.8

 

 

 

 

 

 i 2.8

 

 

 

 i 1,918.9

 

Classified-non-accrual

 

 i 2.6

 

 

 

 

 

 i 9.5

 

 

 

 

 

 i 13.8

 

 

 

 

 

 i 35.1

 

 

 

 

 

 i 15.6

 

 

 

 

 

 i 176.6

 

 

 

 

 

 i 76.3

 

 

 

 

 

—

 

 

 

 i 329.5

 

Total Commercial Banking

 

 i 6,508.1

 

 

 

 

 

 i 5,098.7

 

 

 

 

 

 i 5,811.1

 

 

 

 

 

 i 3,231.4

 

 

 

 

 

 i 1,254.2

 

 

 

 

 

 i 2,370.3

 

 

 

 

 

 i 2,879.4

 

 

 

 

 

 i 63.9

 

 

 

 i 27,217.1

 

Consumer Banking - Consumer and Community Banking (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 166.1

 

 

 

 

 

 i 274.1

 

 

 

 

 

 i 145.3

 

 

 

 

 

 i 97.7

 

 

 

 

 

 i 47.0

 

 

 

 

 

 i 82.0

 

 

 

 

 

 i 2.4

 

 

 

 

 

—

 

 

 

 i 814.6

 

Special Mention

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 10.0

 

 

 

 

 

 i 3.2

 

 

 

 

 

 i 4.4

 

 

 

 

 

 i 3.7

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 21.3

 

Classified-accrual

 

—

 

 

 

 

 

 i 7.4

 

 

 

 

 

 i 27.3

 

 

 

 

 

 i 26.9

 

 

 

 

 

 i 12.0

 

 

 

 

 

 i 16.8

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 90.4

 

Classified-non-accrual

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 17.0

 

 

 

 

 

 i 3.6

 

 

 

 

 

 i 4.2

 

 

 

 

 

 i 7.1

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 i 31.9

 

Total Consumer Banking

 

 i 166.1

 

 

 

 

 

 i 281.5

 

 

 

 

 

 i 199.6

 

 

 

 

 

 i 131.4

 

 

 

 

 

 i 67.6

 

 

 

 

 

 i 109.6

 

 

 

 

 

 i 2.4

 

 

 

 

 

—

 

 

 

 i 958.2

 

Commercial Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 6,579.2

 

 

 

 

 

 i 5,076.8

 

 

 

 

 

 i 4,912.2

 

 

 

 

 

 i 2,644.3

 

 

 

 

 

 i 998.0

 

 

 

 

 

 i 1,919.2

 

 

 

 

 

 i 2,499.0

 

 

 

 

 

 i 60.6

 

 

 

 i 24,689.3

 

Special Mention

 

 i 35.0

 

 

 

 

 

 i 181.7

 

 

 

 

 

 i 333.0

 

 

 

 

 

 i 248.1

 

 

 

 

 

 i 77.0

 

 

 

 

 

 i 92.3

 

 

 

 

 

 i 147.7

 

 

 

 

 

 i 0.5

 

 

 

 i 1,115.3

 

Classified-accrual

 

 i 57.4

 

 

 

 

 

 i 112.2

 

 

 

 

 

 i 734.7

 

 

 

 

 

 i 431.7

 

 

 

 

 

 i 227.0

 

 

 

 

 

 i 284.7

 

 

 

 

 

 i 158.8

 

 

 

 

 

 i 2.8

 

 

 

 i 2,009.3

 

Classified-non-accrual

 

 i 2.6

 

 

 

 

 

 i 9.5

 

 

 

 

 

 i 30.8

 

 

 

 

 

 i 38.7

 

 

 

 

 

 i 19.8

 

 

 

 

 

 i 183.7

 

 

 

 

 

 i 76.3

 

 

 

 

 

—

 

 

 

 i 361.4

 

Total Commercial Loans

$

 i 6,674.2

 

 

 

 

$

 i 5,380.2

 

 

 

 

$

 i 6,010.7

 

 

 

 

$

 i 3,362.8

 

 

 

 

$

 i 1,321.8

 

 

 

 

$

 i 2,479.9

 

 

 

 

$

 i 2,881.8

 

 

 

 

$

 i 63.9

 

 

$

 i 28,175.3

 

(1), (2)See footnotes below table on the next page.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 / 

12

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

Commercial Loans — Risk Rating by Class(1) (dollars in millions) (continued)

 

Term Loans by Origination Year

 

 

 

 

 

 

Revolving Loans Converted

 

 

 

 

 

Grade

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015 & Prior

 

 

Revolving Loans

 

 

to Term Loans

 

 

Total

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

$

 i 4,819.9

 

 

$

 i 2,132.5

 

 

$

 i 2,000.1

 

 

$

 i 678.0

 

 

$

 i 181.1

 

 

$

 i 745.6

 

 

$

 i 3,329.4

 

 

$

 i 61.1

 

 

$

 i 13,947.7

 

Special Mention

 

 i 81.2

 

 

 

 i 206.4

 

 

 

 i 210.8

 

 

 

 i 18.4

 

 

 

 i 30.8

 

 

 

 i 119.9

 

 

 

 i 313.3

 

 

 

 i 2.8

 

 

 

 i 983.6

 

Classified-accrual

 

 i 82.4

 

 

 

 i 161.7

 

 

 

 i 49.8

 

 

 

 i 169.2

 

 

 

 i 107.2

 

 

 

 i 183.1

 

 

 

 i 314.2

 

 

 

 i 5.6

 

 

 

 i 1,073.2

 

Classified-non-accrual

 

 i 0.5

 

 

 

 i 9.0

 

 

 

 i 53.9

 

 

 

 i 9.6

 

 

 

 i 22.1

 

 

 

 i 60.7

 

 

 

 i 83.6

 

 

 

—

 

 

 

 i 239.4

 

Total Commercial Finance

 

 i 4,984.0

 

 

 

 i 2,509.6

 

 

 

 i 2,314.6

 

 

 

 i 875.2

 

 

 

 i 341.2

 

 

 

 i 1,109.3

 

 

 

 i 4,040.5

 

 

 

 i 69.5

 

 

 

 i 16,243.9

 

Real Estate Finance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 1,075.9

 

 

 

 i 2,089.2

 

 

 

 i 1,212.3

 

 

 

 i 663.5

 

 

 

 i 480.3

 

 

 

 i 493.0

 

 

 

 i 28.1

 

 

 

—

 

 

 

 i 6,042.3

 

Special Mention

 

 i 65.9

 

 

 

 i 333.7

 

 

 

 i 126.4

 

 

 

 i 225.5

 

 

 

 i 93.5

 

 

 

 i 46.3

 

 

 

—

 

 

 

—

 

 

 

 i 891.3

 

Classified-accrual

 

 i 0.3

 

 

 

 i 184.4

 

 

 

 i 124.2

 

 

 

 i 74.6

 

 

 

 i 78.0

 

 

 

 i 75.8

 

 

 

—

 

 

 

—

 

 

 

 i 537.3

 

Classified-non-accrual

 

—

 

 

 

 i 33.3

 

 

 

 i 0.2

 

 

 

 i 15.3

 

 

 

 i 0.2

 

 

 

 i 28.0

 

 

 

 i 6.2

 

 

 

—

 

 

 

 i 83.2

 

Total Real Estate Finance

 

 i 1,142.1

 

 

 

 i 2,640.6

 

 

 

 i 1,463.1

 

 

 

 i 978.9

 

 

 

 i 652.0

 

 

 

 i 643.1

 

 

 

 i 34.3

 

 

 

—

 

 

 

 i 7,554.1

 

Business Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 1,678.9

 

 

 

 i 1,371.4

 

 

 

 i 809.5

 

 

 

 i 299.3

 

 

 

 i 106.3

 

 

 

 i 15.6

 

 

 

 i 14.4

 

 

 

 i 0.8

 

 

 

 i 4,296.2

 

Special Mention

 

 i 29.6

 

 

 

 i 67.2

 

 

 

 i 42.4

 

 

 

 i 32.4

 

 

 

 i 12.3

 

 

 

 i 0.3

 

 

 

—

 

 

 

—

 

 

 

 i 184.2

 

Classified-accrual

 

 i 34.3

 

 

 

 i 80.8

 

 

 

 i 71.5

 

 

 

 i 25.9

 

 

 

 i 11.2

 

 

 

 i 0.9

 

 

 

—

 

 

 

—

 

 

 

 i 224.6

 

Classified-non-accrual

 

 i 8.0

 

 

 

 i 33.0

 

 

 

 i 17.1

 

 

 

 i 10.9

 

 

 

 i 2.8

 

 

 

 i 1.0

 

 

 

—

 

 

 

—

 

 

 

 i 72.8

 

Total Business Capital

 

 i 1,750.8

 

 

 

 i 1,552.4

 

 

 

 i 940.5

 

 

 

 i 368.5

 

 

 

 i 132.6

 

 

 

 i 17.8

 

 

 

 i 14.4

 

 

 

 i 0.8

 

 

 

 i 4,777.8

 

Rail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

—

 

 

 

 i 0.8

 

 

 

—

 

 

 

 i 0.1

 

 

 

 i 3.1

 

 

 

 i 56.7

 

 

 

—

 

 

 

—

 

 

 

 i 60.7

 

Total Rail

 

—

 

 

 

 i 0.8

 

 

 

—

 

 

 

 i 0.1

 

 

 

 i 3.1

 

 

 

 i 56.7

 

 

 

—

 

 

 

—

 

 

 

 i 60.7

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 7,574.7

 

 

 

 i 5,593.9

 

 

 

 i 4,021.9

 

 

 

 i 1,640.9

 

 

 

 i 770.8

 

 

 

 i 1,310.9

 

 

 

 i 3,371.9

 

 

 

 i 61.9

 

 

 

 i 24,346.9

 

Special Mention

 

 i 176.7

 

 

 

 i 607.3

 

 

 

 i 379.6

 

 

 

 i 276.3

 

 

 

 i 136.6

 

 

 

 i 166.5

 

 

 

 i 313.3

 

 

 

 i 2.8

 

 

 

 i 2,059.1

 

Classified-accrual

 

 i 117.0

 

 

 

 i 426.9

 

 

 

 i 245.5

 

 

 

 i 269.7

 

 

 

 i 196.4

 

 

 

 i 259.8

 

 

 

 i 314.2

 

 

 

 i 5.6

 

 

 

 i 1,835.1

 

Classified-non-accrual

 

 i 8.5

 

 

 

 i 75.3

 

 

 

 i 71.2

 

 

 

 i 35.8

 

 

 

 i 25.1

 

 

 

 i 89.7

 

 

 

 i 89.8

 

 

 

—

 

 

 

 i 395.4

 

Total Commercial Banking

 

 i 7,876.9

 

 

 

 i 6,703.4

 

 

 

 i 4,718.2

 

 

 

 i 2,222.7

 

 

 

 i 1,128.9

 

 

 

 i 1,826.9

 

 

 

 i 4,089.2

 

 

 

 i 70.3

 

 

 

 i 28,636.5

 

Consumer Banking - Consumer and Community Banking (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 507.6

 

 

 

 i 157.1

 

 

 

 i 104.5

 

 

 

 i 62.3

 

 

 

 i 50.0

 

 

 

 i 67.3

 

 

 

 i 0.1

 

 

 

—

 

 

 

 i 948.9

 

Special Mention

 

—

 

 

 

 i 13.1

 

 

 

 i 4.3

 

 

 

 i 2.8

 

 

 

 i 2.6

 

 

 

 i 0.9

 

 

 

—

 

 

 

—

 

 

 

 i 23.7

 

Classified-accrual

 

 i 21.0

 

 

 

 i 19.3

 

 

 

 i 17.0

 

 

 

 i 11.0

 

 

 

 i 13.8

 

 

 

 i 17.6

 

 

 

 i 0.3

 

 

 

—

 

 

 

 i 100.0

 

Classified-non-accrual

 

—

 

 

 

 i 11.8

 

 

 

 i 3.0

 

 

 

 i 3.2

 

 

 

 i 1.0

 

 

 

 i 0.8

 

 

 

—

 

 

 

—

 

 

 

 i 19.8

 

Total Consumer Banking

 

 i 528.6

 

 

 

 i 201.3

 

 

 

 i 128.8

 

 

 

 i 79.3

 

 

 

 i 67.4

 

 

 

 i 86.6

 

 

 

 i 0.4

 

 

 

—

 

 

 

 i 1,092.4

 

Commercial Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 i 8,082.3

 

 

 

 i 5,751.0

 

 

 

 i 4,126.4

 

 

 

 i 1,703.2

 

 

 

 i 820.8

 

 

 

 i 1,378.2

 

 

 

 i 3,372.0

 

 

 

 i 61.9

 

 

 

 i 25,295.8

 

Special Mention

 

 i 176.7

 

 

 

 i 620.4

 

 

 

 i 383.9

 

 

 

 i 279.1

 

 

 

 i 139.2

 

 

 

 i 167.4

 

 

 

 i 313.3

 

 

 

 i 2.8

 

 

 

 i 2,082.8

 

Classified-accrual

 

 i 138.0

 

 

 

 i 446.2

 

 

 

 i 262.5

 

 

 

 i 280.7

 

 

 

 i 210.2

 

 

 

 i 277.4

 

 

 

 i 314.5

 

 

 

 i 5.6

 

 

 

 i 1,935.1

 

Classified-non-accrual

 

 i 8.5

 

 

 

 i 87.1

 

 

 

 i 74.2

 

 

 

 i 39.0

 

 

 

 i 26.1

 

 

 

 i 90.5

 

 

 

 i 89.8

 

 

 

—

 

 

 

 i 415.2

 

Total Commercial Loans

$

 i 8,405.5

 

 

$

 i 6,904.7

 

 

$

 i 4,847.0

 

 

$

 i 2,302.0

 

 

$

 i 1,196.3

 

 

$

 i 1,913.5

 

 

$

 i 4,089.6

 

 

$

 i 70.3

 

 

$

 i 29,728.9

 

(1)

Amortized cost excludes accrued interest receivable of $ i 39.9 million and $ i 48.6 million at September 30, 2021 and December 31, 2020, respectively, which was included in other assets. 

(2)

Primarily SBA loans.

13

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 i 

The following table provides a summary of the consumer loan LTV distribution for primarily single-family residential (“SFR”) mortgage loans. The average LTV was  i 53% and  i 58% for the total consumer loans included below at September 30, 2021 and December 31, 2020, respectively.

 / 

Consumer Loans LTV Distribution(1) (dollars in millions)

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

Revolving Loans Converted

 

 

 

 

 

LTV Range

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016 & Prior

 

 

Revolving Loans

 

 

to Term Loans

 

 

Total

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Consumer Mortgages

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than 125%

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

 i 16.1

 

 

$

—

 

 

$

 i 0.1

 

 

$

 i 16.2

 

101% – 125%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 22.6

 

 

 

—

 

 

 

 i 0.3

 

 

 

 i 22.9

 

80% – 100%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 64.5

 

 

 

—

 

 

 

 i 1.1

 

 

 

 i 65.6

 

Less than 80%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1,051.1

 

 

 

—

 

 

 

 i 25.5

 

 

 

 i 1,076.6

 

Government-guaranteed (2)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 19.4

 

 

 

—

 

 

 

—

 

 

 

 i 19.4

 

No LTV available (3)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 0.1

 

 

 

—

 

 

 

 i 1.2

 

 

 

 i 1.3

 

Total Legacy Consumer Mortgages

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1,173.8

 

 

 

—

 

 

 

 i 28.2

 

 

 

 i 1,202.0

 

Consumer and Community Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than 125%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

101% – 125%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

80% – 100%

 

 i 11.5

 

 

 

—

 

 

 

 i 0.9

 

 

 

 i 0.8

 

 

 

—

 

 

 

 i 0.8

 

 

 

—

 

 

 

—

 

 

 

 i 14.0

 

Less than 80%

 

 i 1,247.4

 

 

 

 i 946.0

 

 

 

 i 453.6

 

 

 

 i 226.8

 

 

 

 i 287.7

 

 

 

 i 757.0

 

 

 

 i 25.4

 

 

 

—

 

 

 

 i 3,943.9

 

Government-guaranteed (2)

 

—

 

 

 

 i 10.0

 

 

 

 i 22.5

 

 

 

 i 10.3

 

 

 

 i 46.6

 

 

 

 i 13.0

 

 

 

—

 

 

 

—

 

 

 

 i 102.4

 

No LTV available (3)

 

—

 

 

 

 i 0.1

 

 

 

 i 0.1

 

 

 

 i 0.1

 

 

 

 i 0.1

 

 

 

 i 1.0

 

 

 

 i 1.3

 

 

 

—

 

 

 

 i 2.7

 

No LTV required (4)

 

 i 0.8

 

 

 

 i 2.2

 

 

 

 i 1.0

 

 

 

 i 0.8

 

 

 

 i 0.7

 

 

 

 i 13.0

 

 

 

 i 2.2

 

 

 

—

 

 

 

 i 20.7

 

Total Consumer and Community Banking

 

 i 1,259.7

 

 

 

 i 958.3

 

 

 

 i 478.1

 

 

 

 i 238.8

 

 

 

 i 335.1

 

 

 

 i 784.8

 

 

 

 i 28.9

 

 

 

—

 

 

 

 i 4,083.7

 

Total Consumer Loans

$

 i 1,259.7

 

 

$

 i 958.3

 

 

$

 i 478.1

 

 

$

 i 238.8

 

 

$

 i 335.1

 

 

$

 i 1,958.6

 

 

$

 i 28.9

 

 

$

 i 28.2

 

 

$

 i 5,285.7

 

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

Revolving Loans Converted

 

 

 

 

 

LTV Range

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015 & Prior

 

 

Revolving Loans

 

 

to Term Loans

 

 

Total

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Consumer Mortgages

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than 125%

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

 i 37.5

 

 

$

—

 

 

$

 i 0.4

 

 

$

 i 37.9

 

101% – 125%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 60.5

 

 

 

—

 

 

 

 i 1.1

 

 

 

 i 61.6

 

80% – 100%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 189.2

 

 

 

—

 

 

 

 i 3.4

 

 

 

 i 192.6

 

Less than 80%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1,344.3

 

 

 

—

 

 

 

 i 34.7

 

 

 

 i 1,379.0

 

Government-guaranteed (2)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 20.8

 

 

 

—

 

 

 

—

 

 

 

 i 20.8

 

No LTV available (3)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 0.1

 

 

 

—

 

 

 

 i 1.7

 

 

 

 i 1.8

 

Total Legacy Consumer Mortgages

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1,652.4

 

 

 

—

 

 

 

 i 41.3

 

 

 

 i 1,693.7

 

Consumer and Community Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than 125%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

101% – 125%

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

80% – 100%

 

 i 21.3

 

 

 

 i 17.1

 

 

 

 i 3.5

 

 

 

—

 

 

 

—

 

 

 

 i 1.7

 

 

 

 i 2.4

 

 

 

—

 

 

 

 i 46.0

 

Less than 80%

 

 i 1,328.4

 

 

 

 i 1,022.7

 

 

 

 i 445.8

 

 

 

 i 507.2

 

 

 

 i 380.1

 

 

 

 i 778.8

 

 

 

 i 41.5

 

 

 

—

 

 

 

 i 4,504.5

 

Government-guaranteed (2)

 

 i 12.0

 

 

 

 i 33.7

 

 

 

 i 15.7

 

 

 

 i 68.2

 

 

 

 i 9.5

 

 

 

 i 7.8

 

 

 

—

 

 

 

—

 

 

 

 i 146.9

 

No LTV available (3)

 

—

 

 

 

—

 

 

 

 i 0.2

 

 

 

 i 0.2

 

 

 

 i 0.2

 

 

 

 i 0.7

 

 

 

 i 1.3

 

 

 

—

 

 

 

 i 2.6

 

No LTV required (4)

 

 i 2.0

 

 

 

 i 1.0

 

 

 

 i 1.0

 

 

 

 i 0.6

 

 

 

 i 1.0

 

 

 

 i 13.4

 

 

 

 i 3.0

 

 

 

—

 

 

 

 i 22.0

 

Total Consumer and Community Banking

 

 i 1,363.7

 

 

 

 i 1,074.5

 

 

 

 i 466.2

 

 

 

 i 576.2

 

 

 

 i 390.8

 

 

 

 i 802.4

 

 

 

 i 48.2

 

 

 

—

 

 

 

 i 4,722.0

 

Total Consumer Loans

$

 i 1,363.7

 

 

$

 i 1,074.5

 

 

$

 i 466.2

 

 

$

 i 576.2

 

 

$

 i 390.8

 

 

$

 i 2,454.8

 

 

$

 i 48.2

 

 

$

 i 41.3

 

 

$

 i 6,415.7

 

(1)

Amortized cost excludes accrued interest receivable of $ i 13.8 million and $ i 19.0 million at September 30, 2021 and December 31, 2020, respectively, which was included in other assets.

(2)

Represents loans with principal repayments insured by the FHA and U.S. Department of Veterans Affairs (“VA”).

(3)

Represents primarily junior lien loans for which LTV is not available.

(4)

Represents overdrafts, personal lines of credit, unsecured loans and third-party guaranteed loans with servicer recourse option for which LTV is not required.

The following table provides a summary of the most current FICO score distribution for consumer loans by origination year and

14

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

revolving loans. The average FICO score was  i 764 and  i 755 for the total consumer loans included below at September 30, 2021 and December 31, 2020, respectively.

FICO Score Distribution(1) (dollars in millions)

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

Revolving Loans Converted

 

 

 

 

 

Current FICO

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016 & Prior

 

 

Revolving Loans

 

 

to Term Loans

 

 

Total

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Consumer Mortgages

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than or equal to 730

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

 i 607.6

 

 

$

—

 

 

$

 i 13.2

 

 

$

 i 620.8

 

Greater than or equal to 660 and less than 730

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 347.5

 

 

 

—

 

 

 

 i 8.1

 

 

 

 i 355.6

 

Less than 660

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 173.4

 

 

 

—

 

 

 

 i 6.2

 

 

 

 i 179.6

 

Government-guaranteed (2)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 19.4

 

 

 

—

 

 

 

—

 

 

 

 i 19.4

 

No FICO score available (3)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 25.9

 

 

 

—

 

 

 

 i 0.7

 

 

 

 i 26.6

 

FICO score not required (4)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Legacy Consumer Mortgages

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1,173.8

 

 

 

—

 

 

 

 i 28.2

 

 

 

 i 1,202.0

 

Consumer and Community Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than or equal to 730

 

 i 1,068.6

 

 

 

 i 810.8

 

 

 

 i 392.2

 

 

 

 i 188.1

 

 

 

 i 260.4

 

 

 

 i 614.0

 

 

 

 i 19.3

 

 

 

—

 

 

 

 i 3,353.4

 

Greater than or equal to 660 and less than 730

 

 i 182.2

 

 

 

 i 122.8

 

 

 

 i 58.9

 

 

 

 i 33.0

 

 

 

 i 22.4

 

 

 

 i 101.2

 

 

 

 i 6.2

 

 

 

—

 

 

 

 i 526.7

 

Less than 660

 

 i 8.1

 

 

 

 i 12.3

 

 

 

 i 3.7

 

 

 

 i 5.6

 

 

 

 i 4.8

 

 

 

 i 30.4

 

 

 

 i 2.8

 

 

 

—

 

 

 

 i 67.7

 

Government-guaranteed (2)

 

—

 

 

 

 i 10.0

 

 

 

 i 22.5

 

 

 

 i 10.3

 

 

 

 i 46.6

 

 

 

 i 13.0

 

 

 

—

 

 

 

—

 

 

 

 i 102.4

 

No FICO score available (3)

 

—

 

 

 

 i 0.2

 

 

 

—

 

 

 

 i 1.0

 

 

 

 i 0.2

 

 

 

 i 13.6

 

 

 

 i 0.2

 

 

 

—

 

 

 

 i 15.2

 

FICO score not required (4)

 

 i 0.8

 

 

 

 i 2.2

 

 

 

 i 0.8

 

 

 

 i 0.8

 

 

 

 i 0.7

 

 

 

 i 12.6

 

 

 

 i 0.4

 

 

 

—

 

 

 

 i 18.3

 

Total Consumer and Community Banking

 

 i 1,259.7

 

 

 

 i 958.3

 

 

 

 i 478.1

 

 

 

 i 238.8

 

 

 

 i 335.1

 

 

 

 i 784.8

 

 

 

 i 28.9

 

 

 

—

 

 

 

 i 4,083.7

 

Total Consumer Loans

$

 i 1,259.7

 

 

$

 i 958.3

 

 

$

 i 478.1

 

 

$

 i 238.8

 

 

$

 i 335.1

 

 

$

 i 1,958.6

 

 

$

 i 28.9

 

 

$

 i 28.2

 

 

$

 i 5,285.7

 

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

Revolving Loans Converted

 

 

 

 

 

Current FICO

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015 & Prior

 

 

Revolving Loans

 

 

to Term Loans

 

 

Total

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Consumer Mortgages

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than or equal to 730

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

 i 729.1

 

 

$

—

 

 

$

 i 17.9

 

 

$

 i 747.0

 

Greater than or equal to 660 and less than 730

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 499.3

 

 

 

—

 

 

 

 i 13.0

 

 

 

 i 512.3

 

Less than 660

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 369.4

 

 

 

—

 

 

 

 i 9.4

 

 

 

 i 378.8

 

Government-guaranteed (2)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 20.8

 

 

 

—

 

 

 

—

 

 

 

 i 20.8

 

No FICO score available (3)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 33.8

 

 

 

—

 

 

 

 i 1.0

 

 

 

 i 34.8

 

Total Legacy Consumer Mortgages

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1,652.4

 

 

 

—

 

 

 

 i 41.3

 

 

 

 i 1,693.7

 

Consumer and Community Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than or equal to 730

 

 i 1,152.3

 

 

 

 i 923.7

 

 

 

 i 372.3

 

 

 

 i 453.5

 

 

 

 i 339.7

 

 

 

 i 596.7

 

 

 

 i 34.2

 

 

 

—

 

 

 

 i 3,872.4

 

Greater than or equal to 660 and less than 730

 

 i 186.3

 

 

 

 i 104.7

 

 

 

 i 68.7

 

 

 

 i 46.3

 

 

 

 i 34.5

 

 

 

 i 125.6

 

 

 

 i 10.0

 

 

 

—

 

 

 

 i 576.1

 

Less than 660

 

 i 11.0

 

 

 

 i 11.2

 

 

 

 i 8.4

 

 

 

 i 7.3

 

 

 

 i 5.5

 

 

 

 i 40.8

 

 

 

 i 3.1

 

 

 

—

 

 

 

 i 87.3

 

Government-guaranteed (2)

 

 i 12.0

 

 

 

 i 33.7

 

 

 

 i 15.7

 

 

 

 i 68.2

 

 

 

 i 9.5

 

 

 

 i 7.8

 

 

 

—

 

 

 

—

 

 

 

 i 146.9

 

No FICO score available (3)

 

 i 0.1

 

 

 

 i 0.5

 

 

 

 i 0.1

 

 

 

 i 0.3

 

 

 

 i 0.6

 

 

 

 i 18.2

 

 

 

 i 0.2

 

 

 

—

 

 

 

 i 20.0

 

FICO score not required (4)

 

 i 2.0

 

 

 

 i 0.7

 

 

 

 i 1.0

 

 

 

 i 0.6

 

 

 

 i 1.0

 

 

 

 i 13.3

 

 

 

 i 0.7

 

 

 

—

 

 

 

 i 19.3

 

Total Consumer and Community Banking

 

 i 1,363.7

 

 

 

 i 1,074.5

 

 

 

 i 466.2

 

 

 

 i 576.2

 

 

 

 i 390.8

 

 

 

 i 802.4

 

 

 

 i 48.2

 

 

 

—

 

 

 

 i 4,722.0

 

Total Consumer Loans

$

 i 1,363.7

 

 

$

 i 1,074.5

 

 

$

 i 466.2

 

 

$

 i 576.2

 

 

$

 i 390.8

 

 

$

 i 2,454.8

 

 

$

 i 48.2

 

 

$

 i 41.3

 

 

$

 i 6,415.7

 

(1)

Amortized cost excludes accrued interest receivable. See footnote 1 to the LTV table above.

(2)

Represents loans with principal repayments insured by the FHA and VA.

(3)

Represents loans with no FICO score available due to borrower bankruptcy or limited credit history.

(4)

FICO sores not required for these overdrafts, personal lines of credit or third-party guaranteed loans with servicer recourse option.

 

15

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 i 

Past Due and Non-accrual Loans

Additional information on reporting of past due and non-accrual loans is provided in the discussion of the CARES Act and Interagency Statement in Note 1 – Business and Summary of Significant Accounting Policies. Related to loan modifications made in response to the COVID-19 pandemic, the loan maintains the borrower’s delinquency status that existed prior to entering the payment deferral period and is frozen for the duration of the payment deferral period as no contractual payments are due.

The table that follows presents portfolio delinquency status, regardless of accrual or non-accrual classification:

Loans - Delinquency Status (dollars in millions)

 

Past Due

 

 

Total

 

 

 

 

 

 

 

 

 

 

30-59

 

 

60-89

 

 

90 or more

 

 

Past Due

 

 

Current

 

 

Total

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

 i 37.2

 

 

$

 i 8.9

 

 

$

 i 29.8

 

 

$

 i 75.9

 

 

$

 i 16,023.3

 

 

$

 i 16,099.2

 

Real Estate Finance

 

 i 0.2

 

 

 

 i 10.6

 

 

 

 i 9.2

 

 

 

 i 20.0

 

 

 

 i 6,410.8

 

 

 

 i 6,430.8

 

Business Capital

 

 i 58.5

 

 

 

 i 26.4

 

 

 

 i 17.3

 

 

 

 i 102.2

 

 

 

 i 4,521.2

 

 

 

 i 4,623.4

 

Rail

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 63.7

 

 

 

 i 63.7

 

Total Commercial Banking

 

 i 95.9

 

 

 

 i 45.9

 

 

 

 i 56.3

 

 

 

 i 198.1

 

 

 

 i 27,019.0

 

 

 

 i 27,217.1

 

Consumer Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Consumer Mortgage

 

 i 24.1

 

 

 

 i 4.7

 

 

 

 i 25.2

 

 

 

 i 54.0

 

 

 

 i 1,148.1

 

 

 

 i 1,202.1

 

Consumer and Community Banking

 

 i 42.7

 

 

 

 i 26.7

 

 

 

 i 20.2

 

 

 

 i 89.6

 

 

 

 i 4,952.2

 

 

 

 i 5,041.8

 

Total Consumer Banking

 

 i 66.8

 

 

 

 i 31.4

 

 

 

 i 45.4

 

 

 

 i 143.6

 

 

 

 i 6,100.3

 

 

 

 i 6,243.9

 

Total

$

 i 162.7

 

 

$

 i 77.3

 

 

$

 i 101.7

 

 

$

 i 341.7

 

 

$

 i 33,119.3

 

 

$

 i 33,461.0

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

 i 59.9

 

 

$

 i 2.8

 

 

$

 i 122.0

 

 

$

 i 184.7

 

 

$

 i 16,059.2

 

 

$

 i 16,243.9

 

Real Estate Finance

 

 i 71.7

 

 

 

 i 38.3

 

 

 

 i 82.4

 

 

 

 i 192.4

 

 

 

 i 7,361.7

 

 

 

 i 7,554.1

 

Business Capital

 

 i 113.6

 

 

 

 i 40.2

 

 

 

 i 16.6

 

 

 

 i 170.4

 

 

 

 i 4,607.4

 

 

 

 i 4,777.8

 

Rail

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 60.7

 

 

 

 i 60.7

 

Total Commercial Banking

 

 i 245.2

 

 

 

 i 81.3

 

 

 

 i 221.0

 

 

 

 i 547.5

 

 

 

 i 28,089.0

 

 

 

 i 28,636.5

 

Consumer Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Consumer Mortgage

 

 i 61.0

 

 

 

 i 17.6

 

 

 

 i 79.7

 

 

 

 i 158.3

 

 

 

 i 1,535.5

 

 

 

 i 1,693.8

 

Consumer and Community Banking

 

 i 173.1

 

 

 

 i 10.6

 

 

 

 i 34.0

 

 

 

 i 217.7

 

 

 

 i 5,596.6

 

 

 

 i 5,814.3

 

Total Consumer Banking

 

 i 234.1

 

 

 

 i 28.2

 

 

 

 i 113.7

 

 

 

 i 376.0

 

 

 

 i 7,132.1

 

 

 

 i 7,508.1

 

Total

$

 i 479.3

 

 

$

 i 109.5

 

 

$

 i 334.7

 

 

$

 i 923.5

 

 

$

 i 35,221.1

 

 

$

 i 36,144.6

 

 

 / 

16

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 i 

The following table sets forth non-accrual loans, assets received in satisfaction of loans (OREO and repossessed assets) and loans 90 days or more past due and still accruing. Loans that are 90 days or more past due and are guaranteed by government agencies are not placed on non-accrual status. See Note 1 – Business and Summary of Significant Accounting Policies in the 2020 Form 10-K for additional information.

Loans on Non-Accrual Status (dollars in millions) (1)

 

September 30, 2021

 

 

December 31, 2020

 

 

Non-Accrual Loans

 

 

With No Allowance Recorded(2)

 

 

Non-Accrual Loans

 

 

With No Allowance Recorded(2)

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance(3)

$

 i 225.3

 

 

$

 i 13.4

 

 

$

 i 239.4

 

 

$

 i 8.0

 

Business Capital

 i 40.8

 

 

 

 i 3.1

 

 

 

 i 72.8

 

 

 

 i 1.5

 

Real Estate Finance

 i 63.4

 

 

 

 i 2.6

 

 

 

 i 83.2

 

 

 

 i 16.0

 

Total Commercial Banking

 

 i 329.5

 

 

 

 i 19.1

 

 

 

 i 395.4

 

 

 

 i 25.5

 

Consumer Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Community Banking

 

 i 52.1

 

 

 

 i 29.5

 

 

 

 i 53.4

 

 

 

 i 38.2

 

Legacy Consumer Mortgages

 

 i 23.3

 

 

 

 i 5.9

 

 

 

 i 139.3

 

 

 

 i 30.0

 

Total Consumer Banking

 

 i 75.4

 

 

 

 i 35.4

 

 

 

 i 192.7

 

 

 

 i 68.2

 

Total

$

 i 404.9

 

 

$

 i 54.5

 

 

$

 i 588.1

 

 

$

 i 93.7

 

Repossessed assets and OREO(4)

 

 i 10.5

 

 

 

 

 

 

 

 i 7.9

 

 

 

 

 

Total non-performing assets

$

 i 415.4

 

 

 

 

 

 

$

 i 596.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans past due 90 days or more accruing

$

 i 14.7

 

 

 

 

 

 

$

 i 92.5

 

 

 

 

 

Consumer loans past due 90 days or more accruing(5)

 

 i 13.2

 

 

 

 

 

 

 

 i 11.3

 

 

 

 

 

Total accruing loans past due 90 days or more

$

 i 27.9

 

 

 

 

 

 

$

 i 103.8

 

 

 

 

 

(1)

Accrued interest that was reversed when the loan went to non-accrual status was $ i 0.5 million and $ i 1.1 million for the quarters ended September 30, 2021 and 2020, respectively, and $ i 2.8 million and $ i 6.0 million for the nine months ended September 30, 2021 and 2020, respectively.

(2)

Includes loans that have been charged-off to their net realizable value and loans where the collateral or enterprise value exceeds the expected pay off value.

(3)

Factored receivables within our Commercial Finance division do not accrue interest and therefore are not considered within non-accrual loan balances; however factored receivables are considered for credit provisioning purposes.

(4)

Balances consist mostly of single-family residential OREO.

(5)

Consists of loans guaranteed by government agencies.

 / 

Payments received on non-accrual loans are generally applied first against outstanding principal, though in certain instances where the remaining recorded investment is deemed fully collectible, interest income is recognized on a cash basis. Interest recorded on non-accrual loans was $ i 0.5 million and $ i 6.9 million for the quarters ended September 30, 2021 and 2020, respectively, and $ i 1.9 million and $ i 8.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Loans are in the process of foreclosure when repayment is expected to be provided substantially through the sale of the underlying real estate and the borrower is experiencing financial difficulty.  i The table below summarizes the residential mortgage loans in the process of foreclosure. Consistent with the government agency guidance, CIT suspended residential property foreclosures and evictions through July 31, 2021 related to single family homeowners due to the COVID-19 pandemic.

Loans in Process of Foreclosure (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Loans in process of foreclosure

$

 i 11.8

 

 

$

 i 22.9

 

Troubled Debt Restructuring

The Company periodically modifies the terms of loans in response to borrowers’ difficulties. Modifications that include a financial concession to the borrower are accounted for as TDRs. A restructuring of a debt constitutes a TDR for purposes of ASC 310-40 when CIT, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. A concession may be either by agreement between CIT and the debtor or imposed by law or a court of law. See Note 1 – Business and Summary of Significant Accounting Policies in the Company's 2020 Form 10-K for discussion of policies on TDRs.

The CARES Act and Interagency Statement offer some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. See Note 1 – Business and Summary of Significant Accounting Policies for details. Any loan modification that meets these practical expedients would not automatically be considered a TDR because the borrower is presumed not to be experiencing financial difficulty at the time of the loan modification.

Modified loans that meet the definition of a TDR are subject to the Company's individually reviewed loans policy.

 i 

17

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following table presents recorded investment of TDRs, excluding those within a trial modification period of $ i 0.1 million at September 30, 2021 and $ i 4.5 million at December 31, 2020:

TDRs (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

 

Recorded Investment

 

 

% Total TDR

 

 

Recorded Investment

 

 

% Total TDR

 

 

Commercial Banking

$

 i 96.1

 

 

 

 i 74

%

 

$

 i 109.8

 

 

 

 i 82

%

 

Consumer Banking

 

 i 33.4

 

 

 

 i 26

%

 

 

 i 24.6

 

 

 

 i 18

%

 

Total

$

 i 129.5

 

 

 

 i 100

%

 

$

 i 134.4

 

 

 

 i 100

%

 

Percent non-accrual

 

 i 51

%

 

 

 

 

 

 

 i 73

%

 

 

 

 

 

Modifications that are TDRs (dollars in millions)

 

Quarters Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Recorded investment related to modifications qualifying as TDRs that occurred during the periods

$

 i 31.3

 

 

$

 i 10.0

 

 

$

 i 48.8

 

 

$

 i 62.4

 

Recorded investment at the time of default of TDRs that experienced a payment default (payment default is one missed payment) during the periods and for which the payment default occurred within one year of the modification

$

 i 2.9

 

 

$

 i 13.6

 

 

 i 12.9

 

 

 i 19.9

 

There were $ i 9.3 million and $ i 28.3 million of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs as of September 30, 2021 and December 31, 2020, respectively.

 

Modifications qualifying as TDRs based upon recorded investment at September 30, 2021, were comprised of payment deferrals ( i 55%) and covenant relief and/or other ( i 45%). At December 31, 2020, TDR recorded investment was comprised of payment deferrals ( i 40%) and covenant relief and/or other ( i 60%). The financial impact of the various modification strategies that the Company employs in response to borrower difficulties is presented below. The overall nature of modification programs were comparable in the prior periods.

▪

Payment deferrals result in lower net present value of cash flows, if not accompanied by additional interest or fees, and increased provision for credit losses to the extent applicable. The financial impact of these modifications was not significant given the moderate length of deferral periods.

▪

Interest rate reductions result in lower amounts of interest being charged to the customer but are a relatively small part of the Company’s restructuring programs. The weighted average change in interest rates for all TDRs occurring during the quarters ended September 30, 2021 and 2020 were not significant.

▪

Debt forgiveness, or the reduction in amount owed by borrower, results in incremental provision for credit losses, in the form of higher charge-offs. While these types of modifications have the greatest individual impact on the allowance, the amounts of principal forgiveness for TDRs occurring during quarters ended September 30, 2021 and 2020 was not significant, as debt forgiveness is a relatively small component of the Company’s modification programs.

The other elements of the Company’s modification programs that are not TDRs do not have a significant impact on financial results given their relative size or do not have a direct financial impact, as in the case of covenant changes.

18

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 i 

NOTE 4 — ALLOWANCE FOR CREDIT LOSSES

The ACL and the allowance for off-balance sheet credit exposures are reported on the Condensed Consolidated Balance Sheets in the allowance for credit losses and in other liabilities, respectively. Provision for credit losses related to the loan portfolio and the off-balance sheet credit exposures are reported in the Consolidated Statements of Operations as provision for credit losses.

 i 

Allowance for Credit Losses and Recorded Investment in Loans (dollars in millions)

 

Quarter Ended September 30, 2021

 

 

Quarter Ended September 30, 2020

 

 

Commercial Banking

 

 

Consumer Banking

 

 

Total

 

 

Commercial

Banking

 

 

Consumer

Banking

 

 

Total

 

Balance - beginning of period

$

 i 743.4

 

 

$

 i 107.2

 

 

$

 i 850.6

 

 

$

 i 1,020.1

 

 

$

 i 182.6

 

 

$

 i 1,202.7

 

Provision for credit losses(1)

 

( i 49.3

)

 

 

( i 17.8

)

 

 

( i 67.1

)

 

 

 i 87.9

 

 

 

( i 24.6

)

 

 

 i 63.3

 

Other(2)

 

 i 11.7

 

 

 

 i 0.2

 

 

 

 i 11.9

 

 

 

 i 7.1

 

 

 

( i 0.9

)

 

 

 i 6.2

 

Gross charge-offs

 

( i 15.3

)

 

 

( i 1.1

)

 

 

( i 16.4

)

 

 

( i 77.2

)

 

 

( i 1.0

)

 

 

( i 78.2

)

Recoveries

 

 i 10.7

 

 

 

 i 0.7

 

 

 

 i 11.4

 

 

 

 i 11.4

 

 

 

 i 0.8

 

 

 

 i 12.2

 

Balance - end of period

$

 i 701.2

 

 

$

 i 89.2

 

 

$

 i 790.4

 

 

$

 i 1,049.3

 

 

$

 i 156.9

 

 

$

 i 1,206.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2020

 

Balance - beginning of period

$

 i 933.7

 

 

$

 i 130.1

 

 

$

 i 1,063.8

 

 

$

 i 460.4

 

 

$

 i 22.2

 

 

$

 i 482.6

 

CECL adoption(3)

 

-

 

 

 

-

 

 

 

-

 

 

 

 i 74.7

 

 

 

 i 148.9

 

 

 

 i 223.6

 

Provision for credit losses(1)

 

( i 220.6

)

 

 

( i 36.1

)

 

 

( i 256.7

)

 

 

 i 811.5

 

 

 

( i 10.7

)

 

 

 i 800.8

 

Initial ACL recognized on PCD assets(4)

 

-

 

 

 

-

 

 

 

-

 

 

 

 i 18.8

 

 

 

 i 1.4

 

 

 

 i 20.2

 

Other(2)

 

 i 28.2

 

 

 

( i 0.5

)

 

 

 i 27.7

 

 

 

( i 28.6

)

 

 

( i 3.0

)

 

 

( i 31.6

)

Gross charge-offs(4)

 

( i 86.2

)

 

 

( i 6.5

)

 

 

( i 92.7

)

 

 

( i 331.0

)

 

 

( i 3.7

)

 

 

( i 334.7

)

Recoveries

 

 i 46.1

 

 

 

 i 2.2

 

 

 

 i 48.3

 

 

 

 i 43.5

 

 

 

 i 1.8

 

 

 

 i 45.3

 

Balance - end of period

$

 i 701.2

 

 

$

 i 89.2

 

 

$

 i 790.4

 

 

$

 i 1,049.3

 

 

$

 i 156.9

 

 

$

 i 1,206.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

Commercial

Banking

 

 

Consumer

Banking

 

 

Total

 

 

Commercial

Banking

 

 

Consumer

Banking

 

 

Total

 

Allowance Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

$

 i 68.2

 

 

$

 i 4.1

 

 

$

 i 72.3

 

 

$

 i 100.8

 

 

$

 i 5.5

 

 

$

 i 106.3

 

Loans collectively evaluated for impairment

 

 i 633.0

 

 

 

 i 85.1

 

 

 

 i 718.1

 

 

 

 i 832.9

 

 

 

 i 124.6

 

 

 

 i 957.5

 

Allowance for credit losses

$

 i 701.2

 

 

$

 i 89.2

 

 

$

 i 790.4

 

 

$

 i 933.7

 

 

$

 i 130.1

 

 

$

 i 1,063.8

 

Allowance for off-balance sheet credit exposures

$

 i 48.6

 

 

$

 i 1.5

 

 

$

 i 50.1

 

 

$

 i 76.8

 

 

$

 i 1.5

 

 

$

 i 78.3

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

$

 i 289.1

 

 

$

 i 53.1

 

 

$

 i 342.2

 

 

$

 i 346.3

 

 

$

 i 86.4

 

 

$

 i 432.7

 

Loans collectively evaluated for impairment

 

 i 26,928.0

 

 

 

 i 6,190.8

 

 

 

 i 33,118.8

 

 

 

 i 28,290.2

 

 

 

 i 7,421.7

 

 

 

 i 35,711.9

 

Ending balance

$

 i 27,217.1

 

 

$

 i 6,243.9

 

 

$

 i 33,461.0

 

 

$

 i 28,636.5

 

 

$

 i 7,508.1

 

 

$

 i 36,144.6

 

Percent of loans to total loans

 

 i 81.3

%

 

 

 i 18.7

%

 

 

 i 100.0

%

 

 

 i 79.2

%

 

 

 i 20.8

%

 

 

 i 100.0

%

(1)

Included in the provision for credit losses was $( i 11.7) million and $( i 6.4) million for the quarters ended September 30, 2021 and 2020, respectively, and $( i 28.2) million and $ i 29.9 million for the nine months ended September 30, 2021 and 2020, respectively, related to off-balance sheet credit exposures, which is not part of the ACL and is offset in the “Other” line.

(2)

“Other” primarily includes provision changes related to off balance sheet credit exposures, which represents credit cost related to unfunded financing commitments, deferred purchase agreements (“DPA’s”), and letters of credit. The allowance related to this exposure is included in other liabilities.

(3)

CECL adoption was before the MOB Acquisition.

(4)

In connection with the MOB Acquisition, the initial ACL recognized on PCD assets was $ i 58.8 million, of which $ i 38.6 million was charged-off for loans that had been written-off prior to acquisition (whether full or partial) or which met CIT’s charge-off policy at the time of acquisition. After considering loans that were immediately charged-off upon acquisition, the net impact was $ i 20.2 million of additional PCD reserves on January 1, 2020.

 / 

 

The ACL was $ i 790.4 million as of September 30, 2021, compared to $ i 1,063.8 million at December 31, 2020. The lower ACL balance drove a benefit for credit losses of $( i 67.1) million and $( i 256.7) million for the quarter and nine months ended September 30, 2021, respectively, compared to a provision of $ i 63.3 million and $ i 800.8 million for the quarter and nine months ended September 30, 2020, respectively. The allowance for off-balance sheet credit exposures decreased from $ i 78.3 million at December 31, 2020 to $ i 50.1 million at September 30, 2021.

Changes in the ACL and allowance for off-balance sheet credit exposures compared to the prior year periods reflect lower loan balances and off-balance sheet credit exposures, as well as an improvement in the macroeconomic scenario forecasts and credit loss trends. The year-ago ACL and provision reflected the estimated impact of the COVID-19 pandemic on the economy and market environment across our portfolio, along with the adoption of the CECL standard and the impact of the MOB Acquisition on January 1, 2020.

 / 

19

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 i 

NOTE 5 — LEASES

 

Lessee

CIT leases primarily include office space and bank branches, and substantially all of our lease liabilities relate to United States real estate leases under operating lease arrangements. Our lessee finance leases are not significant. Our real estate leases have remaining lease terms of up to  i 15 years. Our lease terms may include options to extend or terminate the lease. The options are considered in the accounting when it is determined that it is reasonably certain the option will be exercised.  

 i 

The following tables present supplemental balance sheet and cash flow information related to operating leases. Right of use (“ROU”) assets are included in other assets and lease liabilities are included in other liabilities.

Supplemental Lease Balance Sheet Information (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

ROU assets

$

 i 252.7

 

 

$

 i 198.8

 

Lease liabilities

 

 i 288.4

 

 

 

 i 249.9

 

Supplemental Cash Flow Information (dollars in millions)

 

Nine Months Ended

September 30,

 

 

2021

 

 

2020

 

Cash paid for amounts included in the measurement of lease liabilities

$

 i 37.4

 

 

$

 i 42.6

 

ROU assets obtained in exchange for new lease liabilities

 

 i 68.9

 

 

 

 i 16.4

 
 / 

A  i 15-year lease commenced in April 2021 for office space in Morristown, NJ, which is primarily occupied by corporate functional staff.  At September 30, 2021, ROU assets and lease liabilities for the lease are $ i 71.9 and $ i 61.7 million, respectively.

Lessor

The Company leases equipment to commercial end-users under operating lease and finance lease arrangements. The majority of operating lease equipment is long-lived rail equipment which is typically leased several times over the equipment’s life. We also lease technology and office equipment and large and small ticket industrial, medical, and transportation equipment under both operating leases and finance leases.  

Our Rail operating leases typically do not include purchase options. Many of our finance leases, and other equipment operating leases, offer the lessee the option to purchase the equipment at fair market value or for a nominal fixed purchase option, and many of the leases that do not have a nominal purchase option include renewal provisions resulting in some leases continuing beyond initial contractual term. Our leases typically do not include early termination options; and continued rent payments are due if leased equipment is not returned at the end of the lease.

 i 

The table that follows presents lease income related to the Company’s operating and finance leases:

Lease Income (dollars in millions)

 

Quarters Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Lease income – Operating leases

$

 i 173.9

 

 

$

 i 191.4

 

 

$

 i 530.5

 

 

$

 i 578.2

 

Variable lease income – Operating leases (1)

 

 i 12.3

 

 

 

 i 9.9

 

 

 

 i 38.6

 

 

 

 i 33.8

 

Rental income on operating leases

 

 i 186.2

 

 

 

 i 201.3

 

 

 

 i 569.1

 

 

 

 i 612.0

 

Interest income - Sales type and direct financing leases

 

 i 39.5

 

 

 

 i 44.3

 

 

 

 i 125.9

 

 

 

 i 127.5

 

Variable lease income included in Other non-interest income (2)

 

 i 10.4

 

 

 

 i 9.9

 

 

 

 i 31.7

 

 

 

 i 31.7

 

Leveraged lease income

 

 i 3.7

 

 

 

 i 3.1

 

 

 

 i 10.5

 

 

 

 i 8.3

 

Total lease income

$

 i 239.8

 

 

$

 i 258.6

 

 

$

 i 737.2

 

 

$

 i 779.5

 

(1)     Primarily includes per diem railcar operating lease rental income earned on a time or mileage usage basis.

(2)     Includes revenue related to insurance coverage on Business Capital leased equipment of $ i 6.8 million and $ i 5.9 million for the quarters ended September 30, 2021 and 2020, respectively, and $ i 20.1 million and $ i 18.3 million for the nine months ended September 30, 2021 and 2020, respectively, as well as revenue related to leased equipment property tax reimbursements due from customers of $ i 3.5 million and $ i 4.0 million for the quarters ended September 30, 2021 and 2020, respectively, and $ i 11.5 million and $ i 13.4 million for the nine months ended September 30, 2021 and 2020.

 / 

 

 

 / 

20

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 i 

NOTE 6 — INVESTMENT SECURITIES

Investment securities include debt and equity securities. See Note 1 — Business and Summary of Significant Accounting Policies in the Company’s 2020 Form 10-K for information on accounting for investment securities.  i The following table presents carrying value of investment securities.

Carrying Value of Investment Securities (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Available-for-sale securities

 

 

 

 

 

 

 

Debt securities

$

 i 5,561.1

 

 

$

 i 6,673.5

 

Non-marketable securities(1)

 

 i 214.1

 

 

 

 i 215.5

 

Total investment securities

$

 i 5,775.2

 

 

$

 i 6,889.0

 

(1)

Non-marketable securities include restricted stock of the FRB and FHLB carried at cost of $ i 164.8 million and $ i 181.7 million at September 30, 2021 and December 31, 2020, respectively. The remaining non-marketable securities without readily determinable fair values measured under the measurement exception totaled $ i 49.3 million and $ i 33.8 million at September 30, 2021 and December 31, 2020, respectively.

Accrued interest receivable on debt securities totaled $ i 7.6 million and $ i 13.7 million as of September 30, 2021 and December 31, 2020, respectively, and were included in other assets.

The Company had $ i 4.4 billion and $ i 3.8 billion of interest-bearing cash at banks at September 30, 2021 and December 31, 2020, respectively, which are cash and cash equivalents and presented separately on the Consolidated Balance Sheet.

 i 

The following table presents interest and dividends on investments and interest-bearing cash.

Interest and Dividend Income (dollars in millions)

 

Quarters Ended

September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income - debt securities(1)

$

 i 15.0

 

 

$

 i 24.0

 

 

$

 i 50.9

 

 

$

 i 90.1

 

Interest income - interest-bearing cash

 

 i 2.0

 

 

 

 i 2.1

 

 

 

 i 4.8

 

 

 

 i 9.5

 

Dividends - equity securities

 

 i 0.9

 

 

 

 i 1.4

 

 

 

 i 3.7

 

 

 

 i 3.6

 

Total interest and dividends

$

 i 17.9

 

 

$

 i 27.5

 

 

$

 i 59.4

 

 

$

 i 103.2

 

 

(1)

Includes interest income on securities purchased under agreement to resell and insignificant amounts of non-taxable interest income.

 

 /  i 

The following table presents proceeds from sales of debt securities AFS and realized gains (losses) included in earnings at the time of sales. The nine months ended September 30, 2021 included the impact of management’s strategic decision to monetize gains on certain AFS securities (primarily mortgage-backed securities (“MBS”) previously included in accumulated other comprehensive income (“AOCI”). See Changes in Accumulated Other Comprehensive Income (Loss) by Component table in Note 11 – Stockholders’ Equity.

Realized Gains (Losses) and Proceeds from Sales of Debt Securities AFS (dollars in millions)

 

Quarters Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Proceeds from sales of debt securities AFS

$

 i 271.4

 

 

$

 i 314.2

 

 

$

 i 2,891.2

 

 

$

 i 2,776.1

 

Gross realized gains

$

 i 5.5

 

 

$

 i 8.4

 

 

$

 i 113.8

 

 

$

 i 30.5

 

Gross realized losses

 

—

 

 

 

( i 0.2

)

 

 

( i 0.5

)

 

 

( i 1.9

)

Net realized gains on sales of debt securities AFS

$

 i 5.5

 

 

$

 i 8.2

 

 

$

 i 113.3

 

 

$

 i 28.6

 
 /  / 

21

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

The following table presents amortized cost and fair value of securities AFS.

Amortized Cost and Fair Value (dollars in millions)

 

Amortized

Cost(1)

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities AFS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government/sponsored agency – Residential

$

 i 1,596.6

 

 

$

 i 0.5

 

 

$

( i 21.6

)

 

$

 i 1,575.5

 

U.S. government/sponsored agency – Commercial

 

 i 1,742.2

 

 

 

 i —

 

 

 

( i 28.6

)

 

 

 i 1,713.6

 

U.S. government/sponsored agency obligations

 

 i 1,509.9

 

 

 

 i —

 

 

 

( i 22.8

)

 

 

 i 1,487.1

 

U.S. Treasury securities

 

 i 506.3

 

 

 

 i —

 

 

 

( i 17.8

)

 

 

 i 488.5

 

Supranational securities

 

 i 309.9

 

 

 

 i —

 

 

 

( i 13.5

)

 

 

 i 296.4

 

Total debt securities AFS

$

 i 5,664.9

 

 

$

 i 0.5

 

 

$

( i 104.3

)

 

$

 i 5,561.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities AFS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government/sponsored agency – Residential

$

 i 2,503.4

 

 

$

 i 76.5

 

 

$

( i 0.1

)

 

$

 i 2,579.8

 

U.S. government/sponsored agency – Commercial

 

 i 1,725.0

 

 

 

 i 56.3

 

 

 

( i 0.5

)

 

 

 i 1,780.8

 

U.S. government/sponsored agency obligations

 

 i 1,474.2

 

 

 

 i 0.5

 

 

 

( i 3.9

)

 

 

 i 1,470.8

 

U.S. Treasury securities

 

 i 505.9

 

 

 

 i —

 

 

 

( i 3.2

)

 

 

 i 502.7

 

Supranational securities

 

 i 330.2

 

 

 

 i 0.2

 

 

 

( i 2.9

)

 

 

 i 327.5

 

Agency asset-backed securities

 

 i 1.5

 

 

 

 i 0.1

 

 

 

 i —

 

 

 

 i 1.6

 

Corporate bonds - foreign

 

 i 10.3

 

 

 

 i —

 

 

 

 i —

 

 

 

 i 10.3

 

Total debt securities AFS

$

 i 6,550.5

 

 

$

 i 133.6

 

 

$

( i 10.6

)

 

$

 i 6,673.5

 

(1)

The amortized cost is net of the ACL. There was no ACL relating to debt securities as of September 30, 2021 and December 31, 2020.

 

 i 

The following table presents the debt securities AFS by contractual maturity dates.

Maturities - Debt Securities AFS (dollars in millions)

 

September 30, 2021

 

 

Amortized

Cost

 

 

Fair

Value

 

 

Weighted

Average

Yield

 

Mortgage-backed securities — U.S. government/sponsored agency – Residential

 

 

 

 

 

 

 

 

 

 

 

After 5 through 10 years

$

 i 0.1

 

 

$

 i 0.1

 

 

 

 i 5.21

%

After 10 years

 

 i 1,596.5

 

 

 

 i 1,575.4

 

 

 

 i 1.68

%

Total

 

 i 1,596.6

 

 

 

 i 1,575.5

 

 

 

 i 1.68

%

Mortgage-backed securities — U.S. government/sponsored agency – Commercial

 

 

 

 

 

 

 

 

 

 

 

After 5 through 10 years

 

 i 31.2

 

 

 

 i 30.1

 

 

 

 i 1.12

%

After 10 years

 

 i 1,711.0

 

 

 

 i 1,683.5

 

 

 

 i 1.45

%

Total

 

 i 1,742.2

 

 

 

 i 1,713.6

 

 

 

 i 1.45

%

U.S. government/sponsored agency obligations

 

 

 

 

 

 

 

 

 

 

 

After 1 through 5 years

 

 i 532.5

 

 

 

 i 528.0

 

 

 

 i 0.66

%

After 5 through 10 years

 

 i 977.4

 

 

 

 i 959.1

 

 

 

 i 1.13

%

Total

 

 i 1,509.9

 

 

 

 i 1,487.1

 

 

 

 i 0.96

%

U.S. Treasury securities

 

 

 

 

 

 

 

 

 

 

 

1 year or less

 

 i 13.0

 

 

 

 i 13.1

 

 

 

 i 0.23

%

After 1 through 5 years

 

 i 99.9

 

 

 

 i 98.1

 

 

 

 i 0.27

%

After 5 through 10 years

 

 i 393.4

 

 

 

 i 377.3

 

 

 

 i 0.50

%

Total

 

 i 506.3

 

 

 

 i 488.5

 

 

 

 i 0.45

%

Supranational securities

 

 

 

 

 

 

 

 

 

 

 

1 year or less

 

—

 

 

 

—

 

 

 

 i 0.00

%

After 1 through 5 years

 

 i 56.9

 

 

 

 i 56.2

 

 

 

 i 0.47

%

After 5 through 10 years

 

 i 253.0

 

 

 

 i 240.2

 

 

 

 i 0.85

%

Total

 

 i 309.9

 

 

 

 i 296.4

 

 

 

 i 0.78

%

Total debt securities AFS

$

 i 5,664.9

 

 

$

 i 5,561.1

 

 

 

 i 1.26

%
 / 

At September 30, 2021 and

22

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

December 31, 2020, certain securities AFS were in unrealized loss positions.  i The following table summarizes by investment category the gross unrealized losses, respective fair value and length of time that those securities have been in a continuous unrealized loss position for which an ACL has not been recorded.

Gross Unrealized Loss (dollars in millions)

 

September 30, 2021

 

 

Less than 12 months

 

 

12 months or greater

 

 

Fair

Value

 

 

Gross

Unrealized

Loss

 

 

Fair

Value

 

 

Gross

Unrealized

Loss

 

Debt securities AFS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government/sponsored agency - Residential

$

 i 1,511.3

 

 

$

( i 21.6

)

 

$

 i —

 

 

$

 i —

 

U.S. government/sponsored agency - Commercial

 

 i 1,594.1

 

 

 

( i 26.9

)

 

 

 i 42.2

 

 

 

( i 1.7

)

U.S. government/sponsored agency obligations

 

 i 1,324.7

 

 

 

( i 21.7

)

 

 

 i 87.4

 

 

 

( i 1.1

)

U.S. Treasury securities

 

 i 434.1

 

 

 

( i 15.7

)

 

 

 i 47.8

 

 

 

( i 2.1

)

Supranational securities

 

 i 187.5

 

 

 

( i 8.0

)

 

 

 i 108.8

 

 

 

( i 5.5

)

Total debt securities AFS

$

 i 5,051.7

 

 

$

( i 93.9

)

 

$

 i 286.2

 

 

$

( i 10.4

)

 

 

December 31, 2020

 

 

Less than 12 months

 

 

12 months or greater

 

 

Fair

Value

 

 

Gross

Unrealized

Loss

 

 

Fair

Value

 

 

Gross

Unrealized

Loss

 

Debt securities AFS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government/sponsored agency - Residential

$

 i 39.3

 

 

$

( i 0.1

)

 

$

 i —

 

 

$

 i —

 

U.S. government/sponsored agency - Commercial

 

 i 267.3

 

 

 

( i 0.5

)

 

 

 i —

 

 

 

 i —

 

U.S. government/sponsored agency obligations

 

 i 628.5

 

 

 

( i 3.9

)

 

 

 i —

 

 

 

 i —

 

U.S. Treasury securities

 

 i 489.9

 

 

 

( i 3.2

)

 

 

 i —

 

 

 

 i —

 

Supranational securities

 

 i 245.4

 

 

 

( i 2.9

)

 

 

 i —

 

 

 

 i —

 

Total debt securities AFS

$

 i 1,670.4

 

 

$

( i 10.6

)

 

$

 i —

 

 

$

 i —

 

 

Impairment of Investment Securities

 

There were  i no impairment losses on debt securities AFS for the quarter ended September 30, 2021. There was a $ i 0.4 million impairment loss on debt securities AFS for the nine months ended September 30, 2021. There were  i  i no /  impairment losses recognized for the quarter and nine months ended September 30, 2020.

 

There were insignificant adjustments for non-marketable securities without readily determinable fair values for the quarter and nine months ended September 30, 2021, and no adjustments for the quarter and nine months ended September 30, 2020.

 

There was no ACL relating to investment securities as of September 30, 2021 and December 31, 2020, primarily due to the high proportion of U.S. government guaranteed securities in the portfolio.

 

There were insignificant unrealized gains and losses on non-marketable securities as of September 30, 2021 and December 31, 2020.

 

Pledged Securities

 

Securities with a carrying value of $ i 136.2 million and $ i 1,926.2 million were pledged as of September 30, 2021 and December 31, 2020, respectively, to secure FHLB financing availability and mortgage programs, public funds in CIT Bank, derivative contracts, and for other purposes as required or permitted by law.

 i 

NOTE 7 — VARIABLE INTEREST ENTITIES

Variable Interest Entities (“VIE”)

Described below are the results of the Company’s assessment of its variable interests in order to determine its current status with regard to being the VIE primary beneficiary (“PB”). See Note 1 — Business and Summary of Significant Accounting Policies in the 2020 Form 10-K for additional information on accounting for VIEs.

Consolidated VIEs

At September 30, 2021 and December 31, 2020, there were  i  i no /  consolidated VIEs.

Unconsolidated VIEs

Unconsolidated VIEs include agency and non-agency securitization structures, limited partnership interests and joint ventures where the Company’s involvement is limited to an investor interest and the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance or obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. 

 i  / 

23

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The table below presents potential losses that would be incurred under hypothetical circumstances, such that the value of its interests and any associated collateral declines to zero and assuming no recovery or offset from any economic hedges. The Company believes the possibility is remote under this hypothetical scenario; accordingly, this disclosure is not an indication of expected loss.

Unconsolidated VIEs Carrying Value (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Securities

 

 

Other

Investments

 

 

Securities

 

 

Other

Investments

 

Agency securities

$

 i 3,289.1

 

 

$

—

 

 

$

 i 4,362.2

 

 

$

—

 

Tax credit equity investments

 

—

 

 

 

 i 366.6

 

 

 

—

 

 

 

 i 311.5

 

Equity investments

 

—

 

 

 

 i 146.6

 

 

 

—

 

 

 

 i 111.9

 

Total assets

$

 i 3,289.1

 

 

$

 i 513.2

 

 

$

 i 4,362.2

 

 

$

 i 423.4

 

Commitments to tax credit investments(1)

$

—

 

 

$

 i 195.7

 

 

$

—

 

 

$

 i 168.3

 

Total liabilities

$

—

 

 

$

 i 195.7

 

 

$

—

 

 

$

 i 168.3

 

Maximum loss exposure

$

 i 3,289.1

 

 

$

 i 513.2

 

 

$

 i 4,362.2

 

 

$

 i 423.4

 

(1)

Represents commitments to invest in affordable housing investments, and other investments qualifying for community reinvestment tax credits. These commitments are payable on demand and are recorded in other liabilities.

 

 i 

NOTE 8 — BORROWINGS

 i 

The following table presents the carrying value of outstanding borrowings.

Borrowings (dollars in millions)

 

 

September 30, 2021

 

 

December 31, 2020

 

 

CIT Group Inc.

 

 

Subsidiaries

 

 

Total

 

 

Total

 

Unsecured borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior

$

 i 3,427.0

 

 

$

 i 313.3

 

 

$

 i 3,740.3

 

 

$

 i 4,236.3

 

Subordinated notes

 

 i 495.3

 

 

 

—

 

 

 

 i 495.3

 

 

 

 i 494.9

 

Secured borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FHLB advances

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 1,100.0

 

Other secured and structured financings

 

—

 

 

 

 i 12.0

 

 

 

 i 12.0

 

 

 

 i 6.1

 

Total borrowings

$

 i 3,922.3

 

 

$

 i 325.3

 

 

$

 i 4,247.6

 

 

$

 i 5,837.3

 
 / 

Unsecured Borrowings

Revolving Credit Facility

The Revolving Credit Facility had a total commitment amount of $ i  i 300 /  million at September 30, 2021 and December 31, 2020, consisting of a $ i 200 million revolving loan tranche and a $ i 100 million revolving loan tranche that could also be utilized for issuance of letters of credit. At September 30, 2021, the Revolving Credit Facility had a Tier 1 capital ratio requirement of  i 8.5%, and applicable margin charged under the facility of  i 1.75% for loans indexed to LIBOR and  i 0.75% for loans related to other indexes, as defined in the credit agreement.

At September 30, 2021, the Revolving Credit Facility was unsecured and guaranteed by  i three of the Company’s domestic operating subsidiaries. In addition, the applicable required minimum guarantor asset coverage ratio could range from 1.0:1.0 to 1.5:1.0 based on CIT’s credit ratings and was  i 1.25:1.00 at September 30, 2021.

The facility matured on  i November 1, 2021 and was not renewed.  

Senior Unsecured Notes

On February 9, 2021, the Company redeemed all of the aggregate principal amount ($ i 500 million) of outstanding  i 4.125% Senior Notes due March 2021 at par. There were no other significant changes from December 31, 2020. See Note 10 – Borrowings in the 2020 Form 10-K.

Subordinated Unsecured Notes

The principal amounts and maturity dates of the subordinated unsecured notes remained unchanged from December 31, 2020. See Note 10 – Borrowings in the 2020 Form 10-K.      

 / 

24

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Secured Borrowings

At September 30, 2021, the Company had pledged $ i 11.9 billion of assets to several financing facilities (including collateral for the FRB discount window that is currently not drawn) which included $ i 11.9 billion of loans and $ i 28 million of cash. Under the FHLB Facility, CIT Bank, N.A. may at any time grant a security interest in, sell, convey or otherwise dispose of any of the assets used for collateral, provided that CIT Bank, N.A. is in compliance with the collateral maintenance requirement immediately following such disposition and all other requirements of the facility at the time of such disposition.

FHLB Advances

 

 i 

The following table presents the FHLB balances as of September 30, 2021 and December 31, 2020.

FHLB Balances (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Total borrowing capacity

$

 i 5,391.4

 

 

$

 i 7,175.3

 

Less:

 

 

 

 

 

 

 

Advances

 

—

 

 

 

( i 1,100.0

)

Available capacity

$

 i 5,391.4

 

 

$

 i 6,075.3

 

Pledged assets (1)

$

 i 7,023.0

 

 

$

 i 8,868.0

 

Weighted Average Rate

N/A

 

 

 

 i 0.82

%

(1)

There were  i no pledged HQL securities at September 30, 2021. December 31, 2020 pledged assets included $ i 1,784.4 million of HQL securities.

 / 

Other Secured and Structured Financings

Other secured (other than FHLB) and structured financings of CIT-owned subsidiaries totaled $ i 12.0 million and $ i 6.1 million at September 30, 2021 and December 31, 2020, respectively. Pledged assets related to these financings, primarily the ABL facility, totaled $ i 2,478.0 million and $ i 2,486.4 million at September 30, 2021 and December 31, 2020, respectively. The outstanding secured and structured financings as of September 30, 2021 had a weighted average rate of  i 4.33%, compared to a weighted average rate of  i 4.39% at December 31, 2020.

FRB

There were  i  i no /  outstanding borrowings from the FRB Discount Window at September 30, 2021 and December 31, 2020.

25

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 i 

NOTE 9 — DERIVATIVE FINANCIAL INSTRUMENTS

See Derivative Financial Instruments and Recent Accounting Pronouncements sections in Note 1 — Business and Summary of Significant Accounting Policies in the Company’s 2020 Form 10-K for a description of the Company’s derivative products and transaction policies.

 i 

The following table presents notional amount and fair value of derivative financial instruments on a gross basis.

Notional Amount and Fair Value of Derivative Financial Instruments (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Notional Amount

 

 

Asset Fair Value

 

 

Liability Fair Value

 

 

Notional Amount

 

 

Asset Fair Value

 

 

Liability Fair Value

 

Derivatives designated as hedging instruments (Qualifying hedges)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

 i 2.6

 

 

$

—

 

 

$

—

 

 

$

 i 33.9

 

 

$

—

 

 

$

( i 0.3

)

Interest rate contracts(1)(3)

 

—

 

 

 

—

 

 

 

—

 

 

 

 i 500.0

 

 

 

—

 

 

 

—

 

Total derivatives designated as hedging instruments

 

 i 2.6

 

 

 

—

 

 

 

—

 

 

 

 i 533.9

 

 

 

—

 

 

 

( i 0.3

)

Derivatives not designated as hedging instruments (Non-qualifying hedges)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts(1)(3)

 

 i 20,948.6

 

 

 

 i 263.9

 

 

 

( i 74.7

)

 

 

 i 21,192.9

 

 

 

 i 429.6

 

 

 

( i 72.2

)

Foreign exchange contracts

 

 i 205.9

 

 

 

 i 4.5

 

 

 

( i 2.6

)

 

 

 i 247.8

 

 

 

 i 1.7

 

 

 

( i 6.0

)

Other contracts(2)

 

 i 909.5

 

 

 

 i 0.1

 

 

 

( i 0.6

)

 

 

 i 875.8

 

 

 

 i 0.3

 

 

 

( i 0.7

)

Total derivatives not designated as hedging instruments

 

 i 22,064.0

 

 

 

 i 268.5

 

 

 

( i 77.9

)

 

 

 i 22,316.5

 

 

 

 i 431.6

 

 

 

( i 78.9

)

Gross derivatives fair values presented in the Consolidated Balance Sheets

$

 i 22,066.6

 

 

$

 i 268.5

 

 

$

( i 77.9

)

 

$

 i 22,850.4

 

 

$

 i 431.6

 

 

$

( i 79.2

)

Less: Gross amounts offset in the Consolidated Balance Sheets

 

 

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

—

 

 

 

—

 

Net amount presented in the Consolidated Balance Sheet

 

 

 

 

 

 i 268.5

 

 

 

( i 77.9

)

 

 

 

 

 

 

 i 431.6

 

 

 

( i 79.2

)

Less: Amounts subject to master netting agreements(4)

 

 

 

 

 

( i 10.8

)

 

 

 i 10.8

 

 

 

 

 

 

 

( i 4.7

)

 

 

 i 4.7

 

Less: Cash collateral pledged (received) subject to master netting agreements(5)

 

 

 

 

 

( i 0.9

)

 

 

 i 18.3

 

 

 

 

 

 

 

—

 

 

 

 i 42.9

 

Total net derivative fair value

 

 

 

 

$

 i 256.8

 

 

$

( i 48.8

)

 

 

 

 

 

$

 i 426.9

 

 

$

( i 31.6

)

(1)

Fair value balances include accrued interest.

(2)

Other derivative contracts not designated as hedging instruments include risk participation agreements.

(3)

The Company accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market”. As a result, variation margin payments are characterized as settlement of the derivative exposure and variation margin balances are netted against the corresponding derivative mark-to-market balances. Gross amounts of recognized assets and liabilities were lowered by $ i 45.5 million and $ i 198.8 million, respectively at September 30, 2021 and $ i 20.5 million and $ i 339.9 million, respectively at December 31, 2020.

(4)

The Company’s derivative transactions are governed by ISDA agreements that allow for net settlements of certain payments as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. We believe our ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure.

(5)

In conjunction with the ISDA agreements described above, the Company has entered into collateral arrangements with its counterparties, which provide for the exchange of cash depending on change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties. Collateral pledged or received is included in other assets or other liabilities, respectively.

 / 

 

Qualifying Hedges

CIT enters into interest rate swap agreements to manage interest rate exposure on its fixed-rate borrowings. The agreements that qualify for hedge accounting are designated as fair value hedges. The following table represents gains (losses) of fair value hedges recognized as interest expense.

 

 i 

Gains (Losses) on Qualifying Hedges (dollars in millions)

 

Quarters Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Recognized on derivatives(1)

$

—

 

 

$

( i 2.3

)

 

$

( i 1.1

)

 

$

 i 2.6

 

Recognized on hedged item

 

—

 

 

 

 i 2.3

 

 

 

 i 1.1

 

 

 

( i 2.6

)

Net recognized on fair value hedges (no ineffectiveness)

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

(1) Gains (losses) exclude amounts related to interest settlements on derivatives.

 /  / 

26

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 i 

The following table presents the carrying value of hedged items and associated cumulative hedging adjustment related to fair value hedges.

Cumulative Fair Value Hedging Adjustments (dollars in millions)

 

 

 

 

 

Cumulative Fair Value Hedging Adjustment Included in the Carrying Value of Hedged Items

 

 

Carrying Value of

Hedged Items(1)

 

 

Currently Designated

 

 

No Longer Designated

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Long-term Debt

$

 i 784.4

 

 

$

—

 

 

$

 i 1.4

 

December 31, 2020

 

 

Long-term Debt

$

 i 1,534.4

 

 

$

 i 1.1

 

 

$

 i 1.8

 

 

(1)

Carrying value includes $ i 784.4 million and $ i 1,033.9 million of carrying value of hedged items no longer designated as of September 30, 2021 and December 31, 2020, respectively.

 /  i 

The following table presents the pre-tax net gains (losses) recorded in the condensed consolidated statements of operations and in the condensed consolidated statements of comprehensive income (loss) relating to derivatives designated as net investment hedges.

Pre-tax Net Gains (Losses) Relating to Derivatives Designated as Net Investment Hedges (dollars in millions)

 

 

 

 

 

Amounts

 

 

 

 

 

 

Amounts

 

 

Recorded in Other

 

 

 

 

 

 

Reclassified from

 

 

Comprehensive

 

 

Total Change in

 

 

AOCI to Income

 

 

Income (Loss)

 

 

AOCI for Period

 

Contract Type

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts - net investment hedges

$

 i 13.5

 

 

$

 i 0.2

 

 

$

 i 13.7

 

Quarter Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts - net investment hedges

$

—

 

 

$

( i 1.6

)

 

$

( i 1.6

)

Nine Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts - net investment hedges

$

 i 13.5

 

 

$

( i 0.3

)

 

$

 i 13.2

 

Nine Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts - net investment hedges

$

—

 

 

$

( i 1.1

)

 

$

( i 1.1

)
 / 

Non-Qualifying Hedges

 i 

The following table presents gains (losses) of non-qualifying hedges recognized as other non-interest income.

 

Gains (Losses) on Non-Qualifying Hedges (dollars in millions)

 

Quarters Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest rate contracts

$

 i 3.1

 

 

$

 i 5.1

 

 

$

 i 11.3

 

 

$

 i 11.7

 

Foreign currency forward contracts

 

 i 2.1

 

 

 

( i 6.1

)

 

 

 i 3.4

 

 

 

( i 3.7

)

Other contracts

 

—

 

 

 

 i 0.2

 

 

 

( i 0.1

)

 

 

( i 0.7

)

Total non-qualifying hedges - income statement impact

$

 i 5.2

 

 

$

( i 0.8

)

 

$

 i 14.6

 

 

$

 i 7.3

 
 / 

 

 i 

NOTE 10 — FAIR VALUE

Fair Value Hierarchy

The Company measures certain financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. See Note 1 — Business and Summary of Significant Accounting Policies in the Company's 2020 Form 10-K for a description of its valuation process for assets and liabilities measured at fair value and the fair value hierarchy.

27

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 i 

The following table summarizes the Company’s assets and liabilities measured at estimated fair value on a recurring basis.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (dollars in millions)

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government/sponsored agency – Residential MBS

$

 i 1,575.5

 

 

$

—

 

 

$

 i 1,575.5

 

 

$

—

 

U.S. government/sponsored agency – Commercial MBS

 

 i 1,713.6

 

 

 

—

 

 

 

 i 1,713.6

 

 

 

—

 

U.S. government/sponsored agency obligations

 

 i 1,487.1

 

 

 

—

 

 

 

 i 1,487.1

 

 

 

—

 

U.S. Treasury securities

 

 i 488.5

 

 

 

 i 8.1

 

 

 

 i 480.4

 

 

 

—

 

Supranational securities

 

 i 296.4

 

 

 

—

 

 

 

 i 296.4

 

 

 

—

 

Total debt securities AFS

 

 i 5,561.1

 

 

 

 i 8.1

 

 

 

 i 5,553.0

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts — non-qualifying hedges

 

 i 263.9

 

 

 

—

 

 

 

 i 263.7

 

 

 

 i 0.2

 

Other derivative — non-qualifying hedges

 

 i 4.6

 

 

 

—

 

 

 

 i 4.4

 

 

 

 i 0.2

 

Total derivative assets at fair value — non-qualifying hedges(1)

 

 i 268.5

 

 

 

—

 

 

 

 i 268.1

 

 

 

 i 0.4

 

Foreign currency forward contracts — net investment qualifying hedges

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total derivative assets at fair value — qualifying hedges

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

$

 i 5,829.6

 

 

$

 i 8.1

 

 

$

 i 5,821.1

 

 

$

 i 0.4

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts — non-qualifying hedges

$

( i 74.7

)

 

$

—

 

 

$

( i 74.7

)

 

$

—

 

Other derivative— non-qualifying hedges

 

( i 3.2

)

 

 

—

 

 

 

( i 2.6

)

 

 

( i 0.6

)

Total derivative liabilities at fair value — non-qualifying hedges(1)

 

( i 77.9

)

 

 

—

 

 

 

( i 77.3

)

 

 

( i 0.6

)

Foreign currency forward contracts — net investment qualifying hedges

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total derivative liabilities at fair value — qualifying hedges

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

$

( i 77.9

)

 

$

—

 

 

$

( i 77.3

)

 

$

( i 0.6

)

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government/sponsored agency – Residential MBS

$

 i 2,579.8

 

 

$

—

 

 

$

 i 2,579.8

 

 

$

—

 

U.S. government/sponsored agency – Commercial MBS

 

 i 1,780.8

 

 

 

—

 

 

 

 i 1,780.8

 

 

 

—

 

U.S. government/sponsored agency obligations

 

 i 1,470.8

 

 

 

—

 

 

 

 i 1,470.8

 

 

 

—

 

U.S. Treasury securities

 

 i 502.7

 

 

 

 i 7.8

 

 

 

 i 494.9

 

 

 

—

 

Supranational securities

 

 i 327.5

 

 

 

—

 

 

 

 i 327.5

 

 

 

—

 

Other securities

 

 i 11.9

 

 

 

—

 

 

 

 i 1.6

 

 

 

 i 10.3

 

Total debt securities AFS

 

 i 6,673.5

 

 

 

 i 7.8

 

 

 

 i 6,655.4

 

 

 

 i 10.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts — non-qualifying hedges

 

 i 429.6

 

 

 

—

 

 

 

 i 428.1

 

 

 

 i 1.5

 

Other derivative — non-qualifying hedges

 

 i 2.0

 

 

 

—

 

 

 

 i 1.7

 

 

 

 i 0.3

 

Total derivative assets at fair value — non-qualifying hedges(1)

 

 i 431.6

 

 

 

—

 

 

 

 i 429.8

 

 

 

 i 1.8

 

Total

$

 i 7,105.1

 

 

$

 i 7.8

 

 

$

 i 7,085.2

 

 

$

 i 12.1

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts — non-qualifying hedges

$

( i 72.2

)

 

$

—

 

 

$

( i 72.2

)

 

$

—

 

Other derivative— non-qualifying hedges

 

( i 6.7

)

 

 

—

 

 

 

( i 6.0

)

 

 

( i 0.7

)

Total derivative liabilities at fair value — non-qualifying hedges(1)

 

( i 78.9

)

 

 

—

 

 

 

( i 78.2

)

 

 

( i 0.7

)

Foreign currency forward contracts — net investment qualifying hedges

 

( i 0.3

)

 

 

—

 

 

 

( i 0.3

)

 

 

—

 

Total derivative liabilities at fair value — qualifying hedges

 

( i 0.3

)

 

 

—

 

 

 

( i 0.3

)

 

 

—

 

Total

$

( i 79.2

)

 

$

—

 

 

$

( i 78.5

)

 

$

( i 0.7

)

(1)

Derivative fair values include accrued interest.

 / 

The methods and assumptions used to estimate the fair value of each class of financial instruments measured at fair value on a recurring basis are as follows:

Debt securities AFS — Investments in U.S. government agency and sponsored agency guaranteed mortgage-backed securities, U.S. government agency and sponsored agency obligations, U.S. Treasury securities and supranational securities were valued using Level 2 inputs. The market for certain corporate bonds is not active, therefore the estimated fair value was determined using a discounted cash flow technique or other appropriate techniques. Given the lack of observable market data, the estimated fair value of the corporate bonds was classified as Level 3. All of the corporate bonds were sold in the second quarter of 2021.

Derivative Assets and Liabilities — Derivatives were valued using models that incorporate inputs depending on the type of derivative. Other than the fair value of credit derivatives, which were estimated using Level 3 inputs, most derivative instruments were valued using Level 2 inputs based on quoted prices for similar assets and liabilities and model-based valuation techniques for which all significant assumptions are observable in the market. See Note 9 — Derivative Financial Instruments for notional principal amounts and fair values.

 i 

28

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following tables summarize information about significant unobservable inputs related to the Company’s categories of Level 3 financial assets and liabilities measured on a recurring basis.

 

Quantitative Information about Level 3 Fair Value Measurements — Recurring (dollars in millions)

Financial Instrument

Estimated

Fair Value

 

 

Valuation

Technique(s)

 

Significant

Unobservable

Inputs

 

Range of

Inputs

 

Weighted

Average

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets — non qualifying

$

 i 0.4

 

 

Internal valuation model

 

Borrower Rate

 

1.8% - 4.1%

 

 i 2.7%

 

Total Assets

$

 i 0.4

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities — non-qualifying

$

( i 0.6

)

 

Internal valuation model

 

 

 

 

 

 

 

 

Total Liabilities

$

( i 0.6

)

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities — AFS

$

 i 10.3

 

 

Discounted cash flow

 

Discount Rate

 

8.5% - 10.4%

 

 i 9.5%

 

Derivative assets — non qualifying

 

 i 1.8

 

 

Internal valuation model

 

Borrower Rate

 

1.9% - 3.6%

 

 i 2.7%

 

Total Assets

$

 i 12.1

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities — non-qualifying

$

( i 0.7

)

 

Internal valuation model

 

 

 

 

 

 

 

 

Total Liabilities

$

( i 0.7

)

 

 

 

 

 

 

 

 

 

 

 

 i 

The following table summarizes the changes in estimated fair value for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3).

Changes in Estimated Fair Value of Level 3 Financial Assets and Liabilities Measured on a Recurring Basis (dollars in millions)

 

 

Securities-

AFS

 

 

Derivative

Assets-

Non-

Qualifying

 

 

Derivative

Liabilities-

Non-

Qualifying

 

 

FDIC

True-up

Liability(1)

 

Balance as of December 31, 2020

$

 i 10.3

 

 

$

 i 1.8

 

 

$

( i 0.7

)

 

$

—

 

Included in earnings

 

—

 

 

 

( i 1.4

)

 

 

 i 0.1

 

 

 

—

 

Included in comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Maturity and settlements

 

( i 9.9

)

 

 

—

 

 

 

—

 

 

 

—

 

Impairment

 

( i 0.4

)

 

 

—

 

 

 

—

 

 

 

—

 

Balance as of September 30, 2021

$

—

 

 

$

 i 0.4

 

 

$

( i 0.6

)

 

$

—

 

Balance as of December 31, 2019

$

 i 67.1

 

 

$

 i 0.3

 

 

$

( i 0.8

)

 

$

( i 68.8

)

Included in earnings

 

 i 0.1

 

 

 

 i 1.1

 

 

 

( i 0.4

)

 

 

( i 0.2

)

Included in comprehensive income

 

( i 1.1

)

 

 

—

 

 

 

—

 

 

 

—

 

Maturity and settlements

 

( i 26.7

)

 

 

—

 

 

 

—

 

 

 

 i 69.0

 

Balance as of September 30, 2020

$

 i 39.4

 

 

$

 i 1.4

 

 

$

( i 1.2

)

 

$

—

 

(1)

The FDIC True-up liability was recorded at estimated fair value as of the date of the OneWest transaction related to the FDIC-assisted transaction of La Jolla. The FDIC True-up liability was settled in April 2020.

 / 

 

Assets Measured at Estimated Fair Value on a Non-recurring Basis

Certain assets or liabilities are required to be measured at estimated fair value on a non-recurring basis subsequent to initial recognition. Generally, these adjustments are the result of lower of cost or market or other impairment accounting.

 i 

29

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following table presents carrying value of assets measured at estimated fair value on a non-recurring basis for which gains and losses from a non-recurring fair value adjustment have been recorded in the periods. The gains and losses reflect amounts for the respective year-to-date periods.

Assets Measured at Fair Value on a Non-recurring Basis (dollars in millions)

 

 

Fair Value Measurements

 

 

 

 

 

 

 

 

Total

 

 

 

 

Level 1

 

 

 

 

Level 2

 

 

 

 

Level 3

 

 

 

 

Total Gains

(Losses)

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale

$

 i 37.4

 

 

 

 

$

—

 

 

 

 

$

 i 6.5

 

 

 

 

$

 i 30.9

 

 

 

 

$

( i 4.7

)

Loans

 

 i 96.2

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 96.2

 

 

 

 

 

( i 20.7

)

Total

$

 i 133.6

 

 

 

 

$

—

 

 

 

 

$

 i 6.5

 

 

 

 

$

 i 127.1

 

 

 

 

$

( i 25.4

)

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale

$

 i 701.6

 

 

 

 

$

 i —

 

 

 

 

$

 i —

 

 

 

 

$

 i 701.6

 

 

 

 

$

( i 112.7

)

Loans

 

 i 106.4

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 106.4

 

 

 

 

 

( i 55.6

)

Mortgage servicing rights

 

 i 4.3

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 4.3

 

 

 

 

 

( i 4.5

)

ROU assets

 

 i 4.4

 

 

 

 

 

—

 

 

 

 

 

—

 

 

 

 

 

 i 4.4

 

 

 

 

 

( i 6.1

)

Total

$

 i 816.7

 

 

 

 

$

 i —

 

 

 

 

$

 i —

 

 

 

 

$

 i 816.7

 

 

 

 

$

( i 178.9

)

 

The methods and assumptions used to estimate the fair value of each class of financial instruments measured at fair value on a non-recurring basis are as follows:

 

Assets Held for Sale — The fair value of Level 2 assets was primarily estimated based on prices of recent trades of similar assets. The fair value of Level 3 assets was primarily measured under the income approach using the discounted cash flow model based on Level 3 inputs including discount rate or the price of executed or committed trades.

 

Loans — Loans that are collateral-dependent were measured based on the fair value of the underlying collateral less costs to sell. These loans are classified as Level 3 as the fair value of underlying collateral is estimated primarily based on third party

appraisals or opinions adjusted for the Company’s experience with liquidation value.

 

Mortgage Servicing Rights — Under the amortization method, the carrying value of the MSRs was reduced to its fair value by

the impairment loss recognized. The fair value of the MSRs was measured under the income approach using the discounted cash flow model based on Level 3 inputs including prepayment speed, discount rates and cost to service.

 

ROU Assets — During 2020, the Company recognized an impairment loss on ROU assets for certain leased facilities. The fair

value of ROU assets was measured based on the discounted cash flows of estimated rental income for the office space to be

subleased, using market participant assumptions. As unobservable inputs are used, ROU assets are classified as Level 3. See

Note 5 – Leases in the Company's 2020 Form 10-K for details.

30

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Financial Instruments not Measured at Fair Value

 i 

The carrying values and estimated fair values of financial instruments not measured at fair value presented below exclude finance leases and operating lease equipment, and certain other assets and liabilities, which were not required for disclosure.

Carrying Value and Fair Value of Financial Instruments (dollars in millions)

 

 

 

 

 

Estimated Fair Value

 

 

Carrying

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and interest bearing deposits

$

 i 4,598.4

 

 

$

 i 4,598.4

 

 

$

—

 

 

$

—

 

 

$

 i 4,598.4

 

Assets held for sale

 

 i 92.2

 

 

 

—

 

 

 

 i 13.1

 

 

 

 i 79.2

 

 

 

 i 92.3

 

Loans(1)

 

 i 30,582.8

 

 

 

—

 

 

 

 i 1,520.4

 

 

 

 i 29,723.5

 

 

 

 i 31,243.9

 

Securities purchased under agreements to resell

 

 i 100.0

 

 

 

—

 

 

 

 i 100.0

 

 

 

—

 

 

 

 i 100.0

 

Investment securities(2)

 

 i 214.1

 

 

 

—

 

 

 

—

 

 

 

 i 214.1

 

 

 

 i 214.1

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits(3)

 

( i 40,249.0

)

 

 

—

 

 

 

—

 

 

 

( i 40,337.4

)

 

 

( i 40,337.4

)

Borrowings(3)

 

( i 4,276.7

)

 

 

—

 

 

 

( i 4,611.6

)

 

 

( i 12.6

)

 

 

( i 4,624.2

)

Credit balances of factoring clients

 

( i 1,556.6

)

 

 

—

 

 

 

—

 

 

 

( i 1,556.6

)

 

 

( i 1,556.6

)

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and interest bearing deposits

$

 i 4,011.7

 

 

$

 i 4,011.7

 

 

$

—

 

 

$

—

 

 

$

 i 4,011.7

 

Assets held for sale

 

 i 720.0

 

 

 

—

 

 

 

 i 14.5

 

 

 

 i 706.2

 

 

 

 i 720.7

 

Loans(1)

 

 i 32,812.9

 

 

 

—

 

 

 

 i 1,332.1

 

 

 

 i 32,285.4

 

 

 

 i 33,617.5

 

Securities purchased under agreement to resell

 

 i 150.0

 

 

 

—

 

 

 

 i 150.0

 

 

 

—

 

 

 

 i 150.0

 

Investment securities(2)

 

 i 215.5

 

 

 

—

 

 

 

—

 

 

 

 i 215.5

 

 

 

 i 215.5

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits(3)

 

( i 43,086.0

)

 

 

—

 

 

 

—

 

 

 

( i 43,224.0

)

 

 

( i 43,224.0

)

Borrowings(3)

 

( i 5,911.1

)

 

 

—

 

 

 

( i 6,371.3

)

 

 

( i 8.0

)

 

 

( i 6,379.3

)

Credit balances of factoring clients

 

( i 1,719.9

)

 

 

—

 

 

 

—

 

 

 

( i 1,719.9

)

 

 

( i 1,719.9

)

(1)

Carrying value of loans (excluding leases) is net of the ACL.

(2)

Non-marketable securities carried at cost. See Assets and Liabilities Measured at Fair Value on a Recurring Basis in this note above for debt securities AFS and securities carried at fair value with changes recorded in net income.  

(3)

Deposits and borrowings include accrued interest, which is included in other liabilities.

 / 

 

The methods and assumptions used to estimate the fair value of each class of financial instruments not measured at fair value are as follows:

Assets Held for Sale — The fair value of Level 2 assets was primarily estimated based on the prices of recent trades of similar assets.

Loans — Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a division or portfolio level. Due to the significance of the unobservable market inputs and assumptions, as well as the absence of a liquid secondary market for most loans, these loans are classified as Level 3. Certain loans are measured based on observable market prices sourced from external data providers and classified as Level 2. Nonaccrual loans are written down and reported at their estimated recovery value which approximates their fair value and classified as Level 3.

 

Securities Purchased Under Agreement to Resell — The fair value of securities purchased under agreement to resell (reverse repo) was determined using a discount cash flow technique. Interest rates appropriate to the maturity and underlying collateral are used for discounting the estimated cash flows. As observable market interest rates are used, the fair value of securities purchased under agreement to resell was classified as Level 2.

Investment Securities–non-marketable — Utilize Level 3 inputs to estimate fair value and were generally recorded under the measurement alternative. FHLB and FRB stock carrying values approximate fair value. Of the remaining non-marketable securities, the fair value is determined based on techniques that use significant assumptions that are not observable in the market.

Deposits — The estimated fair value of deposits with no stated maturity, such as demand deposit accounts, money market accounts, and savings accounts was the amount payable on demand at the reporting date. The fair value of time deposits was estimated based on a discounted cash flow technique using Level 3 inputs appropriate to the contractual maturity.

Borrowings

 

The Level 2 fair value of borrowings included:

▪

Unsecured debt — consists of both senior debt and subordinated debt. Unsecured debt was valued using observable market prices of identical instruments.

31

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

▪

Secured borrowings — consists of FHLB advances. The estimated fair value of FHLB advances was based on a discounted cash flow technique. The cash flows were calculated using the contractual features of the advance and then discounted using observable market interest rates.

The Level 3 fair value of borrowings included:

▪

Secured borrowings — consists of structured financings and other secured borrowings. The fair value of structured financings was estimated based on a discounted cash flow technique using observable market interest rates adjusted for estimated spreads. The fair value of other secured borrowings was estimated based on unobservable inputs.

Credit balances of factoring clients — The impact of the time value of money from the unobservable discount rate for credit balances of factoring clients is inconsequential due to the short term nature of these balances, therefore, the carrying value approximated fair value, and the credit balances were classified as Level 3.

 i 

NOTE 11 — STOCKHOLDERS' EQUITY

 i 

A roll forward of common stock activity is presented in the following table.

Number of Shares of Common Stock

 

Issued

 

 

Less

Treasury

 

 

Outstanding

 

Common stock - December 31, 2020

 

 i 163,309,861

 

 

 

( i 64,700,466

)

 

 

 i 98,609,395

 

Restricted stock issued

 

 i 768,318

 

 

 

—

 

 

 

 i 768,318

 

Shares held to cover taxes on vesting restricted shares and other

 

—

 

 

 

( i 266,668

)

 

 

( i 266,668

)

Employee stock purchase plan participation

 

 i 55,978

 

 

 

—

 

 

 

 i 55,978

 

Common stock - September 30, 2021

 

 i 164,134,157

 

 

 

( i 64,967,134

)

 

 

 i 99,167,023

 
 / 

Accumulated Other Comprehensive Income (Loss) ("AOCI")

 i 

The following table details the components of AOCI, net of tax:

Components of Accumulated Other Comprehensive Income (Loss) (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Gross

Unrealized

 

 

Income

Taxes

 

 

Net

Unrealized

 

 

Gross

Unrealized

 

 

Income

Taxes

 

 

Net

Unrealized

 

Foreign currency translation adjustments

$

 i 10.2

 

 

$

( i 9.1

)

 

$

 i 1.1

 

 

$

( i 2.6

)

 

$

( i 6.5

)

 

$

( i 9.1

)

Changes in benefit plans net loss and prior service (cost)/credit

 

( i 41.2

)

 

 

( i 3.8

)

 

 

( i 45.0

)

 

 

( i 42.5

)

 

 

( i 3.6

)

 

 

( i 46.1

)

Unrealized net (loss) gains on securities AFS

 

( i 103.8

)

 

 

 i 26.5

 

 

 

( i 77.3

)

 

 

 i 123.0

 

 

 

( i 32.1

)

 

 

 i 90.9

 

Total accumulated other comprehensive (loss) income

$

( i 134.8

)

 

$

 i 13.6

 

 

$

( i 121.2

)

 

$

 i 77.9

 

 

$

( i 42.2

)

 

$

 i 35.7

 
 / 

 

The following table details the changes in the components of AOCI, net of income taxes:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (dollars in millions)

 

 

 

 

 

Changes in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit Plan

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

Net (Loss) Gain

 

 

Unrealized Net

 

 

 

 

 

 

Currency

 

 

and Prior

 

 

(Losses) Gains

 

 

 

 

 

 

Translation

 

 

Service (Cost)

 

 

on AFS

 

 

 

 

 

 

Adjustments

 

 

Credit

 

 

Securities

 

 

Total AOCI

 

Balance as of December 31, 2020

$

( i 9.1

)

 

$

( i 46.1

)

 

$

 i 90.9

 

 

$

 i 35.7

 

AOCI activity before reclassifications

 

( i 0.4

)

 

 

 i 0.3

 

 

 

( i 83.8

)

 

 

( i 83.9

)

Amounts reclassified from AOCI

 

 i 10.6

 

 

 

 i 0.8

 

 

 

( i 84.4

)

 

 

( i 73.0

)

Net current period changes in AOCI

 

 i 10.2

 

 

 

 i 1.1

 

 

 

( i 168.2

)

 

 

( i 156.9

)

Balance as of September 30, 2021

$

 i 1.1

 

 

$

( i 45.0

)

 

$

( i 77.3

)

 

$

( i 121.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

$

( i 9.1

)

 

$

( i 52.6

)

 

$

 i 9.6

 

 

$

( i 52.1

)

AOCI activity before reclassifications

 

( i 0.4

)

 

 

 i 2.7

 

 

 

 i 117.2

 

 

 

 i 119.5

 

Amounts reclassified from AOCI

 

-

 

 

 

 i 0.3

 

 

 

( i 21.3

)

 

 

( i 21.0

)

Net current period changes in AOCI

 

( i 0.4

)

 

 

 i 3.0

 

 

 

 i 95.9

 

 

 

 i 98.5

 

Balance as of September 30, 2020

$

( i 9.5

)

 

$

( i 49.6

)

 

$

 i 105.5

 

 

$

 i 46.4

 

 

 / 

32

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

Other Comprehensive Income (Loss)

The amounts included in the Condensed Consolidated Statements of Comprehensive Income (Loss) are net of income taxes.  i The following table presents the pretax and after-tax components of other comprehensive income.

Before- and After-Tax components of OCI (dollars in millions)

Quarters Ended September 30,

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income

 

Gross

 

 

 

 

 

 

Net

 

 

Gross

 

 

 

 

 

 

Net

 

 

Statement

 

Amount

 

 

Tax

 

 

Amount

 

 

Amount

 

 

Tax

 

 

Amount

 

 

Line Item

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AOCI activity before reclassification

$

( i 0.1

)

 

$

( i 0.2

)

 

$

( i 0.3

)

 

$

 i 0.3

 

 

$

 i 0.3

 

 

$

 i 0.6

 

 

 

Reclassifications out of AOCI

 

 i 13.2

 

 

 

( i 2.6

)

 

 

 i 10.6

 

 

 

—

 

 

 

—

 

 

 

—

 

 

Other non-

interest

income

Net Change

 

 i 13.1

 

 

 

( i 2.8

)

 

 

 i 10.3

 

 

 

 i 0.3

 

 

 

 i 0.3

 

 

 

 i 0.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in benefit plan net gain (loss) and prior service (cost) credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AOCI activity before reclassification

 

—

 

 

 

 i 0.1

 

 

 

 i 0.1

 

 

 

 i 0.1

 

 

 

—

 

 

 

 i 0.1

 

 

 

Reclassifications out of AOCI

 

 i 0.4

 

 

 

( i 0.1

)

 

 

 i 0.3

 

 

 

—

 

 

 

—

 

 

 

—

 

 

Operating

expenses

Net Change

 

 i 0.4

 

 

 

-

 

 

 

 i 0.4

 

 

 

 i 0.1

 

 

 

—

 

 

 

 i 0.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net (losses) gains on securities AFS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AOCI activity before reclassification

 

( i 16.6

)

 

 

 i 4.2

 

 

 

( i 12.4

)

 

 

( i 18.9

)

 

 

 i 4.9

 

 

 

( i 14.0

)

 

 

Reclassifications out of AOCI

 

( i 5.5

)

 

 

 i 1.4

 

 

 

( i 4.1

)

 

 

( i 8.2

)

 

 

 i 2.1

 

 

 

( i 6.1

)

 

Other non-

interest

income

Net Change

 

( i 22.1

)

 

 

 i 5.6

 

 

 

( i 16.5

)

 

 

( i 27.1

)

 

 

 i 7.0

 

 

 

( i 20.1

)

 

 

Net current period OCI

$

( i 8.6

)

 

$

 i 2.8

 

 

$

( i 5.8

)

 

$

( i 26.7

)

 

$

 i 7.3

 

 

$

( i 19.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income

 

Gross

 

 

 

 

 

 

Net

 

 

Gross

 

 

 

 

 

 

Net

 

 

Statement

 

Amount

 

 

Tax

 

 

Amount

 

 

Amount

 

 

Tax

 

 

Amount

 

 

Line Item

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AOCI activity before reclassification

$

( i 0.4

)

 

$

—

 

 

$

( i 0.4

)

 

$

( i 0.6

)

 

$

 i 0.2

 

 

$

( i 0.4

)

 

 

Reclassifications out of AOCI

 

 i 13.2

 

 

 

( i 2.6

)

 

 

 i 10.6

 

 

 

—

 

 

 

—

 

 

 

—

 

 

Other non-

interest

income

Net Change

 

 i 12.8

 

 

 

( i 2.6

)

 

 

 i 10.2

 

 

 

( i 0.6

)

 

 

 i 0.2

 

 

 

( i 0.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in benefit plan net gain (loss) and prior service (cost) credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AOCI activity before reclassification

 

 i 0.2

 

 

 

 i 0.1

 

 

 

 i 0.3

 

 

 

 i 3.6

 

 

 

( i 0.9

)

 

 

 i 2.7

 

 

 

Reclassifications out of AOCI

 

 i 1.1

 

 

 

( i 0.3

)

 

 

 i 0.8

 

 

 

 i 0.4

 

 

 

( i 0.1

)

 

 

 i 0.3

 

 

Operating

expenses

Net Change

 

 i 1.3

 

 

 

( i 0.2

)

 

 

 i 1.1

 

 

 

 i 4.0

 

 

 

( i 1.0

)

 

 

 i 3.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net (losses) gains on securities AFS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AOCI activity before reclassification

 

( i 113.0

)

 

 

 i 29.2

 

 

 

( i 83.8

)

 

 

 i 157.5

 

 

 

( i 40.3

)

 

 

 i 117.2

 

 

 

Reclassifications out of AOCI

 

( i 113.8

)

 

 

 i 29.4

 

 

 

( i 84.4

)

 

 

( i 28.6

)

 

 

 i 7.3

 

 

 

( i 21.3

)

 

Other non-

interest

income

Net Change

 

( i 226.8

)

 

 

 i 58.6

 

 

 

( i 168.2

)

 

 

 i 128.9

 

 

 

( i 33.0

)

 

 

 i 95.9

 

 

 

Net current period OCI

$

( i 212.7

)

 

$

 i 55.8

 

 

$

( i 156.9

)

 

$

 i 132.3

 

 

$

( i 33.8

)

 

$

 i 98.5

 

 

 

 

 

 i 

NOTE 12 — INCOME TAXES

The Company’s global effective income tax rate (“ETR”) was  i  i 24.0 / % for both the quarter and nine months ended September 30, 2021 and  i 25.6% and  i 15.7% for the quarter and nine months ended September 30, 2020, respectively. The decrease from  i 25.6% in the prior year quarter to the  i 24.0% rate for the quarter ended September 30, 2021 was primarily driven by the effect that the change in forecasted pre-tax income had on the permanent and other adjustments. The increase from  i 15.7% in the prior year period to the  i 24.0% rate for the nine months ended September 30, 2021 was primarily due to the impact of the non-deductible portion of the goodwill impairment in the prior year.

 / 

33

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The quarterly income tax expense was based on a projection of the Company’s annual ETR. This annual ETR was applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. The ETR each period was also impacted by a number of factors, including discrete items, the relative mix of domestic and international earnings, effects of changes from enacted tax laws, and adjustments to the valuation allowances. The currently forecasted ETR may vary from the actual year-end 2021 ETR due to the changes in these factors.

Uncertain Tax Benefits

The Company recognizes tax benefits when it is more likely than not that the position will prevail, based solely on the technical merits under the tax law of the relevant jurisdiction. The Company recognizes the tax benefit if the position meets this recognition threshold determined based on the largest amount of the benefit that is more than likely to be realized.

 

 i 

NOTE 13 — COMMITMENTS

 i 

The accompanying table summarizes credit-related commitments and other purchase and funding commitments:

Commitments (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Due to Expire

 

 

 

 

 

 

Within

One Year

 

 

After

One Year

 

 

Total

Outstanding

 

 

Total

Outstanding

 

Financing Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing assets (excluding leases)

$

 i 2,615.1

 

 

$

 i 4,058.6

 

 

$

 i 6,673.7

 

 

$

 i 7,708.3

 

Letters of Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Standby letters of credit

 

 i 34.7

 

 

 

 i 212.1

 

 

 

 i 246.8

 

 

 

 i 259.6

 

Other letters of credit

 

 i 9.8

 

 

 

 i 2.5

 

 

 

 i 12.3

 

 

 

 i 9.0

 

Deferred Purchase Agreements

 

 i 2,170.5

 

 

 

—

 

 

 

 i 2,170.5

 

 

 

 i 1,929.4

 

Purchase and Funding Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lessor commitments(1)

 

 i 408.2

 

 

 

—

 

 

 

 i 408.2

 

 

 

 i 628.3

 

(1)

CIT’s purchase and funding commitments relate to the equipment leasing businesses’ commitments to fund finance leases and operating leases, and Rail’s railcar manufacturer purchase commitments.

 / 

Financing Commitments

Financing commitments, referred to as loan commitments or lines of credit, primarily reflect CIT’s agreements to lend to its customers, subject to the customers’ compliance with contractual obligations. At September 30, 2021, substantially all undrawn financing commitments were senior facilities. Most of the Company’s undrawn and available financing commitments are in the Commercial Banking segment.

As financing commitments may not be fully drawn, may expire unused, may be reduced or canceled at the customer’s request, and may require the customer to be in compliance with certain conditions, total commitment amounts do not necessarily reflect actual future cash flow requirements.

The table above excludes uncommitted revolving credit facilities extended by Commercial Finance to its clients for working capital purposes. In connection with these facilities, Commercial Finance has the sole discretion throughout the duration of these facilities to determine the amount of credit that may be made available to its clients at any time and whether to honor any specific advance requests made by its clients under these credit facilities.

Letters of Credit

In the normal course of meeting the needs of clients, CIT sometimes enters into agreements to provide financing and letters of credit. Standby letters of credit are issued by CIT to guarantee payment to the beneficiary if a client on whose behalf the letter of credit was issued does not meet its obligation. These financial instruments generate fees and involve, to varying degrees, elements of credit risk in excess of amounts recognized in the Consolidated Balance Sheets. To minimize potential credit risk, CIT generally requires collateral, and, in some cases, additional forms of credit support from the client.

 / 

34

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Deferred Purchase Agreements

A DPA is a guarantee provided in conjunction with factoring, whereby CIT provides a client with credit protection for trade receivables without purchasing the receivables. The trade receivables terms generally require payment in 90 days or less. If the client’s customer is unable to pay an undisputed receivable solely as the result of credit risk, CIT is then required to purchase the receivable from the client, less any borrowings for such client. The outstanding amount in the table above, less $ i 124.7 million and $ i 157.9 million at September 30, 2021 and December 31, 2020, respectively, of borrowings for such clients, is the maximum amount that CIT would be required to pay under all DPAs. This maximum amount would only occur if all receivables subject to DPAs default in the manner described above, thereby requiring CIT to purchase all such receivables from the DPA clients.

The table above includes $2,129.5 million and $1,881.9 million of DPA credit protection at September 30, 2021 and December 31, 2020, respectively, related to receivables on which CIT has assumed the credit risk. The table also includes $ i 41.0 million and $ i 47.5 million available under DPA credit line agreements provided at September 30, 2021 and December 31, 2020, respectively. The DPA credit line agreements specify a contractually committed amount of DPA credit protection and are cancellable by us only after a notice period. The notice period is typically  i 90 days or less.

 

 i 

NOTE 14 — CONTINGENCIES

Litigation and other Contingencies

CIT is involved, and from time to time in the future may be involved, in a number of pending and threatened judicial, regulatory, and arbitration proceedings as well as proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies. These matters arise in connection with the conduct of CIT’s business. At any given time, CIT may also be in the process of responding to subpoenas, requests for documents, data and testimony relating to such matters and engaging in discussions to resolve the matters (all of the foregoing collectively being referred to as “Litigation”). While most Litigation relates to individual claims, CIT is also subject to putative class action claims and similar broader claims and indemnification obligations.

In view of the inherent difficulty of predicting the outcome of Litigation matters and indemnification obligations, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, CIT cannot state with confidence what the eventual outcome of the pending Litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter will be, if any. In accordance with applicable accounting guidance, CIT establishes reserves for Litigation when those matters present loss contingencies as to which it is both probable that a loss will occur and the amount of such loss can reasonably be estimated. Based on currently available information, CIT believes that the outcome of Litigation that is currently pending will not have a material adverse effect on the Company’s financial condition, but may be material to the Company’s operating results or cash flows for any particular period, depending in part on its operating results for that period. The actual results of resolving such matters may be substantially higher than the amounts reserved.

For certain Litigation matters in which the Company is involved, the Company is able to estimate a range of reasonably possible losses in excess of established reserves and insurance. For other matters for which a loss is probable or reasonably possible, such an estimate cannot be determined. For Litigation and other matters where losses are reasonably possible, management currently estimates an aggregate range of reasonably possible losses of up to $ i 10 million in excess of any established reserves and any insurance we reasonably believe we will collect related to those matters. This estimate represents reasonably possible losses (in excess of established reserves and insurance) over the life of such Litigation, which may span a currently indeterminable number of years, and is based on information currently available as of September 30, 2021. The Litigation matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate.

Those Litigation matters for which an estimate is not reasonably possible or as to which a loss does not appear to be reasonably possible, based on current information, are not included within this estimated range and, therefore, this estimated range does not represent the Company’s maximum loss exposure.

The foregoing statements about CIT’s Litigation are based on the Company’s judgments, assumptions, and estimates and are necessarily subjective and uncertain. The Company has several hundred threatened and pending judicial, regulatory and arbitration proceedings at various stages.

On October 21, 2016, CIT and CIT Bank were named as defendants in an existing lawsuit brought as a qui tam (i.e., whistleblower) action by a former OneWest employee on behalf of the U.S. government. The lawsuit asserts claims related to OneWest’s participation in the Home Affordable Modification Program (“HAMP”) administered by the United States Treasury Department, as well as Federal Housing Administration (“FHA”) and Veterans Administration (“VA”) insurance programs. On October 15, 2019, the plaintiff filed a second amended complaint in the United States District Court for the Eastern District of Texas alleging that, beginning in 2009, CIT (and its predecessor, OneWest) falsely certified its compliance with HAMP, submitted false claims for incentive payments for loan modifications, submitted false claims for FHA and VA insurance payments, and failed to self-report these violations. Plaintiff seeks the return of all U.S. government payments to CIT under the HAMP, FHA or VA programs. CIT has received approximately $ i 93 million in servicer incentives under HAMP, and the government has paid more than $ i 440 million in the aggregate in borrower, servicer, and investor incentives in connection with loans modified by OneWest or CIT under HAMP. The Department of Justice has declined to intervene in this case. On February 12, 2021, CIT filed a motion to dismiss for lack of subject matter jurisdiction, which was denied on August 17, 2021. On June 24, 2021, CIT filed a Motion for Summary Judgment under Federal Rule of Civil Procedure 56 and filed a separate Motion for Partial Summary Judgment under the Public Disclosure Bar.  Both motions remain pending. A Final Pretrial Conference has been rescheduled for June 15, 2022, with a jury trial to commence on June 20, 2022. CIT is defending this litigation vigorously and believes that it has meritorious defenses.

 / 

35

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 i 

NOTE 15 — BUSINESS SEGMENT INFORMATION

Segment Profit (Loss) and Assets

Refer to Note 24 — Business Segment Information in our 2020 Form 10-K for detail on CIT’s business segments, including types of products and services offered.

 i 

Segment Pre-tax Income (Loss) (dollars in millions)

 

Commercial

Banking

 

 

Consumer

Banking

 

 

Corporate

 

 

Total CIT

 

Quarter Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

 i 269.8

 

 

$

 i 72.4

 

 

$

 i 17.6

 

 

$

 i 359.8

 

Interest expense (benefit)

 

 i 69.8

 

 

 

( i 21.4

)

 

 

 i 54.6

 

 

 

 i 103.0

 

Provision for credit losses

 

( i 49.3

)

 

 

( i 17.8

)

 

 

—

 

 

 

( i 67.1

)

Rental income on operating leases

 

 i 186.2

 

 

 

—

 

 

 

—

 

 

 

 i 186.2

 

Other non-interest income

 

 i 89.7

 

 

 

 i 34.0

 

 

 

 i 1.0

 

 

 

 i 124.7

 

Depreciation on operating lease equipment

 

 i 85.1

 

 

 

—

 

 

 

—

 

 

 

 i 85.1

 

Maintenance and other operating lease expenses

 

 i 50.5

 

 

 

—

 

 

 

—

 

 

 

 i 50.5

 

Operating expenses

 

 i 185.9

 

 

 

 i 81.6

 

 

 

 i 0.7

 

 

 

 i 268.2

 

Income (loss) before provision (benefit) for income taxes

$

 i 203.7

 

 

$

 i 64.0

 

 

$

( i 36.7

)

 

$

 i 231.0

 

Select Period End Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

 i 35,782.4

 

 

$

 i 6,464.8

 

 

$

 i 12,172.9

 

 

$

 i 54,420.0

 

Loans

 

 i 27,217.1

 

 

 

 i 6,243.9

 

 

 

—

 

 

 

 i 33,461.0

 

Credit balances of factoring clients

 

( i 1,556.6

)

 

 

—

 

 

 

—

 

 

 

( i 1,556.6

)

Assets held for sale

 

 i 82.7

 

 

 

 i 13.1

 

 

 

—

 

 

 

 i 95.8

 

Operating lease equipment, net

 

 i 7,937.5

 

 

 

—

 

 

 

—

 

 

 

 i 7,937.5

 

Quarter Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

 i 306.7

 

 

$

 i 90.3

 

 

$

 i 26.3

 

 

$

 i 423.3

 

Interest expense (benefit)

 

 i 105.3

 

 

 

( i 5.9

)

 

 

 i 66.1

 

 

 

 i 165.5

 

Provision (benefit) for credit losses

 

 i 87.9

 

 

 

( i 24.6

)

 

 

—

 

 

 

 i 63.3

 

Rental income on operating leases

 

 i 201.3

 

 

 

—

 

 

 

—

 

 

 

 i 201.3

 

Other non-interest income

 

 i 89.6

 

 

 

 i 30.9

 

 

 

 i 25.5

 

 

 

 i 146.0

 

Depreciation on operating lease equipment

 

 i 82.5

 

 

 

—

 

 

 

—

 

 

 

 i 82.5

 

Maintenance and other operating lease expenses

 

 i 48.6

 

 

 

—

 

 

 

—

 

 

 

 i 48.6

 

Operating expenses/gain on debt extinguishment and deposit redemption

 

 i 196.7

 

 

 

 i 94.9

 

 

 

 i 3.9

 

 

 

 i 295.5

 

Income (loss) before provision (benefit) for income taxes

$

 i 76.6

 

 

$

 i 56.8

 

 

$

( i 18.2

)

 

$

 i 115.2

 

Select Period End Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

 i 37,868.5

 

 

$

 i 8,255.3

 

 

$

 i 14,741.2

 

 

$

 i 60,865.0

 

Loans

 

 i 29,244.6

 

 

 

 i 8,075.0

 

 

 

—

 

 

 

 i 37,319.6

 

Credit balances of factoring clients

 

( i 1,320.2

)

 

 

—

 

 

 

—

 

 

 

( i 1,320.2

)

Assets held for sale

 

 i 35.5

 

 

 

 i 21.2

 

 

 

—

 

 

 

 i 56.7

 

Operating lease equipment, net

 

 i 7,799.3

 

 

 

—

 

 

 

—

 

 

 

 i 7,799.3

 

 

 / 

 

 / 

36

Table of Contents

 

 

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

 

Commercial

Banking

 

 

Consumer

Banking

 

 

Corporate

 

 

Total CIT

 

Nine Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

 i 842.0

 

 

$

 i 221.6

 

 

$

 i 57.4

 

 

$

 i 1,121.0

 

Interest expense (benefit)

 

 i 236.0

 

 

 

( i 63.9

)

 

 

 i 157.3

 

 

 

 i 329.4

 

(Benefit) provision for credit losses

 

( i 220.6

)

 

 

( i 36.1

)

 

 

—

 

 

 

( i 256.7

)

Rental income on operating leases

 

 i 569.1

 

 

 

—

 

 

 

—

 

 

 

 i 569.1

 

Other non-interest income

 

 i 292.6

 

 

 

 i 97.1

 

 

 

 i 125.6

 

 

 

 i 515.3

 

Depreciation on operating lease equipment

 

 i 252.6

 

 

 

—

 

 

 

—

 

 

 

 i 252.6

 

Maintenance and other operating lease expenses

 

 i 156.9

 

 

 

—

 

 

 

—

 

 

 

 i 156.9

 

Operating expenses/loss on debt extinguishment and deposit redemption

 

 i 555.8

 

 

 

 i 254.2

 

 

 

( i 16.5

)

 

 

 i 793.5

 

Income from continuing operations before provision (benefit) for income taxes

$

 i 723.0

 

 

$

 i 164.5

 

 

$

 i 42.2

 

 

$

 i 929.7

 

Nine Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

 i 999.1

 

 

$

 i 285.8

 

 

$

 i 98.9

 

 

$

 i 1,383.8

 

Interest expense (benefit)

 

 i 404.3

 

 

 

( i 10.5

)

 

 

 i 199.9

 

 

 

 i 593.7

 

Provision (benefit) for credit losses

 

 i 811.5

 

 

 

( i 10.7

)

 

 

—

 

 

 

 i 800.8

 

Rental income on operating leases

 

 i 612.0

 

 

 

—

 

 

 

—

 

 

 

 i 612.0

 

Other non-interest income

 

 i 254.1

 

 

 

 i 47.6

 

 

 

 i 77.5

 

 

 

 i 379.2

 

Depreciation on operating lease equipment

 

 i 241.9

 

 

 

—

 

 

 

—

 

 

 

 i 241.9

 

Maintenance and other operating lease expenses

 

 i 158.3

 

 

 

—

 

 

 

—

 

 

 

 i 158.3

 

Operating expenses/gain on debt extinguishment and deposit redemption

 

 i 611.2

 

 

 

 i 298.4

 

 

 

 i 65.9

 

 

 

 i 975.5

 

Goodwill impairment

 

 i 301.5

 

 

 

 i 43.2

 

 

 

—

 

 

 

 i 344.7

 

(Loss) income from continuing operations before provision (benefit) for income taxes

$

( i 663.5

)

 

$

 i 13.0

 

 

$

( i 89.4

)

 

$

( i 739.9

)

 

 

 

 

37

Table of Contents

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

and

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

CIT Group Inc. is a bank holding company ("BHC") and a financial holding company ("FHC"). CIT Group Inc., together with its subsidiaries (collectively "we", "our", "CIT" or the "Company"), is regulated by the Board of Governors of the Federal Reserve System ("FRB") and the Federal Reserve Bank of New York ("FRBNY") under the U.S. Bank Holding Company Act of 1956, as amended. CIT Bank, N.A. is regulated by the Office of the Comptroller of the Currency of the U.S. Department of the Treasury ("OCC"). In addition, CIT Bank, as an insured depository institution, is supervised by the Federal Deposit Insurance Corporation (“FDIC”). More information about the Company is available at cit.com.

Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk ("MD&A") contain financial terms that are relevant to our business, and a Glossary of select key terms is included in Item 1. Business Overview in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).

Management uses certain non-GAAP financial measures in its analysis of the financial condition and results of operations of the Company. See Non-GAAP Financial Measurements at the end of the MD&A for a reconciliation of these financial measures to comparable financial measures in accordance with U.S. GAAP.

Throughout this MD&A we reference specific "Notes" to our financial statements. These are Notes to the Condensed Consolidated Financial Statements in Part One, Item 1. Financial Statements (“Item 1”).

ANNOUNCEMENT OF DEFINITIVE MERGER AGREEMENT

On October 16, 2020, First Citizens BancShares, Inc. (“First Citizens”), the parent company of First-Citizens Bank & Trust Company (“FCB”), and CIT Group Inc. jointly announced that they entered into a definitive agreement by and among First Citizens, FCB, FC Merger Subsidiary IX, Inc. and CIT, under which the companies will combine in an all-stock merger (the “Merger Agreement”). Under the terms of the Merger Agreement, CIT stockholders will receive 0.062 shares of First Citizens Class A common stock for each share of CIT common stock they own. First Citizens stockholders will own approximately 61% and CIT stockholders will own approximately 39% of the combined company. The Merger Agreement contains customary representations and warranties and customary covenants, such as non-solicitation obligations and other provisions, including a break-up fee of $64 million payable in certain circumstances. The Merger Agreement also provides certain termination rights for CIT and First Citizens, including, among others, if the merger has not been completed by October 15, 2021. On September 30, 2021, First Citizens and CIT jointly announced that the two companies agreed to extend the merger agreement from October 15, 2021, to March 1, 2022.

The combined bank will be regulated by the North Carolina Commissioner of Banks, the FDIC, and the Federal Reserve Bank of Richmond.

 

The Board of Directors of the combined company will have 14 directors, consisting of the current 11 First Citizens Board members and 3 CIT Board members, including Ellen Alemany, Chairwoman and Chief Executive Officer (“CEO”) of CIT, Michael A. Carpenter, and Vice Admiral John R. Ryan, USN (Ret.).

The combined company will operate under the First Citizens name and will be headquartered in Raleigh, N.C., and will maintain significant operations in California, Nebraska, Arizona, Florida, and South Carolina, as well as in New York and New Jersey. The pro forma organization will include over $100 billion in assets and over $80 billion in deposits.

On December 8, 2020, First Citizens and FCB filed applications with the FRB, FDIC, and the North Carolina Commissioner of Banking requesting approval of the proposed merger with CIT and CIT Bank. On February 9, 2021, CIT held a special meeting of shareholders, at which shareholders approved the adoption of the Merger Agreement. First Citizens also announced that on February 9, 2021, its shareholders approved the issuance of shares of its Class A common stock pursuant to the terms of the Merger Agreement.

On July 14, 2021, First Citizens and CIT jointly announced that the proposal to merge the two companies received regulatory approval from the FDIC. The merger had already received approval from the Office of the North Carolina Commissioner of Banks.

Completion of the proposed merger remains subject to approval from the Board of Governors of the Federal Reserve System, and the satisfaction or waiver of other customary closing conditions.

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SUMMARY OF 2021 FINANCIAL RESULTS

See Credit Metrics for discussion on COVID-19 borrower relief arrangements.

The following table summarizes the Company’s results in accordance with U.S. GAAP as included in the Condensed Consolidated Statements of Operations for the quarter and nine months ended September 30, 2021 and 2020, and the quarter ended June 30, 2021. We similarly provide results that exclude noteworthy items, which are described and reconciled to GAAP in the Non-GAAP Financial Measurements section at the end of the MD&A. As explained further in the Non-GAAP Financial Measurements section, we exclude noteworthy items to reflect how management views the underlying performance of the business.

Results of Operations (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss) available to common shareholders (GAAP)

$

172.7

 

 

$

214.6

 

 

$

82.9

 

 

$

688.3

 

 

$

(642.8

)

Noteworthy items

 

12.5

 

 

 

(4.8

)

 

 

(0.2

)

 

 

(48.7

)

 

 

425.7

 

Net Income (loss) available to common shareholders, excluding noteworthy items (non-GAAP)

$

185.2

 

 

$

209.8

 

 

$

82.7

 

 

$

639.6

 

 

$

(217.1

)

Diluted income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to common shareholders (GAAP)

$

1.72

 

 

$

2.14

 

 

$

0.84

 

 

$

6.89

 

 

$

(6.54

)

Noteworthy items

 

0.12

 

 

 

(0.05

)

 

 

0.00

 

 

 

(0.49

)

 

 

4.33

 

Net Income (loss) available to common shareholders, excluding noteworthy items (non-GAAP)

$

1.84

 

 

$

2.09

 

 

$

0.84

 

 

$

6.40

 

 

$

(2.21

)

Average number of common shares - diluted (thousands)

 

100,432

 

 

 

100,340

 

 

 

98,556

 

 

 

99,950

 

 

 

98,350

 

Third quarter net income available to common shareholders was $172.7 million or $1.72 per diluted common share and included $12.5 million of noteworthy items or $0.12 per share as detailed in the following table. Excluding noteworthy items1, third quarter income available to common shareholders was $185.2 million ($1.84 per share) compared to $209.8 million ($2.09 per share) in the prior quarter, reflecting lower interest income from lower average earning assets, lower non-interest income driven by lower gains on loan sales, higher operating expenses and a lower net benefit to the provision for credit losses of $67.1 million (compared to a net benefit of $72.2 million in the prior quarter). The net benefits reflect lower loan balances, as well as continued improvements in credit trends and certain macroeconomic variable forecasts.

Income in the year-ago quarter included two noteworthy items that essentially offset each other. One related to the integration of Mutual of Omaha Bank (“MOB”) and other cost initiatives of approximately $9 million ($0.09 per common share), which was offset by a reversal of compensation accrual due to a decrease in the probability of achieving certain performance conditions related to the Company’s stock-based compensation. Excluding noteworthy items, the 2020 third quarter income to common shareholders was $82.7 million or $0.84 per diluted common share.

Year-to-date net income available to common shareholders included significant gains on investment sales related to our strategic initiative to monetize unrealized gains within accumulated other comprehensive income (“AOCI”), which was considered noteworthy. The loss in the year-ago nine-month period also included noteworthy items consisting of a goodwill impairment charge, MOB merger and integration costs and MOB day 1 credit provision. Excluding noteworthy items, the loss to common shareholders primarily reflected the building of credit reserves in the first half of 2020 due to the impact of the global pandemic and its adverse effect on the portfolio, along with the adoption of the CECL standard and the continued impacts of the macroeconomic environment at that time.

Financial results for the 2021 third quarter included the following noteworthy items:

 

•

$12.1 million (after-tax) ($0.12 per diluted common share) loss primarily related to the recognition of cumulative translation adjustment (“CTA”) previously reflected in accumulated other comprehensive income (loss) (“AOCI”) upon the completion of the liquidation of our remaining investment in a foreign entity. See discussion in the Income Taxes section for information on the tax component of this item.

 

•

$0.4 million (after-tax) (less than $0.01 per diluted common share) related to FCB merger costs.

Financial results for the 2021 second quarter included the following noteworthy items:

 

•

$6.1 million (after-tax) ($0.06 per diluted common share) benefit from the reversal of previously recorded restructuring charges related to employee reductions, who then resigned prior to their termination date.

 

•

$1.3 million (after-tax) ($0.01 per diluted common share) related to FCB merger costs.

 

1 

Net income (loss) to common shareholders excluding noteworthy items is a non-GAAP measure. See Non-GAAP Financial Measurements section at the end of the MD&A for a reconciliation of these financial measures to comparable financial measures in accordance with U.S. GAAP.

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Table of Contents

 

 

 

Financial results for the 2021 first quarter included the following noteworthy items:

 

•

$61.5 million (after-tax) ($0.62 per diluted common share) gain on sale of investment securities related to a strategic initiative to monetize unrealized gains within AOCI given market conditions. We also periodically sell investment securities in normal course and do not consider those gains as noteworthy.

 

•

$5.1 million (after-tax) ($0.05 per diluted common share) related to FCB merger costs.

The following table reflects the impact of noteworthy items on our GAAP results for the quarter and nine months ended September 30, 2021. See Non-GAAP Financial Measurements for a listing of each noteworthy item and respective balance.

Noteworthy Adjustments – After-tax (dollars in millions, except diluted per share amounts)

 

Quarter Ended

September 30, 2021

 

 

Nine Months Ended

September 30, 2021

 

 

 

 

 

 

Per Share

 

 

 

 

 

 

Per Share

 

Net income available to common shareholders (GAAP)

$

172.7

 

 

$

1.72

 

 

$

688.3

 

 

$

6.89

 

CTA release

 

12.1

 

 

 

0.12

 

 

 

12.1

 

 

 

0.12

 

FCB merger costs

 

0.4

 

 

 

0.00

 

 

 

6.8

 

 

 

0.07

 

Reversal of prior restructuring charges

 

—

 

 

 

—

 

 

 

(6.1

)

 

 

(0.06

)

Gains on strategic sales of investment securities

 

—

 

 

 

—

 

 

 

(61.5

)

 

 

(0.62

)

Non-GAAP results

$

185.2

 

 

$

1.84

 

 

$

639.6

 

 

$

6.40

 

 

 

NET FINANCE REVENUE

Net interest revenue reflects our interest income less interest expense and is included as a line item on the Condensed Consolidated Statements of Operations. Net interest revenue was $256.8 million for the quarter ended September 30, 2021, slightly down from $257.8 million in the year-ago quarter and down from $266.3 million in the prior quarter. Net interest revenue was $791.6 million and $790.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Key metrics used by management to measure the profitability of our earning assets are Net Finance Revenue (“NFR”)2 and Net Finance Margin2 ("NFM"). NFR is a non-GAAP measurement that includes net interest revenue (interest and fees on loans, interest on interest-bearing cash, and interest/dividends on investments less interest expense on deposits and borrowings) plus net operating lease revenue2 (rental income on operating lease equipment less depreciation on operating lease equipment and maintenance and other operating lease expenses). Due to the nature of our portfolio, which includes a higher proportion of operating lease equipment than most BHCs, certain financial measures commonly used by other BHCs, such as net interest income (“NII”), are not as meaningful for CIT. NII is not used because it includes the impact of debt costs of our operating lease assets but excludes the associated rental income.

NFM is NFR calculated as a percentage of average earning assets2 (“AEA”). NFM is used by management, instead of net interest margin (“NIM”), for the same reasons noted for NFR.

The consolidated financial statements include the effects of purchase accounting adjustment (“PAA”) accretion. Accretion and amortization of certain purchase accounting adjustments primarily impact interest income and interest expense and are summarized in a table in this section.

 

2 

Net finance revenue, net finance margin, net operating lease revenue and average earnings assets are non-GAAP measures. See Non-GAAP Financial Measurements at the end of the MD&A. Although these are non-GAAP measures, each is derived from information in our income statement or balance sheet, presented in a different order and with different subtotals than those presented in our financial statements.

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Table of Contents

 

 

 

The following table presents the average balance sheet and related rates, along with NFR and NFM.

Average Balances and Annualized Rates(1) (dollars in millions)

 

Quarters Ended

 

 

September 30, 2021

 

 

June 30, 2021

 

 

September 30, 2020

 

 

Average

Balance

 

 

Income /

Expense

 

 

Yield /

Rate

 

 

Average

Balance

 

 

Income /

Expense

 

 

Yield /

Rate

 

 

Average

Balance

 

 

Income /

Expense

 

 

Yield /

Rate

 

Interest-bearing cash

$

5,296.6

 

 

$

2.0

 

 

 

0.15

%

 

$

5,583.1

 

 

$

1.5

 

 

 

0.11

%

 

$

7,652.1

 

 

$

2.1

 

 

 

0.11

%

Investment securities and securities purchased under agreements to resell

 

5,322.4

 

 

 

15.9

 

 

 

1.19

%

 

 

5,247.5

 

 

 

15.9

 

 

 

1.21

%

 

 

5,989.9

 

 

 

25.4

 

 

 

1.70

%

Loans (including held for sale)(2)(3)

 

31,865.6

 

 

 

341.9

 

 

 

4.29

%

 

 

33,226.5

 

 

 

355.7

 

 

 

4.28

%

 

 

36,301.6

 

 

 

395.8

 

 

 

4.36

%

Total interest earning assets(2)(3)

 

42,484.6

 

 

 

359.8

 

 

 

3.39

%

 

 

44,057.1

 

 

 

373.1

 

 

 

3.39

%

 

 

49,943.6

 

 

 

423.3

 

 

 

3.39

%

Operating lease equipment, net (including held for sale)(4)

 

7,862.5

 

 

 

50.6

 

 

 

2.57

%

 

 

7,754.0

 

 

 

50.6

 

 

 

2.61

%

 

 

7,824.4

 

 

 

70.2

 

 

 

3.59

%

Average earning assets(2)(5)

 

50,347.1

 

 

 

410.4

 

 

 

3.26

%

 

 

51,811.1

 

 

 

423.7

 

 

 

3.27

%

 

 

57,768.0

 

 

 

493.5

 

 

 

3.42

%

Non-interest earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

171.6

 

 

 

 

 

 

 

 

 

 

 

169.7

 

 

 

 

 

 

 

 

 

 

 

175.9

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

(842.1

)

 

 

 

 

 

 

 

 

 

 

(926.7

)

 

 

 

 

 

 

 

 

 

 

(1,196.1

)

 

 

 

 

 

 

 

 

All other non-interest bearing assets

 

3,281.7

 

 

 

 

 

 

 

 

 

 

 

3,255.7

 

 

 

 

 

 

 

 

 

 

 

3,685.8

 

 

 

 

 

 

 

 

 

Total assets

$

52,958.3

 

 

 

 

 

 

 

 

 

 

$

54,309.8

 

 

 

 

 

 

 

 

 

 

$

60,433.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits and borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

$

37,451.0

 

 

$

47.3

 

 

 

0.51

%

 

$

38,283.0

 

 

$

50.7

 

 

 

0.53

%

 

$

42,320.5

 

 

$

103.2

 

 

 

0.98

%

Borrowings

 

4,245.6

 

 

 

55.7

 

 

 

5.25

%

 

 

4,832.1

 

 

 

56.1

 

 

 

4.64

%

 

 

7,557.5

 

 

 

62.3

 

 

 

3.30

%

Total interest-bearing liabilities

 

41,696.6

 

 

 

103.0

 

 

 

0.99

%

 

 

43,115.1

 

 

 

106.8

 

 

 

0.99

%

 

 

49,878.0

 

 

 

165.5

 

 

 

1.33

%

Non-interest bearing deposits

 

3,411.8

 

 

 

 

 

 

 

 

 

 

 

3,360.9

 

 

 

 

 

 

 

 

 

 

 

3,073.4

 

 

 

 

 

 

 

 

 

Other non-interest bearing liabilities

 

1,723.6

 

 

 

 

 

 

 

 

 

 

 

1,906.0

 

 

 

 

 

 

 

 

 

 

 

1,734.2

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

6,126.3

 

 

 

 

 

 

 

 

 

 

 

5,927.8

 

 

 

 

 

 

 

 

 

 

 

5,748.0

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

$

52,958.3

 

 

 

 

 

 

 

 

 

 

$

54,309.8

 

 

 

 

 

 

 

 

 

 

$

60,433.6

 

 

 

 

 

 

 

 

 

Net revenue spread

 

 

 

 

 

 

 

 

 

2.27

%

 

 

 

 

 

 

 

 

 

 

2.28

%

 

 

 

 

 

 

 

 

 

 

2.09

%

Impact of non-interest bearing sources

 

 

 

 

 

 

 

 

 

0.17

%

 

 

 

 

 

 

 

 

 

 

0.17

%

 

 

 

 

 

 

 

 

 

 

0.18

%

NFR ($) / NFM (%)(2)(5)

 

 

 

 

$

307.4

 

 

 

2.44

%

 

 

 

 

 

$

316.9

 

 

 

2.45

%

 

 

 

 

 

$

328.0

 

 

 

2.27

%

 

 

 

Nine Months Ended

 

 

September 30, 2021

 

 

September 30, 2020

 

 

Average

Balance

 

 

Income /

Expense

 

 

Yield /

Rate

 

 

Average

Balance

 

 

Income /

Expense

 

 

Yield /

Rate

 

Interest-bearing cash

$

5,173.6

 

 

$

4.8

 

 

 

0.12

%

 

$

5,534.4

 

 

$

9.5

 

 

 

0.23

%

Investment securities and securities purchased under agreements to resell

 

5,568.4

 

 

 

54.6

 

 

 

1.31

%

 

 

6,569.3

 

 

 

93.7

 

 

 

1.90

%

Loans (including held for sale)(2)(3)

 

33,218.2

 

 

 

1,061.6

 

 

 

4.26

%

 

 

36,633.8

 

 

 

1,280.6

 

 

 

4.66

%

Interest earning assets

 

43,960.2

 

 

 

1,121.0

 

 

 

3.40

%

 

 

48,737.5

 

 

 

1,383.8

 

 

 

3.79

%

Operating lease equipment, net (including held for sale)(4)

 

7,816.0

 

 

 

159.6

 

 

 

2.72

%

 

 

7,615.0

 

 

 

211.8

 

 

 

3.71

%

Average earning assets(2)(5)

 

51,776.2

 

 

 

1,280.6

 

 

 

3.30

%

 

 

56,352.5

 

 

 

1,595.6

 

 

 

3.78

%

Non-interest earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

173.9

 

 

 

 

 

 

 

 

 

 

 

196.5

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

(940.5

)

 

 

 

 

 

 

 

 

 

 

(1,021.4

)

 

 

 

 

 

 

 

 

All other non-interest bearing assets

 

3,318.7

 

 

 

 

 

 

 

 

 

 

 

3,605.3

 

 

 

 

 

 

 

 

 

Total assets

$

54,328.3

 

 

 

 

 

 

 

 

 

 

$

59,132.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits and borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

$

38,338.2

 

 

$

159.2

 

 

 

0.55

%

 

$

41,079.0

 

 

$

398.1

 

 

 

1.29

%

Borrowings

 

4,839.3

 

 

 

170.2

 

 

 

4.69

%

 

 

7,489.4

 

 

 

195.6

 

 

 

3.48

%

Total interest-bearing liabilities

 

43,177.5

 

 

 

329.4

 

 

 

1.02

%

 

 

48,568.4

 

 

 

593.7

 

 

 

1.63

%

Non-interest bearing deposits

 

3,386.3

 

 

 

 

 

 

 

 

 

 

 

2,917.5

 

 

 

 

 

 

 

 

 

Other non-interest bearing liabilities

 

1,824.6

 

 

 

 

 

 

 

 

 

 

 

1,644.1

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

5,939.9

 

 

 

 

 

 

 

 

 

 

 

6,002.9

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

$

54,328.3

 

 

 

 

 

 

 

 

 

 

$

59,132.9

 

 

 

 

 

 

 

 

 

Net revenue spread

 

 

 

 

 

 

 

 

 

2.28

%

 

 

 

 

 

 

 

 

 

 

2.15

%

Impact of non-interest bearing sources

 

 

 

 

 

 

 

 

 

0.17

%

 

 

 

 

 

 

 

 

 

 

0.22

%

NFR ($) / NFM (%)(2)(5)

 

 

 

 

$

951.2

 

 

 

2.45

%

 

 

 

 

 

$

1,001.9

 

 

 

2.37

%

(1)….(5) See footnotes under the next table.

The following table presents disaggregated quarter-over-quarter changes in net interest revenue and operating lease margins as presented in the preceding table between volume (level of lending or borrowing) and rate (rates charged to customers or incurred on borrowings). Volume change is calculated as change in volume times the previous rate, while rate change is calculated as change in rate times the previous volume. The rate/volume change, change in rate times change in volume, is allocated between volume change and rate change at the ratio each component bears to the absolute value of their total.

41

Table of Contents

 

 

Average Balances and Rates(1) (dollars in millions)

 

September 2021 Over

June 2021 Comparison

 

 

September 2021 Over

September 2020 Comparison

 

 

Increase (Decrease)

Due To Change In:

 

 

 

 

 

 

Increase (Decrease)

Due To Change In:

 

 

 

 

 

 

Volume

 

 

Rate

 

 

Net

 

 

Volume

 

 

Rate

 

 

Net

 

Interest-bearing cash

$

—

 

 

$

0.5

 

 

$

0.5

 

 

$

(0.7

)

 

$

0.6

 

 

$

(0.1

)

Investment securities and securities purchased under agreement to resell

 

0.3

 

 

 

(0.3

)

 

 

—

 

 

 

(2.5

)

 

 

(7.0

)

 

 

(9.5

)

Loans and loans held for sale(2)(3)

 

(14.6

)

 

 

0.8

 

 

 

(13.8

)

 

 

(47.6

)

 

 

(6.3

)

 

 

(53.9

)

Operating lease equipment, net (including held for sale)(4)

 

0.8

 

 

 

(0.8

)

 

 

—

 

 

 

0.4

 

 

 

(20.0

)

 

 

(19.6

)

AEA(2)(5)

$

(13.5

)

 

$

0.2

 

 

$

(13.3

)

 

$

(50.4

)

 

$

(32.7

)

 

$

(83.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

$

(1.5

)

 

$

(1.9

)

 

$

(3.4

)

 

$

(10.8

)

 

$

(45.1

)

 

$

(55.9

)

Borrowings

 

(7.3

)

 

 

6.9

 

 

 

(0.4

)

 

 

(34.2

)

 

 

27.6

 

 

 

(6.6

)

Total interest-bearing liabilities

$

(8.8

)

 

$

5.0

 

 

$

(3.8

)

 

$

(45.0

)

 

$

(17.5

)

 

$

(62.5

)

(1)

Average balances are based on daily balances. Tax exempt income was not significant in any of the periods presented. Average rates are impacted by PAA accretion.

(2)

The balance and rate presented is calculated net of average credit balances for factoring clients.

(3)

Non-accrual loans and related income are included in the respective categories.

(4)

Net Operating lease revenue includes rental revenues, net of depreciation and net of maintenance and other operating lease expenses, as these are directly associated with the equipment. Net operating lease revenue is a non-GAAP measure. See Non-GAAP Financial Measurements. Although these are non-GAAP measures, each is derived from information in our income statement or balance sheet, presented in a different order and with different subtotals than those presented in our financial statements.

(5)

AEA, NFR and NFM, and adjusted amounts are non-GAAP measures. See Non-GAAP Financial Measurements for a reconciliation of non-GAAP to GAAP financial information.

NFR was $307.4 million for the quarter ended September 30, 2021, down from $328.0 million in the year-ago quarter and down from $316.9 million in the prior quarter. For the nine months ended September 30, 2021 and 2020, NFR was $951.2 million and $1,001.9 million, respectively.

The $20.6 million reduction in NFR from the year-ago quarter was primarily driven by lower interest income, offset by the decline in deposit costs from lower deposit rates and balances along with a reduction in borrowing costs due to lower FHLB Advances and senior unsecured borrowings. See further discussion on deposits and borrowings below the following tables. The reduction in interest income primarily reflected lower average loans, and to a lesser extent, the lower short-term interest rate environment, which decreased interest earned on our floating rate loan portfolio, and reduced reinvestment rates for investments. Net operating lease revenue was down from the year-ago quarter, driven by lease rate compression on new assignments and renewals in Rail. See the end of this section for more details on our operating lease portfolio.

The $9.5 million reduction in NFR from the prior quarter reflected lower interest income resulting from lower average balances on loans, lower purchase accounting accretion and prepayment benefits partially offset by lower deposit and borrowing costs. Net operating lease revenue remained flat compared to the prior quarter as lower maintenance costs offset lower rental revenue and higher depreciation.  

The trend for the nine months ended September 30, 2021 compared to the same period in 2020 is similar to the quarterly discussion.

NFM was 2.44% for the quarter ended September 30, 2021, up from 2.27% in the year-ago quarter and down slightly from 2.45% in the prior quarter. NFM was 2.45% for the nine months ended September 30, 2021, up from 2.37% in the year-ago period.

NFM increased from the year-ago quarter, reflecting lower weighted average deposit costs and the benefit of a lower mix of cash and investment securities as a percentage of AEA. Lower deposit costs improved our margin as CDs repriced lower and we reduced our non-maturity deposit rates across our deposit channels. We also grew HOA deposits, further contributing to the mix of lower deposit costs. See further discussion on deposits and borrowings below the following tables. Increases in NFM were partially offset by lower market rates that reduced yields on loans and investment securities. Operating lease yields were down, driven by railcar lease renewal rates that re-priced lower.  

The modest decline in NFM compared to the prior quarter generally reflected the items mentioned above in the description of the reduction of NFR as well as a slightly higher mix of average cash and investments as a percentage of AEA.

AEA was down compared to the year-ago and prior quarters, primarily from a reduction in average loans and lower interest-bearing cash, while operating lease equipment remained relatively flat. The year-to-date decline in AEA compared to 2020 was similar to that described in the quarter discussion above.

Compared to the year-ago quarter, Commercial Banking total average loans and leases declined, reflecting lower origination volume in sectors more impacted by the pandemic, the sale of the Aviation Lending portfolio, as well as high prepayments in certain portfolios. Commercial Banking average loans and leases decreased from the prior quarter, reflecting continued elevated prepayments in certain portfolios along with a full quarter impact of the Aviation Lending portfolio sale that occurred in the second quarter. In addition, the Real Estate Finance portfolio continues to be impacted by prepayments and maturities that outpace new origination volume.

The decrease in Consumer Banking average loans was primarily driven by LCM loan sales and continued run-off, and a

42

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reduction in SBA PPP loans due to SBA forgiveness.

The composition of our average funding mix is presented below.

Average Funding Mix

 

Quarters Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

Deposits

 

91

%

 

 

90

%

 

 

86

%

Unsecured borrowings

 

9

%

 

 

9

%

 

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

Secured Borrowings:

 

 

 

 

 

 

 

 

 

 

 

FHLB advances

 

0

%

 

 

1

%

 

 

5

%

Structured financings

 

0

%

 

 

0

%

 

 

0

%

These proportions will fluctuate depending upon our funding activities.

The following table details further the rates of interest-bearing liabilities.

Interest-Bearing Deposits and Borrowings — Average Balances and Annualized Rates for the Quarters Ended (dollars in millions)

 

September 30, 2021

 

 

June 30, 2021

 

 

September 30, 2020

 

 

Average

Balance

 

 

 

 

Interest

Expense

 

 

Rate (%)

 

 

Average

Balance

 

 

 

 

Interest

Expense

 

 

Rate (%)

 

 

Average

Balance

 

 

 

 

Interest

Expense

 

 

Rate (%)

 

Total interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Time deposits

$

8,054.9

 

 

 

 

$

21.1

 

 

 

1.05

%

 

$

8,538.0

 

 

 

 

$

24.4

 

 

 

1.14

%

 

$

11,850.9

 

 

 

 

$

53.0

 

 

 

1.79

%

Interest-bearing checking

 

3,467.4

 

 

 

 

 

2.5

 

 

 

0.29

%

 

 

3,491.7

 

 

 

 

 

2.5

 

 

 

0.29

%

 

 

3,282.6

 

 

 

 

 

2.9

 

 

 

0.35

%

Savings and money market

 

25,928.7

 

 

 

 

 

23.7

 

 

 

0.37

%

 

 

26,253.3

 

 

 

 

 

23.8

 

 

 

0.36

%

 

 

27,187.0

 

 

 

 

 

47.3

 

 

 

0.70

%

Total interest-bearing deposits

 

37,451.0

 

 

 

 

 

47.3

 

 

 

0.51

%

 

 

38,283.0

 

 

 

 

 

50.7

 

 

 

0.53

%

 

 

42,320.5

 

 

 

 

 

103.2

 

 

 

0.98

%

Borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured

$

3,739.3

 

 

 

 

$

45.8

 

 

 

4.90

%

 

$

3,737.6

 

 

 

 

$

45.8

 

 

 

4.90

%

 

$

4,237.5

 

 

 

 

$

48.7

 

 

 

4.60

%

Subordinated unsecured

 

495.2

 

 

 

 

 

7.3

 

 

 

5.90

%

 

 

495.1

 

 

 

 

 

7.3

 

 

 

5.90

%

 

 

494.7

 

 

 

 

 

7.3

 

 

 

5.90

%

FHLB advances

 

—

 

 

 

 

 

—

 

 

 

—

 

 

 

590.7

 

 

 

 

 

0.5

 

 

 

0.34

%

 

 

2,809.8

 

 

 

 

 

4.1

 

 

 

0.58

%

Other secured and structured borrowings

 

11.1

 

 

 

 

 

0.1

 

 

NM

 

 

 

8.7

 

 

 

 

 

0.1

 

 

NM

 

 

 

15.5

 

 

 

 

 

0.1

 

 

 

2.58

%

Other credit facilities(1)

 

—

 

 

 

 

 

2.5

 

 

 

—

 

 

 

—

 

 

 

 

 

2.4

 

 

 

—

 

 

 

—

 

 

 

 

 

2.1

 

 

 

—

 

Total borrowings

 

4,245.6

 

 

 

 

 

55.7

 

 

 

5.25

%

 

 

4,832.1

 

 

 

 

 

56.1

 

 

 

4.64

%

 

 

7,557.5

 

 

 

 

 

62.3

 

 

 

3.30

%

Total interest-bearing liabilities

$

41,696.6

 

 

 

 

$

103.0

 

 

 

0.99

%

 

$

43,115.1

 

 

 

 

$

106.8

 

 

 

0.99

%

 

$

49,878.0

 

 

 

 

$

165.5

 

 

 

1.33

%

(1)

Amounts include interest expense related to facility fees and amortization of deferred costs on unused portions of credit facilities.

The following table reflects our total deposit base, interest bearing and non-interest-bearing deposits, and related rate:

Total Deposits — Average Balances and Annualized Rates for the Quarters Ended (dollars in millions)

 

September 30, 2021

 

 

June 30, 2021

 

 

September 30, 2020

 

 

Average

Balance

 

 

Interest

Expense

 

 

Rate (%)

 

 

Average

Balance

 

 

Interest

Expense

 

 

Rate (%)

 

 

Average

Balance

 

 

Interest

Expense

 

 

Rate (%)

 

Interest-bearing deposits

$

37,451.0

 

 

$

47.3

 

 

 

0.51

%

 

$

38,283.0

 

 

$

50.7

 

 

 

0.53

%

 

$

42,320.5

 

 

$

103.2

 

 

 

0.98

%

Non-interest bearing deposits

 

3,411.8

 

 

 

—

 

 

 

—

 

 

 

3,360.9

 

 

 

—

 

 

 

—

 

 

 

3,073.4

 

 

 

—

 

 

 

—

 

Total deposits

$

40,862.8

 

 

$

47.3

 

 

 

0.46

%

 

$

41,643.9

 

 

$

50.7

 

 

 

0.49

%

 

$

45,393.9

 

 

$

103.2

 

 

 

0.91

%

Compared to the year-ago and prior quarters, the decrease in average deposits reflected a continuation of our strategy to reduce higher cost deposits, including high cost CD maturities, and managing excess liquidity. These offset growth in HOA deposits as we strategically grow this channel. Average HOA deposits totaled 17% of the total average deposits for the quarter ended September 30, 2021, up from 12% in the year-ago quarter and 16% in the prior quarter. The weighted average rate on average outstanding deposits decreased to 0.46% from 0.91% in the year-ago quarter reflecting lower rates across all but our brokered deposit channels and a higher mix of lower cost deposits. The weighted average rate on average outstanding deposits decreased from 0.49% in the prior quarter, primarily due to lower rates across most channels, driven by higher rate CD maturities and run-off of higher cost brokered deposits.

We continued to shift the mix from time deposits to non-maturity deposits. Average non-maturity deposits currently represent 80% of total deposits, compared to 79% in the prior quarter and 74% in the year-ago quarter.

See Funding and Liquidity section for tables that reflect period end deposits by type and by channel.

Interest expense on borrowings decreased compared to the year-ago and prior quarters, mostly due to the repayment of FHLB advances in the first and second quarters and the repayment of $500 million 4.125% senior unsecured notes in the 2021 first quarter. The weighted average maturity profile of the combined unsecured senior and subordinated notes is 2.8 years at September 30, 2021, compared to 3.2 years at December 31, 2020.

Deposits and borrowings are also discussed in Funding and Liquidity.

43

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The following table depicts selected earning asset yields and margin-related data for our segments and divisions within the segments.

Segment Average Yield and Other Data (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Earning Assets (AEA)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

14,787.8

 

 

$

15,295.3

 

 

$

15,709.9

 

 

$

15,226.5

 

 

$

15,847.5

 

Business Capital

 

4,906.6

 

 

 

4,952.8

 

 

 

5,236.0

 

 

 

4,962.2

 

 

 

5,290.1

 

Rail

 

7,290.2

 

 

 

7,188.8

 

 

 

7,194.8

 

 

 

7,224.7

 

 

 

7,040.9

 

Real Estate Finance

 

6,461.6

 

 

 

6,890.3

 

 

 

7,728.4

 

 

 

6,917.9

 

 

 

7,664.1

 

Total

$

33,446.2

 

 

$

34,327.2

 

 

$

35,869.1

 

 

$

34,331.3

 

 

$

35,842.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Finance Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

118.9

 

 

$

122.0

 

 

$

121.5

 

 

$

360.8

 

 

$

369.9

 

Business Capital

 

67.8

 

 

 

68.5

 

 

 

71.4

 

 

 

206.7

 

 

 

210.2

 

Rail

 

20.3

 

 

 

15.9

 

 

 

25.1

 

 

 

56.1

 

 

 

73.5

 

Real Estate Finance

 

43.6

 

 

 

47.8

 

 

 

53.6

 

 

 

142.0

 

 

 

153.0

 

Total

$

250.6

 

 

$

254.2

 

 

$

271.6

 

 

$

765.6

 

 

$

806.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Yield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

 

3.96

%

 

 

3.96

%

 

 

4.14

%

 

 

3.98

%

 

 

4.55

%

Business Capital

 

8.89

%

 

 

8.98

%

 

 

9.11

%

 

 

9.03

%

 

 

9.09

%

Rail

 

7.97

%

 

 

8.13

%

 

 

8.68

%

 

 

8.13

%

 

 

9.11

%

Real Estate Finance

 

3.42

%

 

 

3.52

%

 

 

3.62

%

 

 

3.48

%

 

 

3.97

%

Total

 

5.45

%

 

 

5.47

%

 

 

5.67

%

 

 

5.48

%

 

 

5.99

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Finance Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

 

3.22

%

 

 

3.19

%

 

 

3.10

%

 

 

3.16

%

 

 

3.11

%

Business Capital

 

5.53

%

 

 

5.53

%

 

 

5.45

%

 

 

5.55

%

 

 

5.30

%

Rail

 

1.11

%

 

 

0.89

%

 

 

1.39

%

 

 

1.04

%

 

 

1.39

%

Real Estate Finance

 

2.70

%

 

 

2.78

%

 

 

2.78

%

 

 

2.74

%

 

 

2.66

%

Total

 

3.00

%

 

 

2.96

%

 

 

3.03

%

 

 

2.97

%

 

 

3.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Earning Assets (AEA)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Community Banking

$

5,119.6

 

 

$

5,308.4

 

 

$

6,446.9

 

 

$

5,389.0

 

 

$

6,516.3

 

Legacy Consumer Mortgages

 

1,316.2

 

 

 

1,501.8

 

 

 

1,979.7

 

 

 

1,489.3

 

 

 

2,066.7

 

Total

$

6,435.8

 

 

$

6,810.2

 

 

$

8,426.6

 

 

$

6,878.3

 

 

$

8,583.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Finance Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Community Banking

$

62.3

 

 

$

65.4

 

 

$

60.4

 

 

$

191.6

 

 

$

189.8

 

Legacy Consumer Mortgages

 

31.5

 

 

 

32.6

 

 

 

35.8

 

 

 

93.9

 

 

 

106.5

 

Total

$

93.8

 

 

$

98.0

 

 

$

96.2

 

 

$

285.5

 

 

$

296.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Yield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Community Banking

 

2.91

%

 

 

2.88

%

 

 

3.04

%

 

 

2.85

%

 

 

3.25

%

Legacy Consumer Mortgages

 

10.69

%

 

 

9.82

%

 

 

8.32

%

 

 

9.53

%

 

 

8.19

%

Total

 

4.50

%

 

 

4.41

%

 

 

4.28

%

 

 

4.30

%

 

 

4.44

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Finance Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Community Banking

 

4.87

%

 

 

4.93

%

 

 

3.74

%

 

 

4.74

%

 

 

3.88

%

Legacy Consumer Mortgages

 

9.57

%

 

 

8.68

%

 

 

7.25

%

 

 

8.41

%

 

 

6.87

%

Total

 

5.83

%

 

 

5.76

%

 

 

4.57

%

 

 

5.54

%

 

 

4.60

%

Gross yield (interest income plus rental income on operating leases as a percent of AEA) in Commercial Banking for the quarter ended September 30, 2021 was down from the year-ago quarter driven by decreases in all divisions. Compared to the prior quarter, gross yield in each of the divisions was flat or down. Gross yield in Commercial Finance was flat as modest impacts from asset mix and yields on new business as well as changes in average interest rates offset one another. The change in gross yield in Real Estate Finance was primarily driven by changes in asset mix and the impact from lower average interest rates. The Business Capital gross yield was down compared to the year ago and prior quarters, which benefited from higher renewal income and prepayment benefits. Gross yield in Rail was down from the year-ago and prior quarters, reflecting lease rates that continued to re-price lower. Year-to-date trends generally follow the trends and discussions compared to the year-ago quarter.

For total Consumer Banking, gross yield was up compared to the year-ago and prior quarters, and down compared to the nine months ended September 30, 2020. Within the Consumer and Community Banking division, gross yield was down compared to the year-ago quarter and nine months, as yields on new business have declined reflecting the lower market rate environment, partially offset by higher prepayment activity. Gross yield in LCM was up compared to the year-ago and prior quarters, and compared to the nine-month period, primarily due to higher prepayment activity in respective periods contributing to higher PAA

44

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accretion combined with lower average loan balances. NFM in Consumer and Community Banking was higher than gross yields as this segment receives an interest benefit from the other segments for the value of excess deposits it generates.

The following table displays PAA accretion by segment and division for both interest income and interest expense. As of September 30, 2021, the remaining accretable PAA on loans was $316.9 million, of which $32.9 million related to Commercial Banking and $284.0 million related to Consumer Banking. This compares to $465.4 million of remaining accretable PAA on loans as of December 31, 2020, of which $39.8 million related to Commercial Banking and $425.6 million related to Consumer Banking. The remaining accretable PAA in Consumer Banking is expected to decrease due to the declining LCM loan balances. Similarly, we are expecting accretion of the remaining Commercial Banking PAA to continue to trend lower as well. However, amounts may vary quarter to quarter due to fluctuations in prepayments, which results in the acceleration of a loan's remaining accretable PAA into interest income. (See footnote 1 to the following table).

PAA Accretion for the Quarters Ended (dollars in millions)

 

September 30, 2021

 

 

June 30, 2021

 

 

September 30, 2020

 

 

PAA Accretion Recognized in:

 

 

PAA Accretion Recognized in:

 

 

PAA Accretion Recognized in:

 

 

Interest Income(1)

 

 

Interest

Expense(2)

 

 

NFR

 

 

Interest Income(1)

 

 

Interest

Expense(2)

 

 

NFR

 

 

Interest Income(1)

 

 

Interest

Expense(2)

 

 

NFR

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

1.0

 

 

$

0.1

 

 

$

1.1

 

 

$

0.7

 

 

$

0.2

 

 

$

0.9

 

 

$

1.2

 

 

$

1.0

 

 

$

2.2

 

Real Estate Finance

 

1.3

 

 

 

—

 

 

 

1.3

 

 

 

1.9

 

 

 

—

 

 

 

1.9

 

 

 

2.0

 

 

 

—

 

 

 

2.0

 

Total Commercial Banking

 

2.3

 

 

 

0.1

 

 

 

2.4

 

 

 

2.6

 

 

 

0.2

 

 

 

2.8

 

 

 

3.2

 

 

 

1.0

 

 

 

4.2

 

Consumer Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Community Banking

 

(0.7

)

 

 

0.3

 

 

 

(0.4

)

 

 

(1.0

)

 

 

0.3

 

 

 

(0.7

)

 

 

(1.9

)

 

 

1.3

 

 

 

(0.6

)

Legacy Consumer Mortgages

 

19.8

 

 

 

—

 

 

 

19.8

 

 

 

20.7

 

 

 

—

 

 

 

20.7

 

 

 

18.8

 

 

 

—

 

 

 

18.8

 

Total Consumer Banking

 

19.1

 

 

 

0.3

 

 

 

19.4

 

 

 

19.7

 

 

 

0.3

 

 

 

20.0

 

 

 

16.9

 

 

 

1.3

 

 

 

18.2

 

Total CIT

$

21.4

 

 

$

0.4

 

 

$

21.8

 

 

$

22.3

 

 

$

0.5

 

 

$

22.8

 

 

$

20.1

 

 

$

2.3

 

 

$

22.4

 

(1)

Includes accelerated recognition of PAA accretion due to prepayments of approximately $15 million, $17 million, and $13 million for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

(2)

Reflects PAA accretion on deposits acquired in the MOB Acquisition.

The following table sets forth the details on net operating lease revenues.

Net Operating Lease Data (dollars in millions)

 

Quarters Ended

 

 

September 30, 2021

 

 

June 30, 2021

 

 

September 30, 2020

 

Rental income on operating leases

$

186.2

 

 

 

9.47

%

 

$

188.2

 

 

 

9.71

%

 

$

201.3

 

 

 

10.29

%

Depreciation on operating lease equipment

 

85.1

 

 

 

4.33

%

 

 

82.8

 

 

 

4.27

%

 

 

82.5

 

 

 

4.22

%

Maintenance and other operating lease expenses

 

50.5

 

 

 

2.57

%

 

 

54.8

 

 

 

2.83

%

 

 

48.6

 

 

 

2.48

%

Net operating lease revenue

$

50.6

 

 

 

2.57

%

 

$

50.6

 

 

 

2.61

%

 

$

70.2

 

 

 

3.59

%

Average operating lease equipment, including amounts held for sale

$

7,862.5

 

 

 

 

 

 

$

7,754.0

 

 

 

 

 

 

$

7,824.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

 

 

 

 

 

 

 

Rental income on operating leases

$

569.1

 

 

 

9.71

%

 

$

612.0

 

 

 

10.72

%

 

 

 

 

 

 

 

 

Depreciation on operating lease equipment

 

252.6

 

 

 

4.31

%

 

 

241.9

 

 

 

4.24

%

 

 

 

 

 

 

 

 

Maintenance and other operating lease expenses

 

156.9

 

 

 

2.68

%

 

 

158.3

 

 

 

2.77

%

 

 

 

 

 

 

 

 

Net operating lease revenue

$

159.6

 

 

 

2.72

%

 

$

211.8

 

 

 

3.71

%

 

 

 

 

 

 

 

 

Average operating lease equipment, including amounts held for sale

$

7,816.0

 

 

 

 

 

 

$

7,615.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating lease revenue, which is a component of NFR, is driven principally by the performance of the Rail portfolio within the Commercial Banking segment. Although our rail portfolio grew, net operating lease revenue in dollars and as a percent of average operating lease equipment for the quarter and nine months ended September 30, 2021 was down from the year-ago periods, reflecting renewal rates that continued to re-price lower than the rates of maturing leases on average across the portfolio.

Net operating lease revenue compared to the prior quarter was flat, reflecting lease renewal rates that on average re-priced at a lower but improving rate, offset by lower expenses. Lease renewals repriced down approximately 2% during the current quarter, which was an improvement compared to the decline experienced in the prior quarter and reflects market conditions and the mix of cars that came up for renewal. Railcar utilization, including commitments to lease, improved to 91% at September 30, 2021 from 90% at June 30, 2021.

Depreciation, which is recognized on railcars and other operating lease equipment, increased from the year-ago quarter and nine months and the prior quarter reflecting portfolio growth. Maintenance and other operating lease expenses are variable and primarily relate to the Rail portfolio.

45

Table of Contents

 

 

CREDIT METRICS

The following provides information on the provision for credit losses, allowance for credit losses (“ACL”), and allowance for off-balance sheet credit exposures, as well as certain credit metrics, including net charge-off and non-accrual loan levels, that management uses to track the credit quality of the portfolio. Management also utilizes other metrics and statistics such as risk ratings, concentration limits, migration trends, key portfolio stress testing, and LTV ratio and FICO scores on consumer mortgages, to monitor and manage the risk and credit quality of the portfolio. See Note 3 – Loans and Note 4 – Allowance for Credit Losses in Item 1 for various tables.

The provision for credit losses for the quarter ended September 30, 2021 was a benefit of $67.1 million, while the year-ago quarter reflected a provision expense of $63.3 million and the prior quarter included a benefit of $72.2 million. The benefit for the quarter ended September 30, 2021 included $49.3 million related to the Commercial Banking segment and $17.8 million in the Consumer Banking segment. The net provision benefit in the current quarter included approximately $72 million for the reduction in reserves (including ACL and allowance for off-balance sheet credit exposures), partially offset by $5.0 million of net charge-offs. The reduction in reserves compared to the prior quarter was due to lower loan balances, the continued improvement in credit trends, which are benefiting from CIT’s improved risk profile and disciplined underwriting standards, as well as the improvement in certain macroeconomic variable forecasts. The reduction in reserves included $40.9 million for loans collectively evaluated and $11.7 million for off-balance sheet credit exposures. The remaining decline of $19.3 million in the reserves related to loans that were individually evaluated.

The provision expense in the year-ago quarter of $63.3 million included the impact of the COVID-19 pandemic on the macroeconomic forecasts across our portfolios. The provision expense related to the Commercial Banking segment was $87.9 million, partially offset by a benefit of $24.6 million in the Consumer Banking segment. The net provision benefit in the prior quarter included an approximately $99 million reduction in reserves (including ACL and allowance for off-balance sheet credit exposures), partially offset by $26.1 million of net charge-offs. The reduction in reserves included a $76.6 million decline for loans collectively evaluated and for off-balance sheet credit exposures. The remaining decline of $21.9 million in the reserves related to loans that were individually evaluated and largely offset the net charge-offs.

Net charge-offs were $5.0 million (0.06% of average loans) in the current quarter. Net charge-offs were down from $66.0 million (0.71% of average loans) in the year-ago quarter, which reflected the impact from the COVID-19 pandemic and the associated effects on the economy. The decrease from $26.1 million (0.30% of average loans) in the prior quarter, reflected a decline in net charge-offs in the Real Estate Finance division of Commercial Banking.

Non-accrual loans totaled $404.9 million (1.21% of loans) at September 30, 2021, compared to $588.1 million (1.63% of loans) at December 31, 2020. The decrease was driven by reductions in non-accrual loans across Commercial Banking portfolios as well as loan sales within Consumer Banking.

Net charge-offs and non-accrual loans are discussed and presented in subsequent tables by segment and divisions later in this section.

46

Table of Contents

 

 

The following table presents details on our ACL, including charge-offs and recoveries and provides summarized components of the provision and allowance:

ACL and Provision for Credit Losses (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Allowance - beginning of period

$

850.6

 

 

$

942.3

 

 

$

1,202.7

 

 

$

1,063.8

 

 

$

482.6

 

CIT CECL adoption(1)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

223.6

 

Provision for credit losses(2)

 

(67.1

)

 

 

(72.2

)

 

 

63.3

 

 

 

(256.7

)

 

 

800.8

 

Other(2)

 

11.9

 

 

 

6.6

 

 

 

6.2

 

 

 

27.7

 

 

 

(31.6

)

Net additions

 

(55.2

)

 

 

(65.6

)

 

 

69.5

 

 

 

(229.0

)

 

 

769.2

 

The initial ACL recognized on PCD assets(3)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

20.2

 

Gross charge-offs(3)

 

16.4

 

 

 

47.4

 

 

 

78.2

 

 

 

92.7

 

 

 

334.7

 

Less: Recoveries

 

11.4

 

 

 

21.3

 

 

 

12.2

 

 

 

48.3

 

 

 

45.3

 

Net charge-offs

 

5.0

 

 

 

26.1

 

 

 

66.0

 

 

 

44.4

 

 

 

289.4

 

Allowance - end of period

$

790.4

 

 

$

850.6

 

 

$

1,206.2

 

 

$

790.4

 

 

$

1,206.2

 

Provision for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loans individually reviewed

$

(18.5

)

 

$

1.6

 

 

$

36.0

 

 

$

(2.9

)

 

$

131.8

 

Provision for loans collectively reviewed

 

(48.6

)

 

 

(73.8

)

 

 

27.3

 

 

 

(253.8

)

 

 

669.0

 

Total

$

(67.1

)

 

$

(72.2

)

 

$

63.3

 

 

$

(256.7

)

 

$

800.8

 

Allowance for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance on loans individually reviewed

$

72.3

 

 

$

91.6

 

 

$

128.1

 

 

 

 

 

 

 

 

 

Allowance on loans collectively reviewed

 

718.1

 

 

 

759.0

 

 

 

1,078.1

 

 

 

 

 

 

 

 

 

Total

$

790.4

 

 

$

850.6

 

 

$

1,206.2

 

 

 

 

 

 

 

 

 

Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACL as a percentage of total loans

 

2.36

%

 

 

2.52

%

 

 

3.23

%

 

 

 

 

 

 

 

 

ACL as a percentage of total loans/Commercial Banking loans

 

2.58

%

 

 

2.73

%

 

 

3.59

%

 

 

 

 

 

 

 

 

ACL as a percentage of total loans/Consumer Banking loans

 

1.43

%

 

 

1.66

%

 

 

1.94

%

 

 

 

 

 

 

 

 

(1)

CECL adoption was before the MOB Acquisition.

(2)

Included in the provision for credit losses was $(11.7) million and $(6.4) million for the quarters ended September 30, 2021 and 2020, respectively, $(6.8) million for the quarter ended June 30, 2021 and $(28.2) million and $29.9 million for the nine months ended September 30, 2021 and 2020, respectively, related to off-balance sheet credit exposures, which is not part of the ACL and is offset in the “Other” line. The allowance for off-balance sheet exposures totaled $50.1 million, $62.1 million, and $74.8 million at September 30, 2021, June 30, 2021 and September 30, 2020, respectively. “Other” primarily includes provision changes related to off-balance sheet credit exposures, which represents credit costs related to unfunded financing commitments, deferred purchase agreements (“DPA’s”), and letters of credit. The allowance related to this exposure is included in other liabilities.

(3)

In connection with the MOB Acquisition, the initial ACL recognized on PCD assets was $58.8 million, of which $38.6 million was charged-off for loans that had been written-off prior to acquisition (whether full or partial) or which met CIT’s charge-off policy at the time of acquisition. After considering loans that were immediately charged-off upon acquisition, the net impact was $20.2 million of additional PCD reserves on January 1, 2020.

In 2021, the allowance for off-balance sheet credit exposures decreased to $50.1 million from $78.3 million at December 31, 2020, largely due to a reduction in the off-balance sheet credit exposures, as well as an improvement in the macroeconomic forecast.

Loan Net Carrying Value (dollars in millions)

 

Loans

 

 

Allowance

for

Credit Losses

 

 

Net Carrying

Value

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Commercial Banking

$

27,217.1

 

 

$

(701.2

)

 

$

26,515.9

 

Consumer Banking

 

6,243.9

 

 

 

(89.2

)

 

 

6,154.7

 

Total

$

33,461.0

 

 

$

(790.4

)

 

$

32,670.6

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Commercial Banking

$

28,636.5

 

 

$

(933.7

)

 

$

27,702.8

 

Consumer Banking

 

7,508.1

 

 

 

(130.1

)

 

 

7,378.0

 

Total

$

36,144.6

 

 

$

(1,063.8

)

 

$

35,080.8

 

47

Table of Contents

 

 

 

The following table presents charge-offs, by class and business segment. See Results by Business Segment for additional information.

Charge-offs as a Percentage of Average Loans (dollars in millions)

 

Quarters Ended

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

 

 

2021

 

 

2020

 

Gross Charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

1.6

 

 

 

0.04

%

 

$

12.6

 

 

 

0.31

%

 

$

48.2

 

 

 

1.17

%

 

 

 

$

22.2

 

 

0.18

%

 

$

231.2

 

 

 

1.86

%

Business Capital

 

13.7

 

 

 

1.19

%

 

 

15.4

 

 

 

1.33

%

 

 

29.0

 

 

 

2.37

%

 

 

 

 

46.9

 

 

1.35

%

 

 

99.8

 

 

 

2.68

%

Real Estate Finance

 

—

 

 

 

—

%

 

 

17.1

 

 

 

0.99

%

 

 

—

 

 

 

—

%

 

 

 

 

17.1

 

 

0.33

%

 

 

—

 

 

 

—

%

Commercial Banking

 

15.3

 

 

 

0.23

%

 

 

45.1

 

 

 

0.65

%

 

 

77.2

 

 

 

1.06

%

 

 

 

 

86.2

 

 

0.41

%

 

 

331.0

 

 

 

1.51

%

Consumer and Community Banking

 

0.1

 

 

 

0.01

%

 

 

0.3

 

 

 

0.03

%

 

 

0.2

 

 

 

0.01

%

 

 

 

 

0.7

 

 

0.02

%

 

 

0.2

 

 

 

—

%

Legacy Consumer Mortgages

 

1.0

 

 

 

0.32

%

 

 

2.0

 

 

 

0.52

%

 

 

0.8

 

 

 

0.15

%

 

 

 

 

5.8

 

 

0.52

%

 

 

3.5

 

 

 

0.23

%

Consumer Banking

 

1.1

 

 

 

0.07

%

 

 

2.3

 

 

 

0.13

%

 

 

1.0

 

 

 

0.05

%

 

 

 

 

6.5

 

 

0.13

%

 

 

3.7

 

 

 

0.06

%

Total

$

16.4

 

 

 

0.20

%

 

$

47.4

 

 

 

0.55

%

 

$

78.2

 

 

 

0.84

%

 

 

 

$

92.7

 

 

0.36

%

 

$

334.7

 

 

 

1.18

%

Less: Recoveries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

1.3

 

 

 

0.03

%

 

$

11.1

 

 

 

0.27

%

 

$

1.6

 

 

 

0.03

%

 

 

 

$

20.3

 

 

0.16

%

 

$

16.9

 

 

 

0.13

%

Business Capital

 

9.4

 

 

 

0.81

%

 

 

9.2

 

 

 

0.80

%

 

 

9.8

 

 

 

0.79

%

 

 

 

 

25.8

 

 

0.74

%

 

 

26.6

 

 

 

0.71

%

Commercial Banking

 

10.7

 

 

 

0.16

%

 

 

20.3

 

 

 

0.29

%

 

 

11.4

 

 

 

0.15

%

 

 

 

 

46.1

 

 

0.22

%

 

 

43.5

 

 

 

0.20

%

Legacy Consumer Mortgages

 

0.7

 

 

 

0.25

%

 

 

1.0

 

 

 

0.24

%

 

 

0.8

 

 

 

0.15

%

 

 

 

 

2.2

 

 

0.19

%

 

 

1.8

 

 

 

0.12

%

Consumer Banking

 

0.7

 

 

 

0.05

%

 

 

1.0

 

 

 

0.05

%

 

 

0.8

 

 

 

0.04

%

 

 

 

 

2.2

 

 

0.04

%

 

 

1.8

 

 

 

0.03

%

Total

$

11.4

 

 

 

0.14

%

 

$

21.3

 

 

 

0.25

%

 

$

12.2

 

 

 

0.13

%

 

 

 

$

48.3

 

 

0.19

%

 

$

45.3

 

 

 

0.16

%

Net Charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

$

0.3

 

 

 

0.01

%

 

$

1.5

 

 

 

0.04

%

 

$

46.6

 

 

 

1.14

%

 

 

 

$

1.9

 

 

0.02

%

 

$

214.3

 

 

 

1.73

%

Business Capital

 

4.3

 

 

 

0.38

%

 

 

6.2

 

 

 

0.53

%

 

 

19.2

 

 

 

1.58

%

 

 

 

 

21.1

 

 

0.61

%

 

 

73.2

 

 

 

1.97

%

Real Estate Finance

 

—

 

 

 

—

%

 

 

17.1

 

 

 

0.99

%

 

 

—

 

 

 

—

%

 

 

 

 

17.1

 

 

0.33

%

 

 

—

 

 

 

—

%

Commercial Banking

 

4.6

 

 

 

0.07

%

 

 

24.8

 

 

 

0.36

%

 

 

65.8

 

 

 

0.91

%

 

 

 

 

40.1

 

 

0.19

%

 

 

287.5

 

 

 

1.31

%

Consumer and Community Banking

 

0.1

 

 

 

0.01

%

 

 

0.3

 

 

 

0.03

%

 

 

0.2

 

 

 

0.01

%

 

 

 

 

0.7

 

 

0.02

%

 

 

0.2

 

 

 

—

%

Legacy Consumer Mortgages

 

0.3

 

 

 

0.07

%

 

 

1.0

 

 

 

0.28

%

 

 

(0.0

)

 

 

—

%

 

 

 

 

3.6

 

 

0.33

%

 

 

1.7

 

 

 

0.11

%

Consumer Banking

 

0.4

 

 

 

0.02

%

 

 

1.3

 

 

 

0.08

%

 

 

0.2

 

 

 

0.01

%

 

 

 

 

4.3

 

 

0.09

%

 

 

1.9

 

 

 

0.03

%

Total

$

5.0

 

 

 

0.06

%

 

$

26.1

 

 

 

0.30

%

 

$

66.0

 

 

 

0.71

%

 

 

 

$

44.4

 

 

0.17

%

 

$

289.4

 

 

 

1.02

%

Gross and net charge-offs were down compared to the year-ago quarter and nine months. The year-ago periods were impacted by the COVID-19 pandemic and the associated effects on the economy. Compared to the prior quarter, the decline reflected lower charge-offs in Real Estate Finance.

The following tables present information on non-accruing loans, which when added to other real estate owned (“OREO”) and other repossessed assets, sums to non-performing assets. See Note 3 – Loans in Item 1 for details on the Company’s non-performing assets.

Segment Non-accrual Loans as a Percentage of Loans (dollars in millions)(1)(2)

 

September 30, 2021

 

 

December 31, 2020

 

Commercial Finance

$

225.3

 

 

 

1.40

%

 

$

239.4

 

 

 

1.47

%

Business Capital

 

40.8

 

 

 

0.88

%

 

 

72.8

 

 

 

1.52

%

Real Estate Finance

 

63.4

 

 

 

0.99

%

 

 

83.2

 

 

 

1.10

%

Commercial Banking

 

329.5

 

 

 

1.21

%

 

 

395.4

 

 

 

1.38

%

Consumer and Community Banking

 

52.1

 

 

 

1.03

%

 

 

53.4

 

 

 

0.92

%

Legacy Consumer Mortgages

 

23.3

 

 

 

1.94

%

 

 

139.3

 

 

 

8.22

%

Consumer Banking

 

75.4

 

 

 

1.21

%

 

 

192.7

 

 

 

2.57

%

Total

$

404.9

 

 

 

1.21

%

 

$

588.1

 

 

 

1.63

%

(1)

Factored receivables within our Commercial Finance division do not accrue interest and therefore are not considered within non-accrual loans but are considered for credit provisioning purposes.

(2)

Non-accrual loans include $65.6 million and $97.7 million of TDRs at September 30, 2021 and December 31, 2020, respectively.

Non-accrual loans decreased $183.2 million from December 31, 2020, primarily driven by the LCM division reflecting lower balance due to loan sales, as well as improved payment performance. The decline in Commercial Banking reflects the combination of accounts being repaid and others being returned to accrual status based on improved performance.

As of September 30, 2021, and December 31, 2020, the ACL as a percentage of non-accrual loans was 195% and 181%, respectively. 76% of our non-accrual accounts were paying current at September 30, 2021, compared to 50% at December 31, 2020. We discuss our policy of placing loans on non-accrual status in Note 1 – Business and Summary of Significant Accounting Policies in the 2020 Form 10-K. We may place accounts that are presently paying current on non-accrual status when the financial condition of the borrower deteriorates and payment in full is not expected.

Total delinquency (30 days or more) was 1.0% of loans at September 30, 2021 and 2.6% at December 31, 2020. Delinquency status of loans is presented in Note 3 – Loans in Item 1. We present a delinquency table specific to COVID-19 loans that were provided relief and subsequently exited deferral status in the COVID-19 Borrower Relief Arrangements section below.

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The following table presents a summary of total commercial criticized loans. Detailed definitions of the commercial loan ratings and a detailed table are provided in Note 3 – Loans in Item 1.

Commercial Criticized Loans (dollars in millions)

 

September 30,

 

December 31,

 

September 30,

 

2021

 

2020

 

2020

Total commercial criticized loans

$              3,486.0

 

$                4,433.1

 

$               4,506.5

As a % of total commercial loans

12.4%

 

14.9%

 

14.9%

Commercial criticized loans decreased by $947.1 million from December 31, 2020, reflecting improved credit performance, sales and paydowns. Of the decrease from December 31, 2020, $492 million reduction related to Commercial Finance, $278.4 million reduction related to Real Estate Finance and $176.8 million reduction related to Business Capital.

COVID-19 Borrower Relief Arrangements

CIT is working prudently with borrowers who are or may be unable to meet their current contractual payment obligations because of the effects of COVID-19. Refer to the tables below for a summary of the key data points related to the COVID-19 loan modifications.

Included within Title I of the CARES Act, as amended, was a provision for SBA funding of small business loans through the Paycheck Protection Program (“PPP”) for small businesses to keep their employees paid during the COVID-19 pandemic, with applications accepted through August 8, 2020. PPP loans are guaranteed by the SBA and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. The PPP loan balance at September 30, 2021 was $22 million, down from $84 million at June 30, 2021 and $251 million at December 31, 2020, primarily due to forgiveness payments from the SBA. See our more detailed disclosure in our 2020 Form 10-K.

Loan modifications approved for COVID-19 impacted borrowers totaled $591 million at September 30, 2021, which included deferment and other modifications, such as covenant relief, compared to $705 million at December 31, 2020. The COVID-19 loan modifications were not identified as TDRs due to the practicality exemption provided by the Interagency guidance or, if applicable, the CARES Act.

At September 30, 2021 there was $60 million of new initial COVID-19 loan modifications granted during the third quarter, $58 million represented two real estate contracts in Commercial Banking and $2 million related to nine Consumer Banking contracts.

The table below presents the delinquency status of loans with remaining balances at September 30, 2021 that have exited their COVID-19 loan modification period, regardless of accrual / non-accrual classification, and of the total, the amount on non-accrual status. Not included in the following tables were approximately $850 million of exited COVID-19 loan modifications that had paid off or been sold, and approximately $20 million that were charged off.

COVID-19 Loan Modifications Delinquency Status at September 30, 2021 (dollars in millions)

 

COVID-19 Loan Modifications Exited(1)

 

 

30-59

 

 

60-89

 

 

90 or more

 

 

Total Past Due

 

 

Current

 

 

Total

 

 

Non-Accrual

 

Commercial Banking

$

26

 

 

$

8

 

 

$

6

 

 

$

40

 

 

$

892

 

 

$

932

 

 

$

73

 

Consumer Banking

 

14

 

 

 

5

 

 

 

20

 

 

 

39

 

 

 

478

 

 

 

517

 

 

 

33

 

Total CIT

$

40

 

 

$

13

 

 

$

26

 

 

$

79

 

 

$

1,370

 

 

$

1,449

 

 

$

106

 

(1)

Included in the table above are $32 million of TDRs and $195 million of modifications that are included in the TDRs and Modifications table in the following section.

The total past due loans that have exited COVID-19 modifications status of approximately $79 million represents 23% of the Company's total past due loans and 0.24% of total loans. Of the $106 million of non-accrual loans that were COVID-19 modified loans, approximately 60% were paying current.

As discussed in Note 1 – Business and Summary of Significant accounting Policies in Item 1, loans with deferments granted in response to the COVID-19 pandemic will generally continue to accrue interest during the deferral period. As of September 30, 2021, the accrued and unpaid interest within other assets related to loans that have or had COVID-19 related deferments (i.e. active deferment or exited) were approximately $3 million. Rentals on operating leases will continue to accrue until such time that it is determined that collection of the rental payments is no longer probable. Accrued rentals on operating leases related to accounts with COVID-19 related modifications were approximately $3 million at September 30, 2021.

With respect to the non-accrual, past due and TDR information provided throughout this section, see discussion of the CARES Act and Interagency Statement in Note 1 – Business and Summary of Significant Accounting Policies in Item 1.

Troubled Debt Restructurings and Modifications

The tables that follow reflect loan carrying values of accounts that have been modified, excluding loans in trial modification of $0.1 million and $4.5 million as of September 30, 2021 and December 31, 2020, respectively. The table also excludes modifications made for qualifying COVID-19 impacted borrowers under the exemptions provided by the Interagency guidance or, if applicable, the CARES Act. See tables above for further details.

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TDRs and Modifications(1)(2) (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

 

 

 

 

% Compliant

 

 

 

 

 

 

% Compliant

 

Troubled Debt Restructurings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferral of principal and/or interest

$

71.4

 

 

 

70

%

 

$

53.7

 

 

 

95

%

Covenant relief and other

 

58.1

 

 

 

84

%

 

 

80.7

 

 

 

80

%

Total TDRs

$

129.5

 

 

 

76

%

 

$

134.4

 

 

 

86

%

Percent non-accrual

 

51

%

 

 

 

 

 

 

73

%

 

 

 

 

Modifications(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covenant relief

$

137.2

 

 

 

100

%

 

$

87.2

 

 

 

91

%

Interest rate increase

 

197.4

 

 

 

94

%

 

 

219.4

 

 

 

94

%

Extended maturity

 

179.7

 

 

 

98

%

 

 

122.7

 

 

 

89

%

Other

 

540.2

 

 

 

97

%

 

 

521.2

 

 

 

90

%

Total Modifications

$

1,054.5

 

 

 

97

%

 

$

950.5

 

 

 

91

%

Percent non-accrual

 

22

%

 

 

 

 

 

 

16

%

 

 

 

 

(1)

Table depicts the predominant element of each modification, which may contain several of the characteristics listed.

(2)

Table includes accounts that were criticized at the time of the modification request.

(3)

Excludes $591 million and $705 million of loans with COVID-19 borrower relief arrangements, including $314 million and $458 million of deferments at September 30, 2021 and December 31, 2020, respectively.

TDRs and other credit quality information is included in Note 3 – Loans in Item 1.

NON-INTEREST INCOME

 

Non-interest Income (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Rental income on operating leases

$

186.2

 

 

$

188.2

 

 

$

201.3

 

 

$

569.1

 

 

$

612.0

 

Other non-interest income

 

124.7

 

 

 

160.7

 

 

 

146.0

 

 

 

515.3

 

 

 

379.2

 

Total non-interest income

$

310.9

 

 

$

348.9

 

 

$

347.3

 

 

$

1,084.4

 

 

$

991.2

 

Other non-interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains on investment securities

$

5.5

 

 

$

3.7

 

 

$

8.3

 

 

$

113.9

 

 

$

29.7

 

Fee income

 

32.7

 

 

 

36.2

 

 

 

32.6

 

 

 

98.4

 

 

 

96.8

 

Factoring commissions

 

28.3

 

 

 

26.6

 

 

 

19.8

 

 

 

78.8

 

 

 

54.1

 

Gains on leasing equipment, net of impairments

 

20.7

 

 

 

29.1

 

 

 

24.3

 

 

 

77.8

 

 

 

68.1

 

BOLI income

 

8.3

 

 

 

8.2

 

 

 

15.7

 

 

 

24.6

 

 

 

31.4

 

Property tax income

 

3.5

 

 

 

3.9

 

 

 

4.0

 

 

 

11.5

 

 

 

13.3

 

Other income

 

25.7

 

 

 

53.0

 

 

 

41.3

 

 

 

110.3

 

 

 

85.8

 

Total other non-interest income

$

124.7

 

 

$

160.7

 

 

$

146.0

 

 

$

515.3

 

 

$

379.2

 

Noteworthy items(1)

 

13.2

 

 

 

—

 

 

 

—

 

 

 

(69.8

)

 

 

—

 

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

$

137.9

 

 

$

160.7

 

 

$

146.0

 

 

$

445.5

 

 

$

379.2

 

Factoring volume

$

6,871.6

 

 

$

6,056.0

 

 

$

5,880.1

 

 

$

18,754.5

 

 

$

14,951.0

 

(1)

Noteworthy items are described in the text below.

(2)

Total other non-interest income, excluding noteworthy items is a non-GAAP balance and is reconciled above to the GAAP balance. See Non-GAAP Financial Measurements section for description of use.

Rental Income on Operating Lease Equipment

Rental income on operating leases from equipment we lease is generated in the Rail, Commercial Finance and Business Capital divisions in the Commercial Banking segment. Rental income is discussed in Net Finance Revenue and Results by Business Segment.

Other Non-Interest Income

For the quarter ended September 30, 2021, other non-interest income decreased compared to the year-ago quarter. Some of the drivers included lower gains on investment securities and leasing equipment and lower BOLI income, which offset higher factoring commissions. Gains on investment securities and leasing equipment were down $6.4 million. See tables in the Loans and Leases section, which include amounts of loans and equipment sold by segment. BOLI income in the year-ago quarter included elevated insurance payouts. The increase in factoring commissions reflected higher factoring volumes and surcharges from the year-ago quarter, which was impacted by the global pandemic from the spread of the COVID-19 virus and the ensuing adverse impact on the macroeconomic environment. The noteworthy item in the current quarter, which reduced the other income line, reflected a CTA release related to the liquidation of a foreign entity.

The increase of other non-interest income for the nine months ended September 30, 2021 reflected $104.7 million of gains on sales of investment securities related to our strategic initiative to monetize unrealized gains on investment securities in AOCI in the Corporate segment, of which $83.0 million was considered a noteworthy item. Also driving the year-to-date increase were higher factoring commissions and gains on loan sales (in other income).

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Table of Contents

 

 

Other non-interest income was down from the prior quarter. The decrease reflects lower other income, which included the noteworthy item and a decline of $5 million of net gains on sales of approximately $29 million of consumer mortgage loans, primarily from the LCM division, while the prior quarter included an $8 million gain from the sale of the Aviation Lending portfolio in Commercial Banking. Also driving the decline were lower gains on equipment sales.

NON-INTEREST EXPENSES

 

Non-Interest Expense (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Depreciation on operating lease equipment

$

85.1

 

 

$

82.8

 

 

$

82.5

 

 

$

252.6

 

 

$

241.9

 

Maintenance and other operating lease expenses

 

50.5

 

 

 

54.8

 

 

 

48.6

 

 

 

156.9

 

 

 

158.3

 

Operating expenses

 

268.2

 

 

 

251.2

 

 

 

295.5

 

 

 

793.4

 

 

 

990.3

 

Goodwill impairment

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

344.7

 

Loss on debt extinguishments and deposit redemptions

 

—

 

 

 

—

 

 

 

—

 

 

 

0.1

 

 

 

(14.8

)

Total non-interest expenses

$

403.8

 

 

$

388.8

 

 

$

426.6

 

 

$

1,203.0

 

 

$

1,720.4

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

153.0

 

 

$

148.6

 

 

$

148.6

 

 

$

456.6

 

 

$

496.7

 

Technology

 

32.4

 

 

 

33.4

 

 

 

39.4

 

 

 

99.2

 

 

 

120.9

 

Net occupancy expense

 

17.1

 

 

 

16.3

 

 

 

19.7

 

 

 

51.1

 

 

 

58.8

 

Professional fees

 

10.6

 

 

 

21.2

 

 

 

22.2

 

 

 

45.7

 

 

 

76.8

 

Insurance

 

13.9

 

 

 

14.1

 

 

 

25.3

 

 

 

42.9

 

 

 

55.5

 

Intangible asset amortization

 

8.1

 

 

 

8.3

 

 

 

8.5

 

 

 

24.8

 

 

 

25.5

 

Advertising and marketing

 

5.8

 

 

 

5.0

 

 

 

4.8

 

 

 

14.3

 

 

 

30.3

 

Property tax expense

 

3.9

 

 

 

4.4

 

 

 

4.8

 

 

 

12.7

 

 

 

14.4

 

Restructuring costs

 

—

 

 

 

(7.9

)

 

 

—

 

 

 

(7.9

)

 

 

37.2

 

Other expenses

 

23.4

 

 

 

7.8

 

 

 

22.2

 

 

 

54.0

 

 

 

74.2

 

Total operating expenses

$

268.2

 

 

$

251.2

 

 

$

295.5

 

 

$

793.4

 

 

$

990.3

 

Intangible asset amortization

 

8.1

 

 

 

8.3

 

 

 

8.5

 

 

 

24.8

 

 

 

25.5

 

Noteworthy items

 

0.7

 

 

 

(6.2

)

 

 

0.5

 

 

 

1.4

 

 

 

74.7

 

Total operating expenses, excluding intangible amortization and noteworthy items(1)

$

259.4

 

 

$

249.1

 

 

$

286.5

 

 

$

767.2

 

 

$

890.1

 

Headcount, actuals

 

3,812

 

 

 

3,914

 

 

 

4,260

 

 

 

3,812

 

 

 

4,260

 

Net efficiency ratio(2)

 

60.2

%

 

 

52.5

%

 

 

60.6

%

 

 

53.0

%

 

 

67.2

%

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

 

58.3

%

 

 

52.2

%

 

 

60.4

%

 

 

54.9

%

 

 

64.5

%

(1)

Total operating expenses, excluding intangible asset amortization and noteworthy items is a non-GAAP measurement. The above table provides a reconciliation to the GAAP measurement (total operating expenses). See Non-GAAP Financial Measurements for a description of the balance and usage.

(2)

Our net efficiency ratio excludes intangible asset amortization and restructuring costs (which is considered a noteworthy item). We also present net efficiency ratio excluding noteworthy items, which is adjusted for all noteworthy items. These are non-GAAP measurements used by management to measure operating expenses (before intangible asset amortization and noteworthy items) to the level of total net revenues. See Non-GAAP Financial Measurements for a reconciliation of non-GAAP to GAAP financial information of total net revenues and description of the calculation.

Depreciation on Operating Lease Equipment

Depreciation expense is driven by rail equipment and other small and large ticket equipment, in the Rail, Business Capital and Commercial Finance divisions in Commercial Banking.

Maintenance and Other Operating Lease Expenses

Maintenance and other operating lease expenses relate to equipment ownership and leasing costs associated with the Rail portfolio and tend to be variable. Rail provides railcars primarily pursuant to full-service lease contracts under which Rail as lessor is responsible for railcar maintenance and repair.

Depreciation, along with Maintenance and Other Operating Lease Expenses, are components of NFR and discussed in the Net Finance Revenue section.

Operating Expenses

Operating expenses in the current quarter were down from the year-ago quarter and up from the quarter ended June 30, 2021. Each of the quarters include noteworthy items. Noteworthy items in the quarters ended September 30, 2021 and June 30, 2021 included merger costs related to FCB of $0.7 million and $1.7 million, respectively. The FCB merger costs are presented in a table below. In addition, the prior quarter noteworthy items included a net benefit from reversal of previously recorded restructuring charges of $7.9 million. The year-ago quarter included two noteworthy items that essentially offset each other. These were MOB merger and integration costs of $12.6 million and a reversal of $12.1 million of preferred stock units (“PSU”) compensation expenses due to the decrease in probability of achieving performance conditions related to the Company’s stock-based compensation reflecting the change in market conditions. (See table below for line item impacts due to merger and

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Table of Contents

 

 

integration costs).

Operating expenses, excluding noteworthy items and intangible asset amortization were down $27.0 million compared to the year-ago quarter and down $122.8 million compared to the nine months ended September 30, 2020. Driving the decline compared to the year-ago quarter were lower professional fees and deposit insurance costs. The year-to-date decline also included lower compensation and benefits, reflecting the decrease in headcount, and lower advertising and marketing costs, mostly related to our Direct Bank deposit gathering activity. The lower operating expenses also reflect cost reduction initiatives, including the recognition of cost synergies from our MOB acquisition.

Operating expenses excluding intangible asset amortization and noteworthy items were up by $10.4 million compared to the prior quarter, as the prior quarter benefited from a reserve release related to indemnification obligations for prior divestitures included in other expenses, which was partially offset by higher legal costs. Other changes included a decline in professional fees, and higher incentive compensation and retirement benefit accruals to retain talent.

The noteworthy items in the following table for 2021 periods relate to the FCB merger. 2020 includes only MOB Acquisition merger and integration costs.

Noteworthy Item – Merger and Integration Costs (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

—

 

 

$

—

 

 

$

4.6

 

 

$

—

 

 

$

11.2

 

Technology

 

0.7

 

 

 

1.6

 

 

 

4.6

 

 

 

2.4

 

 

 

12.3

 

Professional fees

 

—

 

 

 

0.1

 

 

 

3.4

 

 

 

6.9

 

 

 

21.1

 

Advertising and marketing

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4.6

 

Other expenses

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.4

 

Noteworthy items

$

0.7

 

 

$

1.7

 

 

$

12.6

 

 

$

9.3

 

 

$

49.6

 

The net efficiency ratio was 60.2% in the current quarter compared to 60.6% in the year-ago quarter and 52.5% in the prior quarter. The net efficiency ratio excluding noteworthy items and intangible asset amortization was 58.8% compared to 60.4% in the year-ago quarter and 52.2% in the prior quarter. The improvement from the year-ago was driven by the lower operating expenses, which offset the decline in total net revenues. Compared to the prior quarter, the increase was due to the noted higher operating expenses and lower net revenues.

Goodwill Impairment

The deterioration of the macroeconomic environment triggered goodwill impairment assessments that resulted in impairments in 2020.

INCOME TAXES

 

Income Tax Data (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Provision (benefit) for income taxes, excluding noteworthy and tax discrete items - Non-GAAP

$

61.7

 

 

$

74.3

 

 

$

30.1

 

 

$

219.9

 

 

$

(75.7

)

Tax on noteworthy items and other discrete items

 

(6.2

)

 

 

(2.6

)

 

 

(0.6

)

 

 

3.6

 

 

 

(40.3

)

Provision (benefit) for income taxes - GAAP

$

55.5

 

 

$

71.7

 

 

$

29.5

 

 

$

223.5

 

 

$

(116.0

)

Effective tax rate

 

24.0

%

 

 

24.0

%

 

 

25.6

%

 

 

24.0

%

 

 

15.7

%

Effective tax rate, excluding noteworthy and tax discrete items - Non-GAAP

 

25.2

%

 

 

25.4

%

 

 

26.0

%

 

 

25.5

%

 

 

27.4

%

(1)

Effective tax rate, excluding noteworthy items and tax discrete items are non-GAAP measures. See “Non-GAAP Financial Measurements” for reconciliation of non-GAAP financial information.

The effective tax rate (“ETR”) was 24.0% in the current quarter, compared to 24.0% and 25.6% in the prior and year-ago quarters, respectively, and 24.0% for the nine months ended September 30, 2021, compared to 15.7% for the nine months ended September 30, 2020. Included in the tax on noteworthy items in the current quarter and year-to-date balances is $2.3 million that relates to the reduction in the tax benefit associated with the CTA release related to the liquidation of the remaining investment in a foreign entity, as the benefit was recognized in a prior year as required under ASC 740.

The ETR before noteworthy and tax discrete items was 25.2% in the current quarter, compared to 25.4% and 26.0% in the prior and year-ago quarters, respectively, and 25.5% for the nine months ended September 30, 2021, compared to 27.4% for the year-ago period.

The ETR before noteworthy and tax discrete items in the current quarter compared to the prior quarter remains essentially unchanged. The ETR before noteworthy and tax discrete items was lower in the current quarter and nine months compared to the year ago periods primarily due to the effect that the change in forecasted pre-tax income has on the permanent and other adjustments.

The ETR each quarter was impacted by a number of factors, including tax discrete items, the relative mix of domestic and

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international earnings, effects of changes from enacted tax laws, and adjustments to valuation allowances. The future period’s ETR may vary due to changes in these factors.

See Note 12 — Income Taxes in Item 1 for additional information.

RESULTS BY BUSINESS SEGMENT

CIT manages its business and reports its financial results in two operating segments, Commercial Banking and Consumer Banking, and a non-operating segment, Corporate. Detailed descriptions of the divisions within Commercial Banking and Consumer Banking are included in Item 1. Business Overview of our 2020 Form 10-K. See Net Finance Revenue, Non-Interest Income, Non-Interest Expenses and Credit Metrics, which reference the segments on these topics.

Commercial Banking

Commercial Banking is comprised of four divisions: Commercial Finance, Rail, Real Estate Finance and Business Capital. Revenue is generated from interest earned on loans, rents on equipment leased, fees and other revenue from lending and leasing activities and banking services, along with capital markets transactions and commissions earned on factoring and related activities. HOA deposits are included in Commercial Banking.

Commercial Banking: Financial Data and Metrics (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

Earnings Summary

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income

$

269.8

 

 

$

281.1

 

 

$

306.7

 

 

$

842.0

 

 

$

999.1

 

Rental income on operating leases

 

186.2

 

 

 

188.2

 

 

 

201.3

 

 

 

569.1

 

 

 

612.0

 

Finance revenue

 

456.0

 

 

 

469.3

 

 

 

508.0

 

 

 

1,411.1

 

 

 

1,611.1

 

Interest expense

 

69.8

 

 

 

77.5

 

 

 

105.3

 

 

 

236.0

 

 

 

404.3

 

Depreciation on operating lease equipment

 

85.1

 

 

 

82.8

 

 

 

82.5

 

 

 

252.6

 

 

 

241.9

 

Maintenance and other operating lease expenses

 

50.5

 

 

 

54.8

 

 

 

48.6

 

 

 

156.9

 

 

 

158.3

 

Net finance revenue ("NFR")

 

250.6

 

 

 

254.2

 

 

 

271.6

 

 

 

765.6

 

 

 

806.6

 

Provision for credit losses

 

(49.3

)

 

 

(66.8

)

 

 

87.9

 

 

 

(220.6

)

 

 

811.5

 

Other non-interest income

 

89.7

 

 

 

111.2

 

 

 

89.6

 

 

 

292.6

 

 

 

254.1

 

Operating expenses

 

185.9

 

 

 

183.0

 

 

 

196.7

 

 

 

555.8

 

 

 

611.2

 

Goodwill Impairment

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

301.5

 

Income (loss) before income taxes

 

203.7

 

 

 

249.2

 

 

 

76.6

 

 

 

723.0

 

 

 

(663.5

)

Noteworthy items

 

—

 

 

 

—

 

 

 

(2.5

)

 

 

—

 

 

 

340.6

 

Income (loss) before income taxes, excluding noteworthy items

$

203.7

 

 

$

249.2

 

 

$

74.1

 

 

$

723.0

 

 

$

(322.9

)

Select Period End Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

$

35,237.3

 

 

$

35,080.9

 

 

$

37,079.4

 

 

$

35,237.3

 

 

$

37,079.4

 

Earning assets (net of credit balances of factoring clients)

 

33,745.7

 

 

 

33,639.4

 

 

 

35,864.8

 

 

 

33,745.7

 

 

 

35,864.8

 

Deposits

 

11,057.8

 

 

 

11,117.4

 

 

 

9,985.3

 

 

 

11,057.8

 

 

 

9,985.3

 

Select Average Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans (includes HFS, and net of credit balances of factoring clients)

$

25,498.5

 

 

$

26,484.4

 

 

$

27,902.6

 

 

$

26,428.5

 

 

$

28,073.8

 

Average operating leases ("AOL") (includes HFS)

 

7,862.5

 

 

 

7,754.0

 

 

 

7,824.4

 

 

 

7,816.0

 

 

 

7,615.0

 

Average earning assets ("AEA")

 

33,446.2

 

 

 

34,327.2

 

 

 

35,869.1

 

 

 

34,331.3

 

 

 

35,842.6

 

Statistical Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin - NFR as a % of AEA

 

3.00

%

 

 

2.96

%

 

 

3.03

%

 

 

2.97

%

 

 

3.00

%

Net operating lease revenue — rental income, net of depreciation and

maintenance and other operating lease expenses

$

50.6

 

 

$

50.6

 

 

$

70.2

 

 

$

159.6

 

 

$

211.8

 

Operating lease margin as a % of AOL

 

2.57

%

 

 

2.61

%

 

 

3.59

%

 

 

2.72

%

 

 

3.70

%

Net efficiency ratio

 

53.7

%

 

 

49.1

%

 

 

53.5

%

 

 

51.5

%

 

 

56.6

%

Pretax return on AEA

 

2.44

%

 

 

2.90

%

 

 

0.85

%

 

 

2.81

%

 

 

(2.47

%)

New business volume

$

2,658.7

 

 

$

2,355.1

 

 

$

2,111.2

 

 

$

6,937.5

 

 

$

7,402.5

 

Pre-tax income for the quarter was up from the year-ago quarter, as lower credit costs and lower operating expenses offset the decline in NFR. There were no noteworthy items in the current quarter, while the year-ago quarter included a portion of the PSU compensation expense reversal of $2.5 million. The year-ago quarter credit provision reflected the continued impact of the global pandemic from the spread of the COVID-19 virus and the expected ensuing adverse impact on the macroeconomic environment that resulted in a higher level of provision for credit losses and net charge-offs. The trends mentioned for the quarter comparison were similar for the year-to-date, excluding noteworthy items, and included higher non-interest income, mostly from higher factoring commissions and gains on asset sales. The year-ago nine months also included noteworthy items of a $301.5 million goodwill impairment charge, a $41.6 million charge to the provision for credit losses related to the MOB acquisition and the portion of the PSU compensation expense reversal mentioned above.

Pre-tax income was down compared to the prior quarter, reflecting a lower benefit for credit losses and lower non-interest income, as the prior quarter included higher gains on asset sales, including the gain on the Aviation Lending portfolio. The benefit in the current quarter credit provision reflected a continued improvement in the macroeconomic forecasts along with lower loan balances and improving credit metrics such as lower charge-offs and non-accrual balances.

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Average loans were down from the year-ago and prior quarters. The decline in average loans from the year ago quarter reflects declines in all divisions due to lower origination volume in sectors more impacted by the pandemic, the sale of the Aviation Lending portfolio in the 2021 second quarter, as well as high prepayments, particularly in Commercial Finance and Real Estate Finance. The decline from the prior quarter primarily reflected a reduction in Real Estate Finance, which continues to be impacted by lower origination volume and high prepayments, as well as Commercial Finance, which reflected a full quarter impact from the sale of the Aviation Lending portfolio along with continued high prepayments.

New business volume was up compared to the year-ago and prior quarters, reflecting improvement in Commercial Finance and Business Capital, while Real Estate Finance continues to remain below pre-pandemic levels.

Factored volume of $6.9 billion was up from $5.9 billion in the year-ago quarter. Factored volume in the year-ago quarter reflected the impact from the macroeconomic environment that reduced demand throughout 2020. Factoring volume was seasonally up from $6.1 billion in the prior quarter. For the nine months ended September 30, 2021, factored volume was $18.8 billion, compared to $15.0 billion in 2020.

Deposits attributed to this segment at September 30, 2021 include approximately $6.9 billion of HOA deposits and other commercial deposits of $4.2 billion.

Trends included:

•

NFR was down from the year-ago quarter, as lower funding costs were offset by a reduction in interest income, primarily reflecting lower average loans, and to a lesser extent the lower interest rate environment, which decreased interest earned on our floating rate loan portfolio, as well as lower net operating lease revenue. NFR was down from the prior quarter, reflecting lower interest income resulting from lower average balances on loans and prepayment benefits, partially offset by lower deposit and borrowing costs. NFR and NFM are discussed in detail in the Net Finance Revenue section. Trends for the year-to-date period were similar.

•

Net operating lease revenue was flat as lower maintenance costs offset lower rental revenue and higher depreciation. Net operating lease revenue is driven primarily by the performance of our Rail portfolio and reflects continued compression on our lease rates on new assignments, which encompasses new equipment and remarketing existing equipment to different customers, and renewals with the same customer. See further discussion in the Net Finance Revenue section.

•

PAA accretion for loans and deposits totaled $2.4 million in the current quarter, compared to $4.2 million in the year-ago quarter and $2.8 million in the prior quarter. Year-to-date, PAA accretion was $7.3 million in 2021, down from $15.5 million in 2020. See Purchase Accounting Accretion table in Net Finance Revenue section for amounts of PAA accretion by division.

•

NFM increased compared to the year-ago quarter due to the drivers noted in NFR discussed above and was flat with the prior quarter.

Consumer Banking

Consumer Banking includes the Consumer and Community Banking and Legacy Consumer Mortgages (“LCM”) divisions. Retail Banking, Consumer Lending, Community Development Lending and SBA Lending are offerings within Consumer and Community Banking. LCM consists of acquired SFR loans that are in run-off. Revenue is generated from interest earned on residential mortgages, small business loans and from fees for banking services.

Consumer Banking: Financial Data and Metrics (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

Earnings Summary

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income

$

72.4

 

 

$

75.2

 

 

$

90.3

 

 

$

221.6

 

 

$

285.8

 

Interest benefit

 

(21.4

)

 

 

(22.8

)

 

 

(5.9

)

 

 

(63.9

)

 

 

(10.5

)

Net finance revenue ("NFR")

 

93.8

 

 

 

98.0

 

 

 

96.2

 

 

 

285.5

 

 

 

296.3

 

Provision for credit losses

 

(17.8

)

 

 

(5.4

)

 

 

(24.6

)

 

 

(36.1

)

 

 

(10.7

)

Other non-interest income

 

34.0

 

 

 

36.6

 

 

 

30.9

 

 

 

97.1

 

 

 

47.6

 

Operating expenses

 

81.6

 

 

 

93.1

 

 

 

94.9

 

 

 

254.2

 

 

 

298.4

 

Goodwill impairment

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

43.2

 

Income before income taxes

 

64.0

 

 

 

46.9

 

 

 

56.8

 

 

 

164.5

 

 

 

13.0

 

Noteworthy items

 

—

 

 

 

—

 

 

 

(0.5

)

 

 

(2.6

)

 

 

45.9

 

Income before income taxes, excluding noteworthy items

$

64.0

 

 

$

46.9

 

 

$

56.3

 

 

$

161.9

 

 

$

58.9

 

Select Period End Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (includes HFS)

$

6,257.0

 

 

$

6,463.5

 

 

$

8,096.2

 

 

$

6,257.0

 

 

$

8,096.2

 

Earning assets

 

6,328.5

 

 

 

6,532.6

 

 

 

8,122.7

 

 

 

6,328.5

 

 

 

8,122.7

 

Deposits

 

27,382.4

 

 

 

27,889.0

 

 

 

31,970.4

 

 

 

27,382.4

 

 

 

31,970.4

 

Select Average Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans (includes HFS)

$

6,367.1

 

 

$

6,742.1

 

 

$

8,399.0

 

 

$

6,789.7

 

 

$

8,554.8

 

Average earning assets ("AEA")

 

6,435.8

 

 

 

6,810.2

 

 

 

8,426.6

 

 

 

6,878.3

 

 

 

8,583.0

 

Statistical Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin - NFR as a % of AEA

 

5.83

%

 

 

5.76

%

 

 

4.57

%

 

 

5.54

%

 

 

4.60

%

Net efficiency ratio

 

60.0

%

 

 

65.6

%

 

 

70.9

%

 

 

62.7

%

 

 

82.6

%

Pretax return on AEA

 

3.98

%

 

 

2.75

%

 

 

2.70

%

 

 

3.19

%

 

 

0.20

%

New business volume

$

592.7

 

 

$

616.9

 

 

$

510.5

 

 

$

1,729.2

 

 

$

1,883.3

 

Pre-tax income for the quarter was up from the year-ago quarter, as the decline in operating expenses, notably FDIC deposit

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insurance costs, offset a lower benefit in the provision for credit losses. There were no noteworthy items in the current quarter, while the year-ago quarter included a portion of the PSU compensation expense reversal of $0.5 million. Pre-tax income was up from the prior quarter, as lower operating expenses and higher benefit for credit losses offset lower NFR due to lower interest income primarily from a decline in average loans and lower other non-interest income (lower gains on sales of loans).

The nine months ended September 30, 2021 included a noteworthy item related to our strategic decision to sell certain investment securities, while the year-ago year-to-date period included a goodwill impairment charge, a $3.2 million charge to the provision for credit losses from the MOB Acquisition, and the noted PSU compensation expense reversal. Pre-tax income excluding noteworthy items for the nine months ended September 30, 2021 was up from the year-ago period as higher other non-interest income, lower operating expenses and higher benefit for credit losses offset lower NFR.

Compared to the year-ago quarter and prior quarter, as well as nine months ended September 30, 2020, average loans were down, primarily due to LCM loan sales and run-off and SBA PPP loan forgiveness. While the prepayment activity has slowed down compared to the prior quarter, prepayment activity was up for the nine months ended September 30, 2021 compared to the year-ago period.

Deposits, which include deposits from the branch and online channels, decreased from the year-ago and prior quarters. The declines are primarily driven by reductions in time deposits. See discussions in Net Finance Revenue and Funding and Liquidity sections.

 

Trends included:

•

NFR decreased for the quarter and nine months ended September 30, 2021 compared to the year-ago and prior quarters as interest income was down due to lower overall loan balances offset by the interest benefit that this segment receives from the other segments for the value of excess deposits it generates

•

NFR benefited from PAA accretion of $19.4 million in the current quarter, compared to $18.2 million in the year-ago quarter and $20.0 million in the prior quarter. For the nine months ended September 30, 2021, PAA accretion was $55.6 million, compared to $52.1 million for the same period in 2020. See Purchase Accounting Accretion table in Net Finance Revenue section for amounts of PAA accretion by division.

Corporate

Corporate includes certain items that are not allocated to operating segments. Some of the more significant and recurring items include interest income on investment securities, a portion of interest expense primarily related to corporate funding costs, mark-to-market adjustments on foreign currency hedges and income on BOLI (other non-interest income), restructuring charges, as well as certain unallocated costs and intangible assets amortization expenses (operating expenses) and loss on debt extinguishments.

Corporate and Other: Financial Data and Metrics (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

Earnings Summary

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income

$

17.6

 

 

$

16.8

 

 

$

26.3

 

 

$

57.4

 

 

$

98.9

 

Interest expense

 

54.6

 

 

 

52.1

 

 

 

66.1

 

 

 

157.3

 

 

 

199.9

 

Net finance revenue ("NFR")

 

(37.0

)

 

 

(35.3

)

 

 

(39.8

)

 

 

(99.9

)

 

 

(101.0

)

Other non-interest income

 

1.0

 

 

 

12.9

 

 

 

25.5

 

 

 

125.6

 

 

 

77.5

 

Operating expenses/(gain) loss on debt extinguishment

 

0.7

 

 

 

(24.9

)

 

 

3.9

 

 

 

(16.5

)

 

 

65.9

 

(Loss) income before income taxes

 

(36.7

)

 

 

2.5

 

 

 

(18.2

)

 

 

42.2

 

 

 

(89.4

)

Noteworthy items

 

13.9

 

 

 

(6.2

)

 

 

3.5

 

 

 

(65.8

)

 

 

77.7

 

(Loss) before income taxes, excluding noteworthy items

$

(22.8

)

 

 

(3.7

)

 

$

(14.7

)

 

$

(23.6

)

 

$

(11.7

)

Select Period End Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earning assets

$

10,167.4

 

 

$

10,421.8

 

 

$

13,006.6

 

 

$

10,167.4

 

 

$

13,006.6

 

Select Average Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average earning assets ("AEA")

$

10,465.1

 

 

$

10,673.7

 

 

$

13,472.3

 

 

$

10,566.7

 

 

$

11,926.9

 

Statistical Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin — NFR as a % of AEA

 

(1.42

%)

 

 

(1.33

%)

 

 

(1.18

%)

 

 

(1.26

%)

 

 

(1.13

%)

Pretax return on AEA

 

(1.41

%)

 

 

0.09

%

 

 

(0.54

%)

 

 

0.53

%

 

 

(1.00

%)

There was a higher pre-tax loss for the quarter compared to the year-ago quarter, while pre-tax income for the nine months ended September 30, 2021 was up from the year-ago pre-tax loss. However, pre-tax results, excluding noteworthy items were down compared to all periods. Compared to the prior quarter, the decline reflected higher operating expenses as the prior quarter included a benefit from the reserve release related to indemnification obligations.

Compared to the year-ago quarter, the decline in pre-tax results, excluding noteworthy items, reflected lower non-interest income from lower gains on sales of investment securities and lower BOLI income. Non-interest income was also down year-to-date compared to 2020, plus while operating expenses in 2021 included the benefit from the reserve release related to indemnification obligations, the year-ago nine months included a gain on debt redemptions of approximately $15 million.

Pre-tax income in each of the periods included noteworthy items.

 

•

For the 2021 periods, the current and prior quarters included $0.7 million and $1.7 million, respectively, of FCB merger costs (operating expenses). The current quarter also include a $13.2 million CTA release charge in other non-interest income. The prior quarter include a $7.9 million reversal of previously recorded restructuring charges (operating expenses). Year-to-date included $80.4 million of gains on strategic sales of investment securities (other non-interest income), the noted CTA release (other non-interest income) and restructuring reserve reversal (operating expenses) and a total of $9.3 million of FCB merger costs (operating expenses).

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Table of Contents

 

 

 

 

•

For the 2020 periods, within operating expenses, the year-ago quarter included $12.6 million of MOB merger and integration costs and the reversal of $9.1 million of PSU compensation expenses. Year-to-date included $49.6 million of MOB merger and integration costs, $37.2 million of restructuring costs, and the noted PSU expense reversal.

Noteworthy items are listed in the Non-GAAP Financial Measurements section.

 

LOANS AND LEASES

The following table presents our period end loans and leases by segment:

 

Loans and Leases Composition (dollars in millions)

 

September 30,

 

 

June 30,

 

 

December 31,

 

 

2021

 

 

2021

 

 

2020

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

Commercial Finance

 

 

 

 

 

 

 

 

 

 

 

Loans

$

16,099.2

 

 

$

15,969.9

 

 

$

16,243.9

 

Operating lease equipment, net

 

355.3

 

 

 

369.9

 

 

 

395.6

 

Assets held for sale

 

78.9

 

 

 

32.5

 

 

 

702.1

 

Total loans and leases

 

16,533.4

 

 

 

16,372.3

 

 

 

17,341.6

 

Business Capital

 

 

 

 

 

 

 

 

 

 

 

Loans

 

4,623.4

 

 

 

4,660.8

 

 

 

4,777.8

 

Operating lease equipment, net

 

321.6

 

 

 

292.8

 

 

 

342.1

 

Assets held for sale

 

1.4

 

 

 

0.7

 

 

 

—

 

Total loans and leases

 

4,946.4

 

 

 

4,954.3

 

 

 

5,119.9

 

Rail

 

 

 

 

 

 

 

 

 

 

 

Loans

 

63.7

 

 

 

62.6

 

 

 

60.7

 

Operating lease equipment, net

 

7,260.6

 

 

 

7,119.1

 

 

 

7,098.9

 

Assets held for sale

 

2.4

 

 

 

-

 

 

 

0.3

 

Total loans and leases

 

7,326.7

 

 

 

7,181.7

 

 

 

7,159.9

 

Real Estate Finance

 

 

 

 

 

 

 

 

 

 

 

Loans

 

6,430.8

 

 

 

6,572.6

 

 

 

7,554.1

 

Total loans and leases

 

6,430.8

 

 

 

6,572.6

 

 

 

7,554.1

 

Total Segment - Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

Loans

 

27,217.1

 

 

 

27,265.9

 

 

 

28,636.5

 

Operating lease equipment, net

 

7,937.5

 

 

 

7,781.8

 

 

 

7,836.6

 

Assets held for sale

 

82.7

 

 

 

33.2

 

 

 

702.4

 

Total loans and leases

 

35,237.3

 

 

 

35,080.9

 

 

 

37,175.5

 

Consumer Banking

 

 

 

 

 

 

 

 

 

 

 

Consumer and Community Banking

 

 

 

 

 

 

 

 

 

 

 

Loans

 

5,041.8

 

 

 

5,079.5

 

 

 

5,814.3

 

Assets held for sale

 

13.1

 

 

 

18.3

 

 

 

13.9

 

Total loans and leases

 

5,054.9

 

 

 

5,097.8

 

 

 

5,828.2

 

Legacy Consumer Mortgages

 

 

 

 

 

 

 

 

 

 

 

Loans

 

1,202.1

 

 

 

1,365.7

 

 

 

1,693.8

 

Assets held for sale

 

-

 

 

 

-

 

 

 

4.9

 

Total loans and leases

 

1,202.1

 

 

 

1,365.7

 

 

 

1,698.7

 

Total Segment - Consumer Banking

 

 

 

 

 

 

 

 

 

 

 

Loans

 

6,243.9

 

 

 

6,445.2

 

 

 

7,508.1

 

Assets held for sale

 

13.1

 

 

 

18.3

 

 

 

18.8

 

Total loans and leases

 

6,257.0

 

 

 

6,463.5

 

 

 

7,526.9

 

Total loans

$

33,461.0

 

 

$

33,711.1

 

 

$

36,144.6

 

Total operating lease equipment, net

 

7,937.5

 

 

 

7,781.8

 

 

 

7,836.6

 

Total assets held for sale

 

95.8

 

 

 

51.5

 

 

 

721.2

 

Total loans and leases

$

41,494.3

 

 

$

41,544.4

 

 

$

44,702.4

 

Origination activity during the 2021 third quarter was up compared to the prior quarter, while loans and leases were relatively flat due to sales and prepayment activity. Commercial Banking loans and leases were up from June 30, 2021 reflecting increased factoring receivables in Commercial Finance due to seasonal trends and higher rail assets reflecting purchases, partially offset by prepayments and repayments in Real Estate Finance. The decline in Consumer Banking reflected prepayment activity that outpaced new business volume in Consumer and Community Banking, and sales and continued run-off of the LCM portfolio.

The decline in loans and leases since December 31, 2020 in Commercial Banking primarily reflect the sale of the Aviation Lending portfolio in Commercial Finance and high prepayment activity in Commercial Finance and Real Estate Finance. The decline in loans in Consumer Banking were driven by higher prepayment activity, and sales and run-off of the LCM portfolio.

56

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The following table presents the changes to our loans and leases:

Changes in Loans and Leases (dollars in millions)

 

Commercial

Banking

 

 

Consumer

Banking

 

 

Total

 

Balance as of June 30, 2021

$

35,080.9

 

 

$

6,463.5

 

 

$

41,544.4

 

New business volume

 

2,658.7

 

 

 

592.7

 

 

 

3,251.4

 

Factoring volume

 

6,871.7

 

 

 

—

 

 

 

6,871.7

 

Loan and portfolio sales

 

(26.6

)

 

 

(126.4

)

 

 

(153.0

)

Equipment sales

 

(46.6

)

 

 

—

 

 

 

(46.6

)

Depreciation

 

(85.1

)

 

 

—

 

 

 

(85.1

)

Gross charge-offs

 

(15.3

)

 

 

(1.1

)

 

 

(16.4

)

Net collections and other

 

(9,200.4

)

 

 

(671.7

)

 

 

(9,872.1

)

Balance as of September 30, 2021

$

35,237.3

 

 

$

6,257.0

 

 

$

41,494.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

$

37,175.5

 

 

$

7,526.9

 

 

$

44,702.4

 

New business volume

 

6,937.5

 

 

 

1,729.2

 

 

 

8,666.7

 

Factoring volume

 

18,754.5

 

 

 

—

 

 

 

18,754.5

 

Loan and portfolio sales

 

(867.9

)

 

 

(374.5

)

 

 

(1,242.4

)

Equipment sales

 

(256.4

)

 

 

—

 

 

 

(256.4

)

Depreciation

 

(252.6

)

 

 

—

 

 

 

(252.6

)

Gross charge-offs

 

(86.2

)

 

 

(6.5

)

 

 

(92.7

)

Net collections and other

 

(26,167.1

)

 

 

(2,618.1

)

 

 

(28,785.2

)

Balance as of September 30, 2021

$

35,237.3

 

 

$

6,257.0

 

 

$

41,494.3

 

Portfolio activities are discussed in the respective segment descriptions in Results by Business Segment.

The following tables present new business volume, loan and portfolio sales, and equipment sales by segment:

New Business Volume (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Commercial Banking

$

2,658.7

 

 

$

2,355.1

 

 

$

2,111.2

 

 

$

6,937.5

 

 

$

7,402.5

 

Consumer Banking

 

592.7

 

 

 

616.9

 

 

 

510.5

 

 

 

1,729.2

 

 

 

1,883.3

 

Total

$

3,251.4

 

 

$

2,972.0

 

 

$

2,621.7

 

 

$

8,666.7

 

 

$

9,285.8

 

Loan and Portfolio Sales (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Commercial Banking

$

26.6

 

 

$

768.3

 

 

$

53.9

 

 

$

867.9

 

 

$

95.5

 

Consumer Banking

 

126.4

 

 

 

147.9

 

 

 

151.9

 

 

 

374.5

 

 

 

270.9

 

Total

$

153.0

 

 

$

916.2

 

 

$

205.8

 

 

$

1,242.4

 

 

$

366.4

 

Equipment Sales (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Commercial Banking

$

46.6

 

 

$

84.4

 

 

$

74.9

 

 

$

256.4

 

 

$

176.3

 

Corporate

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.3

 

Total

$

46.6

 

 

$

84.4

 

 

$

74.9

 

 

$

256.4

 

 

$

176.6

 

57

Table of Contents

 

 

 

 

CONCENTRATIONS

CONSOLIDATED CONCENTRATIONS

Geographic Concentrations

The following table represents CIT’s combined commercial and consumer loans and leases, including assets held for sale, by geographical regions:

Total Loans and Leases by Geographic Region(1) (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

West

$

12,696.3

 

 

 

30.6

%

 

$

14,553.4

 

 

 

32.6

%

Northeast

 

8,748.8

 

 

 

21.1

%

 

 

9,495.3

 

 

 

21.2

%

Midwest

 

6,161.7

 

 

 

14.8

%

 

 

6,098.8

 

 

 

13.6

%

Southwest

 

5,776.7

 

 

 

13.9

%

 

 

5,881.8

 

 

 

13.2

%

Southeast

 

5,112.8

 

 

 

12.3

%

 

 

5,457.7

 

 

 

12.2

%

Total U.S.

 

38,496.3

 

 

 

92.7

%

 

 

41,487.0

 

 

 

92.8

%

Canada

 

1,517.5

 

 

 

3.7

%

 

 

1,454.6

 

 

 

3.3

%

Europe

 

471.0

 

 

 

1.1

%

 

 

565.5

 

 

 

1.3

%

Asia / Pacific

 

385.7

 

 

 

0.9

%

 

 

601.1

 

 

 

1.3

%

All other countries

 

623.8

 

 

 

1.6

%

 

 

594.2

 

 

 

1.3

%

Total

$

41,494.3

 

 

 

100.0

%

 

$

44,702.4

 

 

 

100.0

%

(1) Table represents a combination of commercial loans and leases that are shown by obligor geography and consumer loans that are shown by property address.

Ten Largest Accounts

Our ten largest loan and lease accounts, primarily lessees of rail assets, in the aggregate represented approximately 5.4% and 5.3% of our total loans and leases at September 30, 2021 and December 31, 2020, respectively (the largest account was less than 1.0%).

COMMERCIAL CONCENTRATIONS

Geographic Concentrations

The following table represents the commercial loans and leases, including assets held for sale, by obligor geography:

Commercial Loans and Leases by Obligor - Geographic Region (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

West

$

8,733.3

 

 

 

24.1

%

 

$

9,878.0

 

 

 

25.8

%

Northeast

 

8,307.1

 

 

 

23.0

%

 

 

8,913.8

 

 

 

23.3

%

Midwest

 

5,991.3

 

 

 

16.6

%

 

 

5,854.5

 

 

 

15.3

%

Southwest

 

5,478.5

 

 

 

15.1

%

 

 

5,506.4

 

 

 

14.4

%

Southeast

 

4,687.3

 

 

 

12.9

%

 

 

4,899.9

 

 

 

12.8

%

Total U.S.

 

33,197.5

 

 

 

91.7

%

 

 

35,052.6

 

 

 

91.6

%

Canada

 

1,517.5

 

 

 

4.2

%

 

 

1,454.6

 

 

 

3.8

%

Europe

 

471.0

 

 

 

1.3

%

 

 

565.5

 

 

 

1.5

%

Asia / Pacific

 

385.7

 

 

 

1.1

%

 

 

601.1

 

 

 

1.6

%

All other countries

 

623.8

 

 

 

1.7

%

 

 

594.2

 

 

 

1.5

%

Total

$

36,195.5

 

 

 

100.0

%

 

$

38,268.0

 

 

 

100.0

%

 

58

Table of Contents

 

 

 

The following table summarizes both state concentrations greater than 5.0% and international country concentrations in excess of 1.0% of our loans and leases:

Commercial Loans and Leases by Obligor - State and Country (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

State

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California

$

6,317.9

 

 

 

17.5

%

 

$

6,981.6

 

 

 

18.2

%

Texas

 

4,506.0

 

 

 

12.4

%

 

 

4,461.6

 

 

 

11.7

%

New York

 

2,695.2

 

 

 

7.4

%

 

 

3,257.2

 

 

 

8.5

%

Florida

 

1,851.0

 

 

 

5.1

%

 

 

2,011.1

 

 

 

5.3

%

All other states

 

17,827.4

 

 

 

49.3

%

 

 

18,341.1

 

 

 

47.9

%

Total U.S.

$

33,197.5

 

 

 

91.7

%

 

$

35,052.6

 

 

 

91.6

%

Country

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada

$

1,517.5

 

 

 

4.2

%

 

$

1,454.6

 

 

 

3.8

%

Marshall Islands

 

369.1

 

 

 

1.0

%

 

 

498.2

 

 

 

1.3

%

All other countries

 

1,111.4

 

 

 

3.1

%

 

 

1,262.6

 

 

 

3.3

%

Total international

$

2,998.0

 

 

 

8.3

%

 

$

3,215.4

 

 

 

8.4

%

 

Industry Concentrations

The following table represents loans and leases, including assets held for sale, by industry of obligor:

Commercial Loans and Leases by Obligor – Industry(3) (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

Real Estate

$

7,087.3

 

 

 

19.6

%

 

$

7,708.5

 

 

 

20.1

%

Manufacturing(1)

 

5,617.9

 

 

 

15.5

%

 

 

5,409.8

 

 

 

14.1

%

Service industries

 

2,812.9

 

 

 

7.8

%

 

 

2,850.1

 

 

 

7.4

%

Retail(2)

 

2,630.0

 

 

 

7.3

%

 

 

2,627.9

 

 

 

6.9

%

Energy and utilities

 

2,601.0

 

 

 

7.2

%

 

 

2,537.7

 

 

 

6.6

%

Wholesale

 

2,362.5

 

 

 

6.5

%

 

 

2,145.7

 

 

 

5.6

%

Rail

 

1,876.9

 

 

 

5.2

%

 

 

1,959.4

 

 

 

5.1

%

Finance and insurance

 

1,767.8

 

 

 

4.9

%

 

 

1,948.4

 

 

 

5.1

%

Business services

 

1,741.9

 

 

 

4.8

%

 

 

2,274.8

 

 

 

5.9

%

Healthcare

 

1,300.4

 

 

 

3.6

%

 

 

1,611.9

 

 

 

4.2

%

Oil and gas extraction / services

 

1,093.1

 

 

 

3.0

%

 

 

1,378.2

 

 

 

3.6

%

Transportation

 

1,061.3

 

 

 

2.9

%

 

 

1,491.3

 

 

 

3.9

%

Communications

 

801.4

 

 

 

2.2

%

 

 

711.5

 

 

 

1.9

%

Maritime

 

742.7

 

 

 

2.1

%

 

 

929.7

 

 

 

2.4

%

Other (no industry greater than 2%)

 

2,698.4

 

 

 

7.4

%

 

 

2,683.1

 

 

 

7.2

%

Total

$

36,195.5

 

 

 

100.0

%

 

$

38,268.0

 

 

 

100.0

%

(1)

At September 30, 2021, includes manufacturers of chemicals, including pharmaceuticals (4.3%), petroleum and coal, including refining (2.7%), stone, clay, glass and concrete (1.6%), food (1.2%), and industrial machinery (1.0%).

(2)

At September 30, 2021, includes retailers of general merchandise (3.2%).

(3)

At September 30, 2021, in addition to the rail industry category, exposure in the Rail division is also included in other obligor industries, with the largest being $2.9 billion in manufacturing, $1.1 billion in wholesale and $696.7 million in Oil and gas extraction / services.

CONSUMER CONCENTRATIONS

The following table presents our total outstanding consumer loans by product, including loans held for sale:

Consumer Loans (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Net

Investment

 

 

% of

Total

 

 

Net

Investment

 

 

% of

Total

 

Single family residential

$

5,240.5

 

 

 

98.9

%

 

$

6,343.2

 

 

 

98.6

%

Home equity lines of credit and other

 

58.3

 

 

 

1.1

%

 

 

91.3

 

 

 

1.4

%

Total loans

$

5,298.8

 

 

 

100.0

%

 

$

6,434.5

 

 

 

100.0

%

The following table summarizes state concentrations greater than 5.0% based upon property address:

Consumer Loans Geographic Concentrations (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Net

Investment

 

 

% of

Total

 

 

Net

Investment

 

 

% of

Total

 

California

$

3,232.6

 

 

 

61.0

%

 

$

3,652.2

 

 

 

56.8

%

Texas

 

281.0

 

 

 

5.3

%

 

 

346.9

 

 

 

5.4

%

Washington

 

240.2

 

 

 

4.5

%

 

 

329.5

 

 

 

5.1

%

Other states

 

1,545.0

 

 

 

29.2

%

 

 

2,105.9

 

 

 

32.7

%

Total loans

$

5,298.8

 

 

 

100.0

%

 

$

6,434.5

 

 

 

100.0

%

 

59

Table of Contents

 

 

 

OTHER ASSETS AND OTHER LIABILITIES

The following tables present the components of other assets and other liabilities.

Other Assets (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Tax credit investments and investments in unconsolidated entities

$

516.1

 

 

$

427.0

 

Fair value of derivative financial instruments

 

268.5

 

 

 

431.6

 

Right of use assets

 

252.7

 

 

 

198.8

 

Property, furniture and fixtures

 

176.7

 

 

 

187.0

 

Prepaid expenses

 

165.3

 

 

 

169.9

 

Counterparty receivables

 

140.2

 

 

 

174.1

 

Intangible assets, net

 

110.0

 

 

 

134.9

 

Current and deferred federal and state tax assets

 

35.3

 

 

 

60.8

 

Other(1)

 

384.2

 

 

 

464.4

 

Total other assets

$

2,049.0

 

 

$

2,248.5

 

(1)

Other includes assets supporting legacy non-qualified compensation plans, accrued interest and dividends, accrued rent on operating leases, servicing advances, OREO, and other miscellaneous assets.

Other Liabilities (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Accrued expenses and accounts payable

$

456.6

 

 

$

546.4

 

Lease liabilities

 

288.4

 

 

 

249.9

 

Current and deferred taxes payable

 

227.8

 

 

 

122.1

 

Commitment to fund tax credit investments

 

195.2

 

 

 

167.7

 

Fair value of derivative financial instruments

 

77.9

 

 

 

79.2

 

Allowance for off-balance sheet credit exposure

 

50.1

 

 

 

78.3

 

Accrued interest payable

 

40.8

 

 

 

88.2

 

Other(1)

 

867.1

 

 

 

423.1

 

Total other liabilities

$

2,203.9

 

 

$

1,754.9

 

(1)

The increase in the current quarter is due to payables related to investment securities purchased at quarter end that did not settle until October. Other also includes liabilities for taxes other than income, equipment maintenance liabilities, and other miscellaneous liabilities.

 

RISK MANAGEMENT

CIT is subject to a variety of risks that may arise through the Company's business activities, including the following principal forms of risk that are explained further in our 2020 Form 10-K.

•

Credit risk is the risk of loss when a borrower or series of borrowers do not meet their financial obligations to the Company, or their performance weakens, and increased reserving is required. Credit risk may arise from lending, leasing, the purchase of accounts receivable in factoring and/or counterparty activities.

•

Asset risk is the equipment valuation and residual risk of leased equipment owned by the Company that arises from fluctuations in the supply and demand for the underlying leased equipment. The Company is exposed to the risk that, at the end of the lease term, the value of the asset will be lower than expected, resulting in either reduced future lease income over the remaining life of the asset or a lower sale value.

•

Market risk includes interest rate and foreign currency risk. Interest rate risk is the risk that fluctuations in interest rates can have an adverse impact on the Company’s NFR and on the market or liquidity value of the Company’s assets, liabilities and off-balance sheet obligations. Foreign currency risk is the risk that fluctuations in exchange rates between currencies can have an adverse impact on the Company’s non-dollar denominated assets, liabilities and cash flows. See detailed discussion in the Interest Rate Risk section below.

•

Liquidity risk is the risk that the Company has an inability to maintain adequate cash or collateral resources and funding capacity to meet its obligations, including in stressed environments. See discussion in the Funding and Liquidity section.

•

Capital adequacy risk is the risk that the Company does not have adequate capital to cover its risks and to support its growth and strategic objectives. See discussion in the Capital section.

•

Strategic risk is the risk of the impact on earnings or capital arising from adverse strategic business decisions, improper implementation of strategic decisions, or lack of responsiveness to changes in the industry, including changes in the financial services industry as well as fundamental changes in the businesses in which our customers and our firm engage.

•

Operational risk is the risk of financial loss, damage to the Company’s reputation, or other adverse impacts resulting from inadequate or failed internal processes and systems, people or external events.

•

Technology Risk is the risk of financial loss, damage to the Company’s reputation or other adverse impacts resulting from unauthorized (malicious or accidental) disclosure, modification, or destruction of information, including cyber-crime, unintentional errors and omissions, Information Technology (“IT”) disruptions due to natural or man-made disasters, or failure to exercise due care and diligence in the implementation and operation of an IT system.

•

Compliance Risk is the risk that the Company is not in compliance with applicable laws, regulations, and standards of conduct, which may result in fines, regulatory criticism or business restrictions, or damage to the Company’s reputation.

•

Reputational Risk is the potential that negative publicity, whether true or not, will cause a decline in the value of the Company due to changes in the customer base, costly litigation, missed opportunities, or other revenue reductions or expense increases.

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Interest Rate Risk (a component of Market Risk)

CIT is exposed to the risk that changes in market conditions or government policy may affect interest rates and negatively impact earnings. The risk arises from the nature of CIT’s business activities, the composition of CIT’s balance sheet, and changes in the level or shape of the yield curve. CIT manages this inherent interest rate risk strategically based on prescribed guidelines and approved limits.

Interest rate risk can arise from many of CIT’s business activities, such as lending, leasing, investing, deposit taking, derivatives, and funding activities. This risk is a result of assets and liabilities repricing at different times, or not at all, as interest rates change. We evaluate and monitor interest rate risk primarily through two metrics.

•

Net Interest Income Sensitivity (“NII Sensitivity”), which measures the net impact of hypothetical changes in interest rates on forecasted NFR, for our interest rate sensitive assets, liabilities, and off-balance sheet instruments, assuming a static balance sheet over a twelve-month period; and

•

Economic Value of Equity Sensitivity (“EVE Sensitivity"), which measures the net impact of these hypothetical changes on the value of equity by assessing the economic value of assets, liabilities and off-balance sheet instruments.

Our exposure to interest rate risk is guided by the company’s Risk Appetite Framework and a series of risk metrics including measurements of changes in income given a change in rates. The Company utilizes tools across the balance sheet to adjust its interest rate risk exposures, including through business line actions and actions within its investment, funding and derivative activities, as well as deposit product design and pricing.

The composition of our interest rate sensitive assets and liabilities generally results in a net asset-sensitive position, concentrated at the short end of the yield curve, mostly driven by moves in LIBOR, whereby our assets will reprice faster than our liabilities. Interest rate sensitive assets generally consist of interest-bearing cash and floating rate loans. At September 30, 2021, approximately 60% of our total commercial and consumer loans (or approximately 50% of our loans and leases) had floating contractual reference rates, the majority of which were indexed to 1-month and 3-month LIBOR. Approximately 75% of our floating rate loans had index floors, of which approximately 55% were set at 0%. See Reference Rate Reform section below.

Our funding sources consist primarily of non-maturity deposits and time deposits generated through the core deposit channels, including Online, Branch, HOA and Commercial as well as our network of deposit brokers. We also support our funding needs through wholesale funding sources (unsecured and secured debt), including FHLB Advances, though there were no advances at September 30, 2021.

At September 30, 2021, deposits totaled $40 billion. The deposit rates we offer are influenced by market conditions and competitive factors. Changes in interest rates, expected funding needs, as well as actions by competitors, can affect our deposit taking activities and deposit pricing. We regularly assess the effect of deposit rate changes on our balances and seek to achieve optimal alignment between assets and liabilities. As CIT evolves its strategies through various interest rate cycles, management may periodically revise the modelling assumptions and approaches in accordance with CIT’s governance structure, which may also impact changes in reported sensitivity.

The table below summarizes the results of simulation modeling produced by our asset/liability management system. The simulations we run require assumptions about rates, time horizons, balance sheet volumes, prepayment speeds, pricing and deposit behaviors, along with other inputs. The results presented below reflect the simulation of the NII Sensitivity over the next twelve months and the EVE Sensitivity over the life of the interest rate sensitive assets, liabilities and off-balance sheet items. These simulations assume an immediate 100 and 200 bps parallel increase and a 25 bps parallel decrease for both periods from the market-based forward curve. The NII Sensitivity is presented based on an assumption that the balance sheet composition and size remain static over the 12-month projection period.

NII Sensitivity and EVE Sensitivity (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

+200 bps

 

 

+100 bps

 

 

-25 bps / 0% Floors

 

 

+200 bps

 

 

+100 bps

 

 

-25 bps / 0% Floors

 

NII Sensitivity

$

165

 

 

$

74

 

 

$

(11

)

 

$

137

 

 

$

85

 

 

$

(15

)

EVE Sensitivity

$

(12

)

 

$

(10

)

 

$

(1

)

 

$

6

 

 

$

62

 

 

$

(54

)

The NII Sensitivity and EVE Sensitivity results presented above assume that the Company takes no action in response to the changes in interest rates and includes only impacts from interest rate related influences. NII Sensitivity generally assumes cash flows from portfolio run-off are reinvested in similar products or cash to keep the balance sheet static. For that reason and others, the estimated impacts do not reflect the likely actual results but serve as estimates of interest rate risk. NII Sensitivity is not comparable to actual results disclosed elsewhere or directly predictive of future values of other measures provided.  The 25 bps down shock reported above is modeled with an assumption of a 0% market rate floor.

On a year-to-date basis, as of September 30, 2021, the dollar NII and EVE sensitivity changes are primarily due to changes in the composition of the balance sheet, as well as enhancements in modeling assumptions impacting long term deposit betas.

We generally have more floating rate/re-pricing interest sensitive assets than liabilities on the short end of the yield curve. As a result, the interest rate risk sensitivity of our current portfolio is more impacted by moves in short-term interest rates. Therefore, the NFR associated with the interest rate sensitive assets, liabilities and off-balance sheet items may change when short-term interest rates change and may also be impacted by factors beyond interest rates, such as changes in balance sheet composition, spread compression or expansion, and deviations from modelled deposit betas. In addition, re-pricing of our non-interest rate sensitive assets (for example, the rail operating leases) will impact NFR.

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Market-implied forward rates over the future twelve months are used to estimate a base interest rate scenario for the net interest income projection in the base case for NII Sensitivity. This base projection is compared with those calculated under varying interest rate scenarios to arrive at NII Sensitivity. Though there are many assumptions that affect the estimates for NII Sensitivity, those pertaining to deposit pricing, deposit mix and overall balance sheet composition are particularly impactful. Management continually evaluates the sensitivity of its risk metrics to these key assumptions.

EVE Sensitivity supplements NII Sensitivity simulation analysis as it estimates risk exposures beyond a twelve-month horizon. EVE Sensitivity modeling measures the extent to which the economic value of assets, liabilities and off-balance sheet instruments may change in response to a change in interest rates. EVE Sensitivity is calculated by subjecting the balance sheet to different rate shocks, measuring the net value of assets, liabilities and off-balance sheet instruments, and comparing those amounts with the EVE in the base case, calculated using a market-implied forward interest rate curve. The methodology with which the operating lease assets are assessed in the EVE Sensitivity results in the table above reflects the existing contractual rental cash flows and the expected residual value at the end of the existing contract term.

A wide variety of potential interest rate scenarios beyond those presented here are simulated within our asset/liability management system. Interest sensitive assets, liabilities and off-balance sheet instruments are valued using discounted cash flow analysis for EVE Sensitivity. Rates are shocked via a set of scenarios that include both parallel and non-parallel interest rate movements. Scenarios are also run to capture our sensitivity to changes in the shape of the yield curve. Furthermore, we evaluate the sensitivity of these results to a number of key assumptions, such as discount spreads, deposit beta and prepayments of mortgage-related assets.

NII Sensitivity and EVE Sensitivity risk metrics have been established and are monitored for certain of the key scenarios. We manage the exposure to changes in NII Sensitivity and EVE Sensitivity in accordance with our risk appetite and within Board-approved limits.

We use results of our various interest rate risk analyses to formulate and implement asset and liability management (“ALM”) strategies, in coordination with the Asset Liability Committee (“ALCO”), to achieve the desired risk profile, while managing our objectives for capital adequacy, liquidity risk exposures and other strategic objectives. Specifically, we may manage our interest rate risk position through certain pricing strategies and product design for loans and deposits, our investment portfolio, issuing term debt with floating or fixed interest rates, and using derivatives such as interest rate swaps, which modify the interest rate characteristics of certain assets or liabilities.

These measurements provide an estimate of our interest rate sensitivity; however, they do not account for potential changes in credit quality, size, mix, and prepayment characteristics of our balance sheet, changes in PAA, or changes in the competition for business in the industries we serve. They also do not account for other business developments such as the recently announced Definitive Merger Agreement and other actions that could affect NFR, or for management actions that could affect NFR or that could be taken to change our risk profile. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. Further, the range of such simulations is not intended to represent our current view of the expected range of future interest rate movements.

Reference Rate Reform

In 2017, the U.K. Financial Conduct Authority, which is the authority responsible for regulating LIBOR, announced that the publication of LIBOR is not guaranteed beyond 2021. On November 30, 2020, the Intercontinental Exchange Benchmark Administration (“IBA”) announced it will cease the publication of one week and two-month USD LIBOR settings at the end of December 2021 and the remaining USD LIBOR settings at the end of June 2023. CIT holds instruments such as loans, investments, derivative products, and other financial instruments that use LIBOR as a benchmark rate. However, CIT’s LIBOR exposure is primarily to tenures other than one week and two-month USD LIBOR.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency followed with a joint statement encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. As a result, CIT will stop originating new products using LIBOR by the end of 2021. LIBOR is a benchmark interest rate for most of our floating rate earning assets, particularly in Commercial Finance, Real Estate Finance and Consumer Banking (primarily mortgages), as well as certain liabilities and off-balance sheet exposures. We continue to monitor industry and regulatory developments and have a well-established transition program in place to manage the implementation of alternative reference rates as the market transitions away from LIBOR. Coordination is being handled by the Alternative Rates Working Group, a cross-functional team directed by a senior executive-level steering committee. Its mission is to work with CIT's businesses to ensure a smooth transition for CIT and its customers to an appropriate LIBOR alternative. Certain financial markets and products have already migrated to alternatives. CIT's Alternative Rates Working Group ensures that CIT is ready to move quickly and efficiently as consensus around LIBOR alternatives emerge. The Company has processes in place to complete its review of the population of legal contracts impacted by the LIBOR transition, and updates to our operational systems and processes are substantially in place.

The Company expects to utilize SOFR as our preferred replacement index for LIBOR; however, we continue to monitor how the market evolves regarding the use of alternative rates.

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FUNDING AND LIQUIDITY

We continue to maintain appropriate levels of liquidity in accordance with our risk limit structures and comprehensive liquidity risk management framework. As of September 30, 2021, we were 90% deposit funded, and continued to maintain liquidity in excess of our minimum required risk limits. The framework includes monitoring processes and systems that are designed to ensure we have the appropriate level of liquidity to meet expected and contingent funding needs under both normal and stressed environments.  

CIT actively manages its liquidity and monitors liquidity risk through a suite of tiered early warning indicators along with management and Board limits. The assessments of liquidity risk are measured under the assumption of normal operating conditions as well as under a range of stress scenarios, which use assumptions to reflect the changing market environment. Such scenarios cover a range of events, including systemic market-wide events and CIT-specific events. Liquidity stresses are applied in terms of duration and severity. Although not required by regulators, CIT continues to calculate and maintain a strong Liquidity Coverage Ratio above 100%, as defined for Category IV banks based on the FRB Tailoring Rule.

Liquidity stress test results, along with our risk metrics and other liquidity risk measurement practices, inform our business strategy, risk appetite, requirements for minimum balances of Liquid Assets and contingency funding plans.

We utilize a series of measurement tools to assess and monitor the level and adequacy of our liquidity position, liquidity conditions and trends. The primary tool is a liquidity forecast designed to identify movements in and levels of available cash and collateral flows, both contractually and behaviorally. We use a stress testing framework to better understand the range of potential risks and the impacts of those risks on CIT. Included among our liquidity measurement tools are risk metrics that assist in identifying potential liquidity risk and CIT’s exposure to those risks as well as their impact on CIT’s liquidity.

Oversight is provided by the Risk Management Committee, Enterprise Risk Committee, ALCO and the Risk Control Committee.

CIT closely monitors daily and intraday liquidity requirements in order to maintain appropriate amounts of Liquid Assets on our balance sheet and access to contingent sources of liquidity in order to meet our obligations.

At September 30, 2021, we had approximately $9.2 billion of total Liquid Assets and approximately $6.2 billion of contingent liquidity sources available, most of which is held at the Bank, commensurate with our assets.

•

At September 30, 2021, our Liquid Assets3 comprised approximately 17% of total assets and included $4.4 billion of Available Cash (of which $0.7 billion is available at the parent and non-bank subsidiaries) and approximately $4.8 billion of High Quality Liquid securities4 (“HQL securities”).

•

At September 30, 2021, our contingent liquidity sources included:

 

o

A committed and secured ABL facility (matures on December 20, 2021) of $750 million available to the parent and non-bank subsidiaries, of which $724 million was unused, provided that eligible assets are available to serve as collateral. Based on eligible collateral, net of reserves, $513 million was available to be drawn to support the FHC liquidity needs.

 

o

A committed Revolving Credit Facility of $300 million, all of which was available to be drawn by CIT Group Inc. The facility matured on November 1, 2021 and was not renewed.

 

o

FHLB capacity of $5.4 billion (collateralized by lending assets). There were no advances outstanding, resulting in $5.4 billion of available capacity for CIT Bank. (There were no HQL securities pledged at the FHLB at quarter end).

In addition, the Company has access to a borrowing facility with the FRB Discount Window. No amount was outstanding on this facility. See “FRB” section further below.

Cash

Cash totaled $4.6 billion at September 30, 2021 and $4.0 billion at December 31, 2020.

Investment Securities

Investment securities consisted primarily of US Treasury and Agency-issued fixed income securities and totaled $5.8 billion at September 30, 2021 and $6.9 billion at December 31, 2020, of which $5.6 billion and $6.7 billion, respectively, were AFS. Given market conditions, during the first quarter of 2021 we strategically sold certain AFS securities, which were primarily mortgage backed securities (“MBS”), to monetize unrealized gains that resided in AOCI. Securities of $0.1 billion and $1.9 billion were pledged as of September 30, 2021 and December 31, 2020, respectively, to secure FHLB financing availability and mortgage programs, public funds in CIT Bank, derivative contracts and for other purposes as required or permitted by law.

We had $100 million and $150 million of securities purchased under agreement to resell at September 30, 2021 and December 31, 2020, respectively. See Note 6 — Investment Securities in Item 1 for additional information on types and maturities of investment securities.

 

3 

Liquid Assets include available cash and HQL securities.

4 

HQL securities include readily marketable, unpledged securities, as well as securities available for sale and pledged but not drawn against at the FHLB. HQL securities generally are comprised of Treasury and Agency securities held outright or via reverse repurchase agreements.

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Funding Sources

We fund our operations through deposits and borrowings. Deposits totaled $40.2 billion, 90% of total funding at September 30, 2021 and $43.0 billion, 88% of total funding at December 31, 2020. Borrowings totaled $4.2 billion at September 30, 2021 and $5.8 billion at December 31, 2020. Borrowings consist of senior unsecured notes, subordinated unsecured notes and secured borrowings.

Unsecured borrowings were approximately 10% of total funding at September 30, 2021 and December 31, 2020. Secured borrowings were less than 1% at September 30, 2021, down from 2% at December 31, 2020, due to repayments. See the Net Finance Revenue section for a tabular presentation of our average funding mix.

In the first quarter of 2021, $500 million of unsecured borrowings were scheduled to mature, which we redeemed on February 9, 2021. No premium was paid upon redemption. In addition, we paid down $1.1 billion of FHLB advances during the first half of 2021. The next scheduled unsecured borrowings maturity coming due is the $1.147 billion, 5.0% Senior Notes which mature in August 2022. As of September 30, 2021, time deposits with maturities over the coming twelve months were $5.6 billion.

Deposits

CIT Bank offers a full suite of deposit offerings to its commercial and consumer customers through a national online platform, a network of approximately 80 branches, which are in top MSAs in Southern California, and include bank branches acquired with the MOB Acquisition, primarily in the Southwest, Midwest and Southeast. The period end balances are as follows:

Deposits by Channel (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Total

 

 

Percent of Total

 

 

Total

 

 

Percent of Total

 

Online

$

16,215.7

 

 

 

40

%

 

$

18,864.6

 

 

 

44

%

Branch

 

11,166.7

 

 

 

28

%

 

 

11,461.8

 

 

 

26

%

Homeowners association

 

6,888.6

 

 

 

17

%

 

 

5,871.6

 

 

 

14

%

Commercial

 

4,256.0

 

 

 

11

%

 

 

4,445.0

 

 

 

10

%

Brokered / other channel

 

1,710.3

 

 

 

4

%

 

 

2,428.6

 

 

 

6

%

Total deposits

$

40,237.3

 

 

 

100

%

 

$

43,071.6

 

 

 

100

%

The following table details our period end deposit balances by type:

Deposits by Type (dollars in millions)

 

September 30, 2021

 

 

December 31, 2020

 

 

Total

 

 

Percent of Total

 

 

Total

 

 

Percent of Total

 

Savings and money market

$

25,652.5

 

 

 

64

%

 

$

26,019.1

 

 

 

60

%

Time deposits

 

7,821.2

 

 

 

20

%

 

 

10,420.2

 

 

 

24

%

Interest-bearing checking

 

3,382.7

 

 

 

8

%

 

 

3,247.6

 

 

 

8

%

Non-interest bearing deposits

 

3,380.9

 

 

 

8

%

 

 

3,384.7

 

 

 

8

%

Total deposits

$

40,237.3

 

 

 

100

%

 

$

43,071.6

 

 

 

100

%

The decline in the deposit balance in 2021 reflected our decision to reduce excess interest-bearing cash and implement strategic rate reductions. We lowered higher cost time and brokered deposits, partially offset by growth in the HOA channel, as we continued to shift the mix from time deposits to non-maturity deposits.

See “Net Finance Revenue” for discussion on deposits interest expense and rates.

At the Company, the loans and leases to deposits ratio was 103% at September 30, 2021, compared to 104% at December 31, 2020. At the Bank, the loans and leases to deposits ratio was 89% at September 30, 2021, compared to 90% at December 31, 2020.

Unsecured Borrowings

Revolving Credit Facility

There were no borrowings outstanding under the Revolving Credit Facility. The Revolving Credit Facility had a total commitment amount of $300 million as of September 30, 2021, all of which was available to be drawn. The facility matured on November 1, 2021 and was not renewed.

Senior Unsecured Notes

At September 30, 2021, senior unsecured notes outstanding totaled $3.7 billion and the weighted average coupon rate was 4.70%, compared to $4.2 billion and 4.63% at December 31, 2020. The changes reflected the $500 million redemption in February.

Subordinated Unsecured Notes

Subordinated unsecured notes principal amount totaled $500 million as of September 30, 2021 and consisted of $100 million of 4.125% fixed-to-fixed subordinated notes due in 2029 and $400 million of 6.125% fixed rate subordinated notes due 2028, which are included in Tier 2 capital.

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Secured Borrowings

We may pledge assets for secured borrowing transactions, which include borrowings from the FHLB and/or FRB, or for other purposes as required or permitted by law. The debt issued in conjunction with these transactions is collateralized by certain discrete receivables, securities, loans, leases and/or underlying equipment. Certain related cash balances are restricted.

FHLB Advances

As a member of the FHLB of San Francisco, CIT Bank N.A. can access financing based on an evaluation of its creditworthiness, statement of financial position, size and eligibility of collateral. The interest rates charged by the FHLB for advances typically vary depending upon maturity, the cost of funds of the FHLB, and the collateral provided for the borrowing. Advances are secured by certain Bank assets and bear either a fixed or floating interest rate. The FHLB advances are collateralized by a variety of consumer and commercial loans, including SFR mortgage loans, multi-family mortgage loans, commercial real estate loans and securities.

There were no outstanding FHLB advances at September 30, 2021. The decline from December 31, 2020 reflected net repayments during the year. CIT Bank may borrow additional FHLB advances, as liquidity needs arise or repay advances as liquidity allows. The available capacity was $5.4 billion at September 30, 2021 with pledged assets of $7.0 billion, essentially all lending assets. FHLB advances and pledged assets are also discussed in Note 8 — Borrowings.

Other Secured and Structured Financings

Outstanding other secured and structured financings were not significant and totaled $12.0 million at September 30, 2021, and $6.1 million at December 31, 2020. The total borrowing capacity of the ABL facility was $750 million, with net availability based on eligible collateral. There were $26 million of LCs outstanding and no borrowings at September 30, 2021. The facility expires in December 2021.

FRB

The Company has a borrowing facility with the FRB Discount Window that can be used for short-term, typically overnight borrowings. The borrowing capacity is determined by the FRB based on the collateral pledged. There were no outstanding borrowings with the FRB Discount Window as of September 30, 2021 and December 31, 2020. See Note 8 — Borrowings in Item 1 for total balances pledged, including amounts to the FRB.

Debt Ratings

Debt ratings can influence the cost and availability of short- and long-term funding, the terms and conditions on which such funding may be available, the collateral requirements, if any, for borrowings and certain derivative instruments, the acceptability of our letters of credit, and the number of investors and counterparties willing to lend to the Company.

CIT Group Inc. and CIT Bank, N.A. debt ratings, as rated by Standard & Poor’s Ratings Services (“S&P”), Fitch Ratings, Inc. (“Fitch”) and Moody’s Investors Service (“Moody’s”) are presented in the following table:

Ratings

 

S&P

 

Fitch

 

Moody’s

Last Credit Update

12/10/20

 

11/2/21

 

10/1/21

CIT Group Inc.

 

 

 

 

 

Long Term Senior Unsecured Debt

BB+

 

BBB-

 

Ba1

Subordinated Debt

BB

 

BB+

 

Ba1

Non-Cumulative Perpetual Stock

B+

 

B+

 

Ba3

Ratings Outlook / Trend

Positive (Watch)

 

Positive (Watch)

 

Upgrade (Review)

CIT Bank, N.A.

 

 

 

 

 

Issuer Rating

BBB-

 

BBB-

 

Ba1

Long Term Senior Bank Notes

BBB-

 

BBB-

 

Ba1

Deposit Rating (LT/ST)

N/A

 

BBB / F3

 

Baa1 / P-2

Outlook

Positive (Watch)

 

Positive (Watch)

 

Upgrade (Review)

N/A — Not Applicable

Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current operating, legislative and regulatory environment, including implied government support. Potential changes in the factors noted above, rating methodology as well as in the legislative and regulatory environment and the timing of those changes could negatively impact the Company’s ratings, which could adversely affect the Company’s liquidity and financial condition.

A debt rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

On June 15, 2021, DBRS, Inc. (DBRS) withdrew its ratings on CIT Group Inc. and CIT Bank, N.A. Their last rating action on CIT was on October 16, 2020, when DBRS placed CIT's ratings, including its Long Term Senior Unsecured Debt rating of BBB (low), under review with positive implications. This prior rating action followed the announcement that CIT had entered into a definitive merger agreement with First Citizens.

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Contractual Commitments

The following table summarizes commitment expiration during the respective twelve-month periods.

Commitment Expiration for the Twelve Months Ending September 30, (dollars in millions)

 

Total

 

 

2022

 

 

2023

 

 

2024

 

 

2025

 

 

2026+

 

Financing commitments (excluding leases)

$

6,673.7

 

 

$

2,615.1

 

 

$

1,118.7

 

 

$

1,229.7

 

 

$

751.3

 

 

$

958.9

 

Lessor commitments

 

408.2

 

 

 

408.2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Letters of credit

 

259.1

 

 

 

44.5

 

 

 

56.2

 

 

 

62.7

 

 

 

27.5

 

 

 

68.2

 

Deferred purchase agreements

 

2,170.5

 

 

 

2,170.5

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total contractual commitments

$

9,511.5

 

 

$

5,238.3

 

 

$

1,174.9

 

 

$

1,292.4

 

 

$

778.8

 

 

$

1,027.1

 

At September 30, 2021, substantially all of our undrawn financing commitments were senior facilities, with approximately 95% secured by commercial equipment or other assets, and the remainder primarily comprised of cash flow or enterprise value facilities. Most of our undrawn and available financing commitments are in the Commercial Finance and Real Estate Finance divisions of Commercial Banking and include unused revolver availability of $2.9 billion, which is subject to borrower base revolver capacity and covenant compliance. Also included in financing commitments are delayed draws and term loans of $1.7 billion. Customer draws on such facilities are subject to certain pre-determined contract conditions. The top ten undrawn financing commitments totaled $678.9 million at September 30, 2021. Financing commitments related to consumer loans totaled approximately $519.3 million. See Note 13 – Commitments in Item 1 for further detail.

CAPITAL

Capital Management  

The Company’s capital management is discussed in our Annual Report on Form 10-K, Item 1. Business Overview - Regulation, subsections Capital Requirements and Regulatory Expectations for Capital Planning.

The Company maintains a comprehensive capital adequacy process. The Company establishes internal capital risk limits and warning thresholds, which utilize Risk-Based and Leverage-Based Capital calculations, internal and external early warning indicators, its capital planning process, and stress testing to evaluate the Company's capital adequacy for multiple types of risk in both normal and stressed environments. The capital management framework requires management to define contingency plans, which may be employed at management’s discretion.

Return of Capital

We declared and paid the following dividends in 2021:

Declaration Date

 

 

Payment Date

 

Per Share

Dividend

 

Common Stock

 

 

 

 

 

 

 

January 22, 2021

 

 

February 19, 2021

 

$

0.35

 

April 20, 2021

 

 

May 21, 2021

 

$

0.35

 

July 19, 2021

 

 

August 13, 2021

 

$

0.35

 

Series A Preferred Stock

 

 

 

 

 

 

 

April 20, 2021

 

 

June 15, 2021

 

$

29.00

 

Series B Preferred Stock (dividend per share rounded)

 

 

 

 

 

 

 

January 22, 2021

 

 

March 15, 2021

 

$

0.35

 

April 20, 2021

 

 

June 15, 2021

 

$

0.35

 

July 19, 2021

 

 

September 15, 2021

 

$

0.35

 

On October 18, 2021, the Board of Directors of the Company declared a quarterly cash dividend in the amount of $0.35 per outstanding common share. The common stock dividend is payable on November 12, 2021 to common shareholders of record as of October 29, 2021.

On October 18, 2021, the Board of Directors of the Company declared a semi-annual cash dividend in the amount of $29 per outstanding share on Series A preferred stock and a quarterly cash dividend in the amount of approximately $0.35 per outstanding share on Series B preferred stock. The dividends are payable on December 15, 2021 to Series A and B preferred shareholders of record as of November 30, 2021. Payment of the dividend on the Company’s Series A and Series B preferred stock is conditional on the anticipated merger between CIT and FCB, if approved, occurring after the record date. If the merger occurs before the record date, the Company’s Series A and Series B preferred stock will be replaced with First Citizens’ new Series B and new Series C Preferred Stock, respectively, and will have such rights, preferences, privileges and voting powers, and limitations and restrictions, taken as a whole, that are not materially less favorable to the holders thereof than the Company’s existing Series A and Series B Preferred Stock, and First Citizens will be responsible for paying the dividend on December 15, 2021 to holders of record as of November 30, 2021 of its new Series B and new Series C Preferred Stock, respectively.

Capital Composition and Ratios

The Company is subject to various regulatory capital requirements. We compute capital ratios in accordance with Federal Reserve and OCC capital rules for assessing adequacy of capital. The regulatory capital rules applicable to the Company and CIT Bank were the Basel III Rule and the Simplification Final Rule for the periods ended September 30, 2021 and December 31, 2020. At September 30, 2021 and December 31, 2020, the capital ratios of the Company and CIT Bank exceeded all capital adequacy requirements.

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In March 2020, the OCC, FRB and FDIC collectively issued the Revised CECL Transition Rule for regulatory capital, which provides for the option to delay for two years the impact of CECL’s effect on regulatory capital, followed by a three-year transition period. The Company elected to use the 5-year transition under the Revised CECL Transition Rule, which resulted in a benefit of $109 million in capital as of September 30, 2021.

Capital Components, Risk-Weighted Assets, and Capital Ratios (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

CET1 Capital

 

 

 

 

 

 

 

Total common stockholders’ equity(1)

$

5,649.6

 

 

$

5,197.9

 

Effect of CECL transition impact on retained earnings(2)

 

109.0

 

 

 

174.0

 

Effect of certain items in AOCI excluded from CET1 Capital

 

122.3

 

 

 

(44.8

)

Adjusted total equity

 

5,880.9

 

 

 

5,327.1

 

Deferred tax assets (DTAs) arising from net operating loss and tax credit carryforwards

 

(6.1

)

 

 

(8.8

)

Intangible assets, net of associated deferred tax liabilities (DTLs)

 

(102.6

)

 

 

(125.5

)

CET1 Capital

 

5,772.2

 

 

 

5,192.8

 

Additional Tier 1 Capital

 

 

 

 

 

 

 

Preferred Stock

 

525.0

 

 

 

525.0

 

Total Additional Tier 1 Capital

 

525.0

 

 

 

525.0

 

Total Tier 1 Capital

 

6,297.2

 

 

 

5,717.8

 

Tier 2 Capital

 

 

 

 

 

 

 

Qualifying Tier 2 Capital Instruments

 

495.3

 

 

 

494.9

 

Qualifying adjusted allowance for credit losses(2)(3)

 

605.3

 

 

 

650.5

 

Total Tier 2 Capital

 

1,100.6

 

 

 

1,145.4

 

Total Capital

$

7,397.8

 

 

$

6,863.2

 

Risk-Weighted Assets

$

48,383.4

 

 

$

51,847.0

 

CIT Ratios

 

 

 

 

 

 

 

CET1 Capital Ratio

 

11.9

%

 

 

10.0

%

Tier 1 Capital Ratio

 

13.0

%

 

 

11.0

%

Total Capital Ratio

 

15.3

%

 

 

13.2

%

Tier 1 Leverage Ratio

 

11.5

%

 

 

9.5

%

CIT Bank, N.A. Capital Components and Ratios

 

 

 

 

 

 

 

CET1 Capital

$

5,446.7

 

 

$

4,907.7

 

Tier 1 Capital

 

5,446.7

 

 

 

4,907.7

 

Total Capital

 

6,255.6

 

 

 

5,760.1

 

Risk-Weighted Assets

 

40,607.8

 

 

 

43,962.5

 

CET1 Capital Ratio

 

13.4

%

 

 

11.2

%

Tier 1 Capital Ratio

 

13.4

%

 

 

11.2

%

Total Capital Ratio

 

15.4

%

 

 

13.1

%

Tier 1 Leverage Ratio

 

11.1

%

 

 

8.9

%

Effective/Required Minimum Ratios under Basel III Guidelines (CIT and CIT Bank)

 

 

 

 

 

 

 

CET1 Capital Ratio

 

7.0

%

 

 

7.0

%

Tier 1 Capital Ratio

 

8.5

%

 

 

8.5

%

Total Capital Ratio

 

10.5

%

 

 

10.5

%

Tier 1 Leverage Ratio

 

4.0

%

 

 

4.0

%

(1)

See Condensed Consolidated Balance Sheets for the components of total common stockholders’ equity.

(2)

Reflects the CECL transition impact based on the Revised CECL Transition Rule.

(3)

ACL included in Tier 2 Capital is limited to 1.25% of risk weighted assets and includes allowance for off-balance sheet credit exposures (e.g. unfunded lending commitments and DPAs) recorded in other liabilities.

The CET1 Capital Ratio increased from December 31, 2020, reflecting increased retained earnings, combined with a reduction in RWA.

The reconciliation of balance sheet assets to RWA is presented below:

Risk-Weighted Assets (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Balance sheet assets

$

54,420.0

 

 

$

58,106.6

 

Risk weighting adjustments to balance sheet assets

 

(11,961.9

)

 

 

(12,898.1

)

Risk-weighted off-Balance sheet items

 

5,925.3

 

 

 

6,638.5

 

Risk-Weighted Assets

$

48,383.4

 

 

$

51,847.0

 

 

 

 

 

 

 

 

 

The decrease in balance sheet assets was driven by a decline in loans and investment securities, partially offset by an increase in cash balances. The risk weighting adjustments to balance sheet assets as of September 30, 2021 decreased from December 31, 2020 as a result of the decline in investment securities, single family residential loans and mark-to-market on derivatives, slightly offset by higher cash balances. The off-balance sheet items are lower, primarily due to lower off-balance sheet commitments and derivative contract exposures.  See Note 13 – Commitments in Item 1, which presents a table reflecting the

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Table of Contents

 

 

off-balance sheet commitments.

The 2021 off-balance sheet items primarily reflect $2.7 billion of unused lines of credit (largely related to the Commercial and Real Estate Finance divisions), $2.2 billion related to DPAs (Commercial Finance division), $0.5 billion of derivative exposures, and $0.5 billion of other items. See Note 13 — Commitments in Item 1 for further detail on commitments.

Book Value, Tangible Book Value and per Share Amounts (dollars in millions, except per share amounts)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Total common stockholders' equity

$

5,649.6

 

 

$

5,197.9

 

Intangible assets

 

(110.0

)

 

 

(134.9

)

Tangible book value(1)

$

5,539.6

 

 

$

5,063.0

 

Book value per share

$

56.97

 

 

$

52.71

 

Tangible book value per share(1)

$

55.86

 

 

$

51.34

 

(1)

Tangible book value and tangible book value per share are non-GAAP measures. See Non-GAAP Financial Measurements for reconciliation of Non-GAAP to GAAP financial information

Book value ("BV") and tangible book value (“TBV”), and the respective per share amounts, at September 30, 2021 increased from December 31, 2020, as net income more than offset changes in AOCI and dividends paid, as well as the increase in common shares outstanding due to the vesting of restricted stock.

 

CIT BANK, N.A.

The following tables present condensed financial information for CIT Bank. Trends and significant items are discussed in the previous sections of the MD&A. Loans and leases not included in the bank primarily relate to certain rail assets and our factoring business. Capital ratios are presented in the Capital section.

Condensed Balance Sheets (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

ASSETS:

 

 

 

 

 

 

 

Cash and deposits with banks

$

4,375.0

 

 

$

3,829.8

 

Securities purchased under agreement to resell

 

100.0

 

 

 

150.0

 

Investment securities

 

5,757.3

 

 

 

6,871.1

 

Assets held for sale

 

90.5

 

 

 

718.2

 

Loans

 

30,957.8

 

 

 

33,632.5

 

Allowance for credit losses

 

(780.0

)

 

 

(1,024.6

)

Operating lease equipment, net

 

5,372.2

 

 

 

5,232.2

 

Bank owned life insurance

 

1,193.4

 

 

 

1,168.8

 

Other assets

 

1,654.7

 

 

 

1,806.7

 

Total Assets

$

48,720.9

 

 

$

52,384.7

 

LIABILITIES AND EQUITY:

 

 

 

 

 

 

 

Deposits, including $618.8 and $1,131.3 due to affiliates at September 30, 2021 and December 31, 2020, respectively

$

40,856.2

 

 

$

44,202.9

 

FHLB advances

 

—

 

 

 

1,100.0

 

Borrowings, including $302.1 and $552.2 due to affiliates at September 30, 2021 and December 31, 2020, respectively

 

627.7

 

 

 

872.7

 

Other liabilities, including $253.9 and $89.7 payable to affiliates at September 30, 2021 and December 31, 2020, respectively

 

1,888.9

 

 

 

1,266.1

 

Total Liabilities

 

43,372.8

 

 

 

47,441.7

 

Total Equity

 

5,348.1

 

 

 

4,943.0

 

Total Liabilities and Equity

$

48,720.9

 

 

$

52,384.7

 

Loans and Leases, including HFS, by Segment (dollars in millions)

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

 

Commercial Banking

 

 

 

 

 

 

 

Commercial Finance

$

14,080.5

 

 

$

14,875.1

 

Business Capital

 

4,945.3

 

 

 

5,118.8

 

Rail

 

4,706.9

 

 

 

4,508.0

 

Real Estate Finance

 

6,430.8

 

 

 

7,554.1

 

Total

 

30,163.5

 

 

 

32,056.0

 

Consumer Banking

 

 

 

 

 

 

 

Consumer and Community Banking

 

5,054.9

 

 

 

5,828.2

 

Legacy Consumer Mortgages

 

1,202.1

 

 

 

1,698.7

 

Total

 

6,257.0

 

 

 

7,526.9

 

Total loans and leases

$

36,420.5

 

 

$

39,582.9

 

 

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Table of Contents

 

 

 

Condensed Statements of Operations (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest and fees on loans

$

328.4

 

 

$

342.4

 

 

$

383.9

 

 

$

1,021.7

 

 

$

1,235.5

 

Other interest and dividends

 

17.8

 

 

 

17.1

 

 

 

27.2

 

 

 

58.6

 

 

 

101.7

 

Interest income

 

346.2

 

 

 

359.5

 

 

 

411.1

 

 

 

1,080.3

 

 

 

1,337.2

 

Interest on deposits

 

47.3

 

 

 

50.7

 

 

 

103.2

 

 

 

159.2

 

 

 

398.1

 

Interest on borrowings

 

3.1

 

 

 

3.4

 

 

 

6.8

 

 

 

11.2

 

 

 

31.2

 

Interest on deposits and payables with affiliated companies

 

3.1

 

 

 

4.5

 

 

 

3.4

 

 

 

12.1

 

 

 

11.0

 

Interest expense

 

53.5

 

 

 

58.6

 

 

 

113.4

 

 

 

182.5

 

 

 

440.3

 

Net interest revenue

 

292.7

 

 

 

300.9

 

 

 

297.7

 

 

 

897.8

 

 

 

896.9

 

Provision for credit losses

 

(61.3

)

 

 

(53.1

)

 

 

21.5

 

 

 

(212.8

)

 

 

651.3

 

Net interest revenue, after credit provision

 

354.0

 

 

 

354.0

 

 

 

276.2

 

 

 

1,110.6

 

 

 

245.6

 

Rental income on operating leases

 

114.0

 

 

 

117.2

 

 

 

126.8

 

 

 

351.6

 

 

 

370.4

 

Other non-interest income

 

104.9

 

 

 

130.1

 

 

 

116.5

 

 

 

435.5

 

 

 

304.5

 

Total net revenue, net of interest expense and credit provision

 

572.9

 

 

 

601.3

 

 

 

519.5

 

 

 

1,897.7

 

 

 

920.5

 

Operating expenses

 

241.1

 

 

 

224.4

 

 

 

275.1

 

 

 

716.0

 

 

 

905.2

 

Loss on debt extinguishment and deposit redemptions

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15.4

)

Goodwill impairment

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

323.1

 

Depreciation on operating lease equipment

 

67.5

 

 

 

65.2

 

 

 

64.5

 

 

 

199.4

 

 

 

187.3

 

Maintenance and other operating lease expenses

 

17.8

 

 

 

24.4

 

 

 

13.4

 

 

 

77.9

 

 

 

68.1

 

Income (loss) before provision for income taxes

 

246.5

 

 

 

287.3

 

 

 

166.5

 

 

 

904.4

 

 

 

(547.8

)

Provision (benefit) for income taxes

 

60.5

 

 

 

75.7

 

 

 

46.5

 

 

 

231.1

 

 

 

(66.2

)

Net income (loss)

$

186.0

 

 

$

211.6

 

 

$

120.0

 

 

$

673.3

 

 

$

(481.6

)

New business volume - funded

$

3,215.6

 

 

$

2,972.0

 

 

$

2,621.6

 

 

$

8,627.5

 

 

$

9,255.6

 

 

Net Finance Revenue (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income

$

346.2

 

 

$

359.5

 

 

$

411.1

 

 

$

1,080.3

 

 

$

1,337.2

 

Rental income on operating leases

 

114.0

 

 

 

117.2

 

 

 

126.8

 

 

 

351.6

 

 

 

370.4

 

Finance revenue

 

460.2

 

 

 

476.7

 

 

 

537.9

 

 

 

1,431.9

 

 

 

1,707.6

 

Interest expense

 

53.5

 

 

 

58.6

 

 

 

113.4

 

 

 

182.5

 

 

 

440.3

 

Depreciation on operating lease equipment

 

67.5

 

 

 

65.2

 

 

 

64.5

 

 

 

199.4

 

 

 

187.3

 

Maintenance and other operating lease expenses

 

17.8

 

 

 

24.4

 

 

 

13.4

 

 

 

77.9

 

 

 

68.1

 

Net finance revenue

$

321.4

 

 

$

328.5

 

 

$

346.6

 

 

$

972.1

 

 

$

1,011.9

 

AEA

$

46,877.5

 

 

$

48,300.9

 

 

$

54,277.6

 

 

$

48,305.7

 

 

$

52,599.7

 

 

Net Finance Margin

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income

 

2.96

%

 

 

2.98

%

 

 

3.03

%

 

 

2.98

%

 

 

3.39

%

Rental income on operating leases

 

0.97

%

 

 

0.97

%

 

 

0.93

%

 

 

0.97

%

 

 

0.94

%

Finance revenue

 

3.93

%

 

 

3.95

%

 

 

3.96

%

 

 

3.95

%

 

 

4.33

%

Interest expense

 

0.46

%

 

 

0.49

%

 

 

0.84

%

 

 

0.50

%

 

 

1.12

%

Depreciation on operating lease equipment

 

0.58

%

 

 

0.54

%

 

 

0.48

%

 

 

0.55

%

 

 

0.47

%

Maintenance and other operating lease expenses

 

0.15

%

 

 

0.20

%

 

 

0.10

%

 

 

0.22

%

 

 

0.17

%

Net finance margin

 

2.74

%

 

 

2.72

%

 

 

2.55

%

 

 

2.68

%

 

 

2.57

%

 

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect reported amounts of assets and liabilities, reported amounts of income and expense and the disclosure of contingent assets and liabilities. The following estimates, which are based on relevant information available at the end of each period, include inherent risks and uncertainties related to judgments and assumptions made. We consider these estimates to be critical in applying our accounting policies, due to the existence of uncertainty at the time the estimate is made, the likelihood of changes in estimates from period to period and the potential impact on the financial statements.

Management believes that the judgments and assessments utilized for the more critical accounting estimates, such as the ACL and realizability of deferred tax assets, are reasonable. We do not believe that different assumptions are more likely than those utilized, although actual events may differ from such assumptions. Consequently, our estimates could prove inaccurate, and we may be exposed to charges to earnings that could be material.

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Table of Contents

 

 

There have been no significant changes to the methodologies and processes used in developing estimates relating to these items from those described in our 2020 Form 10-K.

 

SELECT DATA

Select Data (dollars in millions, except per share amounts)

 

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Select Statement of Operations Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest revenue

$

256.8

 

 

$

266.3

 

 

$

257.8

 

 

$

791.6

 

 

$

790.1

 

Provision for credit losses

 

(67.1

)

 

 

(72.2

)

 

 

63.3

 

 

 

(256.7

)

 

 

800.8

 

Total non-interest income

 

310.9

 

 

 

348.9

 

 

 

347.3

 

 

 

1,084.4

 

 

 

991.2

 

Total non-interest expenses

 

403.8

 

 

 

388.8

 

 

 

426.6

 

 

 

1,203.0

 

 

 

1,720.4

 

Net income (loss)

 

175.5

 

 

 

226.9

 

 

 

85.7

 

 

 

706.2

 

 

 

(623.9

)

Net income (loss) available to common shareholders

 

172.7

 

 

 

214.6

 

 

 

82.9

 

 

 

688.3

 

 

 

(642.8

)

Per Common Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per common share

 

1.72

 

 

 

2.14

 

 

 

0.84

 

 

 

6.89

 

 

 

(6.54

)

Book value per common share

 

56.97

 

 

 

55.58

 

 

 

53.17

 

 

 

 

 

 

 

 

 

Tangible book value per common share

 

55.86

 

 

 

54.39

 

 

 

50.29

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

0.35

 

 

 

0.35

 

 

 

0.35

 

 

 

1.05

 

 

 

1.05

 

Dividend payout ratio

 

20.4

%

 

 

16.4

%

 

 

41.6

%

 

 

15.3

%

 

NM

 

Performance Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return (available to common shareholders; continuing operations) on average common stockholders' equity

 

11.28

%

 

 

14.48

%

 

 

6.35

%

 

 

14.98

%

 

NM

 

Return (available to common shareholders; continuing operations) on average tangible common stockholders' equity

 

13.04

%

 

 

16.73

%

 

 

7.24

%

 

 

17.82

%

 

NM

 

Net finance revenue as a percentage of average earning assets

 

2.44

%

 

 

2.45

%

 

 

2.27

%

 

 

2.45

%

 

 

2.37

%

Return (available to common shareholders; continuing operations) on AEA

 

1.37

%

 

 

1.66

%

 

 

0.57

%

 

 

1.77

%

 

NM

 

Average total equity to average total asset ratio

 

11.6

%

 

 

10.9

%

 

 

9.5

%

 

 

10.9

%

 

 

10.2

%

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans including receivables pledged

$

33,461.0

 

 

$

33,711.1

 

 

$

37,319.6

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

(790.4

)

 

 

(850.6

)

 

 

(1,206.2

)

 

 

 

 

 

 

 

 

Operating lease equipment, net

 

7,937.5

 

 

 

7,781.8

 

 

 

7,799.3

 

 

 

 

 

 

 

 

 

Goodwill

 

-

 

 

 

-

 

 

 

140.4

 

 

 

 

 

 

 

 

 

Total cash and deposits

 

4,598.5

 

 

 

5,280.7

 

 

 

6,705.6

 

 

 

 

 

 

 

 

 

Investment securities

 

5,775.2

 

 

 

5,295.8

 

 

 

6,608.8

 

 

 

 

 

 

 

 

 

Total assets

 

54,420.0

 

 

 

54,703.7

 

 

 

60,865.0

 

 

 

 

 

 

 

 

 

Deposits

 

40,237.3

 

 

 

41,271.0

 

 

 

44,706.2

 

 

 

 

 

 

 

 

 

Borrowings

 

4,247.6

 

 

 

4,244.1

 

 

 

7,284.7

 

 

 

 

 

 

 

 

 

Total common stockholders’ equity

 

5,649.6

 

 

 

5,510.8

 

 

 

5,239.0

 

 

 

 

 

 

 

 

 

Credit Quality

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-accrual loans as a percentage of loans

 

1.21

%

 

 

1.63

%

 

 

1.73

%

 

 

 

 

 

 

 

 

Net charge-offs as a percentage of average loans

 

0.06

%

 

 

0.30

%

 

 

0.71

%

 

 

0.17

%

 

 

1.02

%

Allowance for credit losses as a percentage of loans

 

2.36

%

 

 

2.52

%

 

 

3.23

%

 

 

 

 

 

 

 

 

Capital Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CET1 capital ratio

 

11.9

%

 

 

11.6

%

 

 

9.9

%

 

 

 

 

 

 

 

 

Tier 1 capital ratio

 

13.0

%

 

 

12.7

%

 

 

10.9

%

 

 

 

 

 

 

 

 

Total capital ratio

 

15.3

%

 

 

15.0

%

 

 

13.1

%

 

 

 

 

 

 

 

 

NM – not meaningful

NON-GAAP FINANCIAL MEASUREMENTS

Management uses non-GAAP financial measures that it believes to be useful in assessing the Company’s financial condition and results of operations. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance or financial position that may either exclude or include amounts or is adjusted in some way to the effect of including or excluding amounts, as compared to the most directly comparable measure calculated and presented in accordance with GAAP financial statements. These non-GAAP measures are not in accordance with, or a substitute for, GAAP and may be different from or inconsistent with non-GAAP financial measures used by other institutions.

The accompanying MD&A contains non-GAAP financial measures. We intend our non-GAAP financial measures to provide transparency about, or an alternate means of assessing, our operating results and financial position for our investors and analysts, on the same basis that our management analyzes such results.

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Whenever we refer to a non-GAAP financial measure, we generally define it, or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure. In instances when the non-GAAP balance is an aggregation of various line items from a financial statement, we present those exact line item names and balances for the user to clearly see the components. We describe each of these measures below and explain why we believe the measure to be useful.

1.

Total Net Revenue, Net Finance Revenue, and Net Operating Lease Revenue

Total net revenue is a non-GAAP measure that represents the combination of NFR and other non-interest income and is an aggregation of all sources of revenue for the Company. The source of the data is various statement of operations line items, arranged in a different order and with different subtotals than included in the statement of operations, and therefore is considered non-GAAP. Total net revenue is used by management to monitor business performance and to calculate a net efficiency ratio, as discussed below in item 2.

NFR is a non-GAAP measure that represents the level of interest income earned on our loans and leases, investment securities and cash, plus rental income on operating lease equipment less interest expense and expenses relating to operating lease equipment. NFR is a key performance measure used by management to monitor portfolio performance. NFR is also used to calculate a performance metric, net finance margin, or NFM.

Due to the nature of our loans and leases, which include a higher proportion of operating lease equipment than most BHCs, certain financial measures commonly used by other BHCs are not as meaningful for our Company. As such, given our asset composition includes a high level of operating lease equipment, NFM as calculated below is used by management, rather than net interest margin (“NIM”) (a common metric used by other bank holding companies), which does not fully reflect the earnings of our portfolio because it includes the impact of debt costs of all our assets but excludes the net operating lease revenue.

Net operating lease revenue is a non-GAAP measure that represents the combination of rental income on operating leases less depreciation on operating lease equipment and maintenance and other operating lease expenses. Net operating lease revenues is a measurement used by management to monitor portfolio performance and returns on its purchased equipment.

Total Net Revenue and Net Operating Lease Revenue (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Interest income

$

359.8

 

 

$

373.1

 

 

$

423.3

 

 

$

1,121.0

 

 

$

1,383.8

 

Rental income on operating lease equipment

 

186.2

 

 

 

188.2

 

 

 

201.3

 

 

 

569.1

 

 

 

612.0

 

Finance revenue (Non-GAAP)

 

546.0

 

 

 

561.3

 

 

 

624.6

 

 

 

1,690.1

 

 

 

1,995.8

 

Interest expense

 

103.0

 

 

 

106.8

 

 

 

165.5

 

 

 

329.4

 

 

 

593.7

 

Depreciation on operating lease equipment

 

85.1

 

 

 

82.8

 

 

 

82.5

 

 

 

252.6

 

 

 

241.9

 

Maintenance and other operating lease expenses

 

50.5

 

 

 

54.8

 

 

 

48.6

 

 

 

156.9

 

 

 

158.3

 

Net finance revenue (NFR) (Non-GAAP)

 

307.4

 

 

 

316.9

 

 

 

328.0

 

 

 

951.2

 

 

 

1,001.9

 

Other non-interest income

 

124.7

 

 

 

160.7

 

 

 

146.0

 

 

 

515.3

 

 

 

379.2

 

Total net revenues (Non-GAAP)

$

432.1

 

 

$

477.6

 

 

$

474.0

 

 

$

1,466.5

 

 

$

1,381.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NFR (Non-GAAP)

$

307.4

 

 

$

316.9

 

 

$

328.0

 

 

$

951.2

 

 

$

1,001.9

 

Net finance margin (NFR as a % of AEA)(NFM)(Non-GAAP)

 

2.44

%

 

 

2.45

%

 

 

2.27

%

 

 

2.45

%

 

 

2.37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Operating Lease Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income on operating leases

$

186.2

 

 

$

188.2

 

 

$

201.3

 

 

$

569.1

 

 

$

612.0

 

Depreciation on operating lease equipment

 

85.1

 

 

 

82.8

 

 

 

82.5

 

 

 

252.6

 

 

 

241.9

 

Maintenance and other operating lease expenses

 

50.5

 

 

 

54.8

 

 

 

48.6

 

 

 

156.9

 

 

 

158.3

 

Net operating lease revenue (Non-GAAP)

$

50.6

 

 

$

50.6

 

 

$

70.2

 

 

$

159.6

 

 

$

211.8

 

 

2.

Operating Expenses and Net Efficiency Ratio

Operating expenses excluding restructuring costs and intangible asset amortization is a non-GAAP measure used by management to compare period over period expenses. We exclude restructuring costs and intangible amortization from operating expenses as they are charges resulting from our strategic initiatives and not our operating activity. In addition, we exclude other noteworthy items to monitor the underlying level of operating expenses and cost of generating revenue. Non-GAAP operating expenses are reconciled to GAAP in the Non-Interest Expenses section table.

Net efficiency ratio is another key performance metric. Net efficiency ratio is a non-GAAP measurement used by management to measure the level of operating expenses (before restructuring costs and intangible amortization) to total net revenues. The base ratio is derived by dividing the operating expenses (before restructuring costs and intangible amortization) by total net revenue (see components in Item 1 above). A lower result reflects a more efficient use of our expenses to generate revenue.

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Table of Contents

 

 

We present a second net efficiency calculation that excludes other noteworthy items (restructuring costs are considered noteworthy items) in the numerator and denominator due to their episodic nature and size. Due to the exclusions of the items, both calculations are considered non-GAAP measures.

See Non-Interest Expenses for operating expenses.

Net Efficiency Ratio (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Total net revenues (Non-GAAP)

$

432.1

 

 

$

477.6

 

 

$

474.0

 

 

$

1,466.5

 

 

$

1,381.1

 

Noteworthy items

 

13.2

 

 

 

—

 

 

 

—

 

 

 

(69.8

)

 

 

—

 

Total net revenues, excluding noteworthy items (Non-GAAP)

$

445.3

 

 

$

477.6

 

 

$

474.0

 

 

$

1,396.7

 

 

$

1,381.1

 

Net efficiency ratio (Non-GAAP)

 

60.2

%

 

 

52.5

%

 

 

60.6

%

 

 

53.0

%

 

 

67.2

%

Net efficiency ratio, excluding noteworthy items (Non-GAAP)

 

58.3

%

 

 

52.2

%

 

 

60.4

%

 

 

54.9

%

 

 

64.5

%

3.

Earning Assets, Average Earning Assets (“AEA”) and Core Loans and Leases

Earning asset balances (period end balances) displayed in the table below are directly derived from the respective line items in the balance sheet. These represent revenue generating assets, and the average (AEA) of which provides a basis for management performance calculations, such as NFM. The source of the data is various balance sheet line items, however, when aggregated, the total is considered non-GAAP. We net the credit balances of factoring clients as the correlated receivable is included in loans on the balance sheet but these generate commission income, which is non-interest income and does not impact either the NFR and NIM. The average balances are based on daily balances.

Average Earnings Assets and Earning Assets (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Average Earning Assets (Non-GAAP)

$

50,347.1

 

 

$

51,811.1

 

 

$

57,768.0

 

 

$

51,776.3

 

 

$

56,352.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

 

 

 

 

 

 

 

Period End Earning Assets

2021

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

Loans

$

33,461.0

 

 

$

33,711.1

 

 

$

37,319.6

 

 

 

 

 

 

 

 

 

Operating lease equipment, net

 

7,937.5

 

 

 

7,781.8

 

 

 

7,799.3

 

 

 

 

 

 

 

 

 

Assets held for sale

 

95.8

 

 

 

51.5

 

 

 

56.7

 

 

 

 

 

 

 

 

 

Credit balances of factoring clients

 

(1,556.6

)

 

 

(1,530.5

)

 

 

(1,320.2

)

 

 

 

 

 

 

 

 

Interest-bearing cash

 

4,428.7

 

 

 

5,134.1

 

 

 

6,529.9

 

 

 

 

 

 

 

 

 

Investment securities and securities purchased under agreement to resell

 

5,875.2

 

 

 

5,445.8

 

 

 

6,608.8

 

 

 

 

 

 

 

 

 

Total earning assets (Non-GAAP)

$

50,241.6

 

 

$

50,593.8

 

 

$

56,994.1

 

 

 

 

 

 

 

 

 

Certain portfolios within the segments are being either run-off or sold. In order to gauge the underlying level of loans and leases, management will exclude these portfolios when comparing to prior periods. By excluding these portfolios from the total of loans, operating lease equipment and AHFS balances, this metric is considered non-GAAP, and is presented only to assist the reader in understanding how management views the underlying change in earning asset levels in aggregate. The following table reflects the average balances for the respective periods.

Core Average Loans and Leases (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Total average loans (incl HFS, net of credit balances)

$

31,865.6

 

 

$

33,226.5

 

 

$

36,301.6

 

 

$

33,218.2

 

 

$

36,633.8

 

Total average operating lease equipment (incl HFS)

 

7,862.5

 

 

 

7,754.0

 

 

 

7,824.4

 

 

 

7,816.0

 

 

 

7,615.0

 

Total average loans and leases (Non-GAAP)

 

39,728.1

 

 

 

40,980.5

 

 

 

44,126.0

 

 

 

41,034.2

 

 

 

44,248.8

 

Average non-core portfolio, LCM

 

1,316.2

 

 

 

1,501.8

 

 

 

1,979.7

 

 

 

1,489.3

 

 

 

2,066.7

 

Average core loans and leases

$

38,411.9

 

 

$

39,478.7

 

 

$

42,146.3

 

 

$

39,544.9

 

 

$

42,182.1

 

 

4.

Tangible Book Value, ROTCE and Tangible Book Value per Share

Tangible Book Value (“TBV”), return on tangible common equity (“ROTCE”), and TBV per share are considered key financial performance measures by management, and are used by other financial institutions. TBV, as calculated and used by management, represents CIT’s common stockholders’ equity, less goodwill and intangible assets. See the Capital section (Tangible Book Value and per Share Amounts table) for calculation of TBV per share. TBV per share is calculated by dividing TBV by the outstanding number of common shares.

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Table of Contents

 

 

ROTCE measures CIT’s profitability applicable to common stockholders as a percentage of average tangible common equity. This measure is useful for evaluating the performance of CIT as it calculates the return available to common stockholders without the impact of intangible assets. The average adjusted tangible common equity is derived using averages of balances presented, based on daily balances for the period.

TBV, ROTCE and TBV per share are measurements used by management and other users of CIT’s financial data in assessing CIT’s use of equity. We believe the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income. In addition, we believe TBV, ROTCE and TBV per share are important measures for comparative purposes with other institutions, but are not defined under U.S. GAAP, and therefore are considered non-GAAP financial measures.

Tangible Book Value (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Total common shareholders' equity

$

5,649.6

 

 

$

5,510.8

 

 

$

5,239.0

 

 

$

5,649.6

 

 

$

5,239.0

 

Less: goodwill

 

—

 

 

 

—

 

 

 

140.4

 

 

 

—

 

 

 

140.4

 

Less: Intangible assets

 

110.0

 

 

 

118.1

 

 

 

143.4

 

 

 

110.0

 

 

 

143.4

 

Tangible common equity for ROTCE (Non-GAAP)

$

5,539.6

 

 

$

5,392.7

 

 

$

4,955.2

 

 

$

5,539.6

 

 

$

4,955.2

 

Average tangible common equity (Non-GAAP)

$

5,486.3

 

 

$

5,279.4

 

 

$

4,927.9

 

 

$

5,291.7

 

 

$

5,060.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) available to common shareholders

$

172.7

 

 

$

214.6

 

 

$

82.9

 

 

$

688.3

 

 

$

(642.8

)

Goodwill impairment, after tax

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

339.0

 

Intangible asset amortization, after tax

 

6.1

 

 

 

6.2

 

 

 

6.3

 

 

 

18.9

 

 

 

18.5

 

Non-GAAP income (loss) - for ROTCE calculation

$

178.8

 

 

$

220.8

 

 

$

89.2

 

 

$

707.2

 

 

$

(285.3

)

Return on average tangible common equity (Non-GAAP)

 

13.04

%

 

 

16.73

%

 

 

7.24

%

 

 

17.82

%

 

NM

 

Non-GAAP income (loss) (from the following non-GAAP noteworthy tables)

$

185.2

 

 

$

209.8

 

 

$

82.7

 

 

$

639.6

 

 

$

(217.1

)

Intangible asset amortization, after tax

 

6.1

 

 

 

6.2

 

 

 

6.3

 

 

 

18.9

 

 

 

18.5

 

Non-GAAP income (loss) - for ROTCE calculation, excluding noteworthy items

$

191.3

 

 

$

216.0

 

 

$

89.0

 

 

$

658.5

 

 

$

(198.6

)

Preferred dividend normalization

 

(4.7

)

 

 

4.7

 

 

 

(4.7

)

 

 

(4.7

)

 

 

(4.7

)

Non-GAAP income (loss) - for ROTCE calculation, excluding noteworthy items and preferred dividend normalization

$

186.6

 

 

$

220.7

 

 

$

84.3

 

 

$

653.8

 

 

$

(203.3

)

Return on average tangible common equity, after noteworthy items (Non-GAAP)

 

13.95

%

 

 

16.37

%

 

 

7.22

%

 

 

16.59

%

 

NM

 

Return on average tangible common equity, after noteworthy items and preferred dividend normalization

 

13.60

%

 

 

16.72

%

 

 

6.84

%

 

 

16.47

%

 

NM

 

 

73

Table of Contents

 

 

 

5.

Net income (loss) excluding noteworthy items

Net income (loss) excluding noteworthy items are non-GAAP measures, as the measures exclude items from the respective line item in the GAAP statement of operations. We exclude noteworthy items to reflect how management views the underlying performance of the business and believe that adjusting for these items will also provide the user of CIT’s financial information a measure of the underlying performance. The non-GAAP noteworthy items are summarized in the following categories: significant due to the size of the transaction; transactions pertaining to items no longer considered core to CIT’s on-going operations (e.g. sales of non-strategic portfolios); and other items, such as restructuring costs or costs incurred specific to mergers and acquisitions.

Net Income (Loss) Available to Common Shareholders, Excluding Noteworthy Items (dollars in millions, except per share data)

 

 

 

 

Pre-tax

 

 

 

 

 

 

After-Tax

 

 

Per

 

 

Description

Line Item

 

Balance

 

 

Tax(2)

 

 

Balance

 

 

Share

 

Quarter Ended September 30, 2021

 

Net income available to common shareholders

 

 

 

 

 

 

 

 

 

$

172.7

 

 

$

1.72

 

 

CTA release

Other non-interest income

 

$

13.2

 

 

$

(1.1

)

 

 

12.1

 

 

 

0.12

 

 

FCB merger costs

Operating expenses

 

 

0.7

 

 

 

(0.3

)

 

 

0.4

 

 

 

0.00

 

Non-GAAP net income available to common shareholders, excluding noteworthy items(1)

 

 

 

 

 

 

 

 

 

$

185.2

 

 

$

1.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended June 30, 2021

 

Net income available to common shareholders

 

 

 

 

 

 

 

 

 

$

214.6

 

 

$

2.14

 

 

Reversal of prior restructuring costs

Operating expenses

 

$

(7.9

)

 

$

1.8

 

 

 

(6.1

)

 

 

(0.06

)

 

FCB merger costs

Operating expenses

 

 

1.7

 

 

 

(0.4

)

 

 

1.3

 

 

 

0.01

 

Non-GAAP income available to common shareholders, excluding noteworthy items(1)

 

 

 

 

 

 

 

 

 

$

209.8

 

 

$

2.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended September 30, 2020

 

Net income available to common shareholders

 

 

 

 

 

 

 

 

 

$

82.9

 

 

$

0.84

 

 

MOB merger and integration costs

Operating expenses

 

$

12.6

 

 

$

(3.8

)

 

 

8.8

 

 

 

0.09

 

 

Performance Stock Units expense reversal

Operating expenses

 

 

(12.1

)

 

 

3.1

 

 

 

(9.0

)

 

 

(0.09

)

Non-GAAP net income available to common shareholders, excluding noteworthy items(1)

 

 

 

 

 

 

 

 

 

$

82.7

 

 

$

0.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax

 

 

 

 

 

 

 

 

 

 

After-Tax

 

 

 

 

Per

 

 

Description

Line Item

 

Balance

 

 

 

 

Tax(2)

 

 

 

 

Balance

 

 

 

 

Share

 

Nine Months Ended September 30, 2021

 

Net income available to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

$

688.3

 

 

 

 

$

6.89

 

 

Gains on sales of investment securities

Other non-interest income

 

$

(83.0

)

 

 

 

$

21.5

 

 

 

 

 

(61.5

)

 

 

 

 

(0.62

)

 

CTA release

Other non-interest income

 

 

13.2

 

 

 

 

 

(1.1

)

 

 

 

 

12.1

 

 

 

 

 

0.12

 

 

FCB merger costs

Operating expenses

 

 

9.3

 

 

 

 

 

(2.5

)

 

 

 

 

6.8

 

 

 

 

 

0.07

 

 

Reversal of prior restructuring costs

Operating expenses

 

 

(7.9

)

 

 

 

 

1.8

 

 

 

 

 

(6.1

)

 

 

 

 

(0.06

)

Non-GAAP net income available to common shareholders, excluding noteworthy items(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

639.6

 

 

 

 

$

6.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2020

 

Net loss available to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(642.8

)

 

 

 

$

(6.54

)

 

MOB day 1 provision for credit losses

Provision for credit losses

 

$

44.8

 

 

 

 

$

(8.1

)

 

 

 

 

36.7

 

 

 

 

 

0.37

 

 

Performance Stock Units expense reversal

Operating expenses

 

 

(12.1

)

 

 

 

 

3.1

 

 

 

 

 

(9.0

)

 

 

 

 

(0.09

)

 

Restructuring charges

Operating expenses

 

 

37.2

 

 

 

 

 

(13.6

)

 

 

 

 

23.6

 

 

 

 

 

0.24

 

 

MOB merger and integration costs

Operating expenses

 

 

49.6

 

 

 

 

 

(14.2

)

 

 

 

 

35.4

 

 

 

 

 

0.36

 

 

Goodwill impairment

Goodwill impairment

 

 

344.7

 

 

 

 

 

(5.7

)

 

 

 

 

339.0

 

 

 

 

 

3.45

 

Non-GAAP net loss available to common shareholders, excluding noteworthy items(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(217.1

)

 

 

 

$

(2.21

)

(1)

Items may not sum due to rounding.

(2)

Income tax rates vary depending on the specific item and the entity location in which it is recorded.

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6.

Effective Tax Rate Reconciliation

The provision for income taxes before noteworthy items and tax discrete items and the respective effective tax rate are non-GAAP measures, which management uses for analytical purposes to understand the Company’s underlying tax rate. Noteworthy items are presented in item 5 above, and discussed in various sections of the MD&A.

Effective Tax Rate Reconciliation - Noteworthy Items (dollars in millions)

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Provision (benefit) for income taxes - GAAP

$

55.5

 

 

$

71.7

 

 

$

29.5

 

 

$

223.5

 

 

$

(116.0

)

Income tax on noteworthy items

 

1.4

 

 

 

(1.4

)

 

 

0.7

 

 

 

(19.7

)

 

 

38.5

 

Provision (benefit) for income taxes, before noteworthy items - Non-GAAP

 

56.9

 

 

 

70.3

 

 

 

30.2

 

 

 

203.8

 

 

 

(77.5

)

Income tax - remaining discrete items

 

4.8

 

 

 

4.0

 

 

 

(0.1

)

 

 

16.1

 

 

 

1.8

 

Provision (benefit) for income taxes, before noteworthy and discrete tax items - Non-GAAP

$

61.7

 

 

$

74.3

 

 

$

30.1

 

 

$

219.9

 

 

$

(75.7

)

Income (loss) before (benefit) provision for income taxes - GAAP

$

231.0

 

 

$

298.6

 

 

$

115.2

 

 

$

929.7

 

 

$

(739.9

)

Noteworthy items before tax

 

13.9

 

 

 

(6.2

)

 

 

0.5

 

 

 

(68.4

)

 

 

464.2

 

Adjusted income (loss) before (benefit) provision for income taxes and discrete items - Non-GAAP

$

244.9

 

 

$

292.4

 

 

$

115.7

 

 

$

861.3

 

 

$

(275.7

)

Effective tax rate

 

24.0

%

 

 

24.0

%

 

 

25.6

%

 

 

24.0

%

 

 

15.7

%

Effective tax rate, excluding noteworthy items - Non-GAAP

 

23.2

%

 

 

24.0

%

 

 

26.1

%

 

 

23.7

%

 

 

28.1

%

Effective tax rate, excluding noteworthy and tax discrete items - Non-GAAP

 

25.2

%

 

 

25.4

%

 

 

26.0

%

 

 

25.5

%

 

 

27.4

%

7.

Regulatory Capital Measures

Included within this Form 10-Q are risk-weighted assets, risk-based capital and leverage ratios as calculated under the Basel III Rule, the Simplification Final Rule and the Revised CECL Transition Rule as of September 30, 2021 and December 31, 2020. Such measures are considered key regulatory capital measures used by banking regulators, investors and analysts to assess CIT’s (as a BHC) regulatory capital position and to compare CIT to other financial institutions. For information on our capital ratios and requirements, see the Capital section.


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FORWARD-LOOKING STATEMENTS

Certain statements contained in this document are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended. All statements contained herein that are not clearly historical in nature are forward-looking and the words “anticipate,” “believe,” “could,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “potential,” “project,” “target” and similar expressions are generally intended to identify forward-looking statements. Any forward-looking statements contained herein, in press releases, written statements or other documents filed with the Securities and Exchange Commission or in communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls, concerning our operations, economic performance and financial condition are subject to known and unknown risks, uncertainties and contingencies. Forward-looking statements are included, for example, in the discussions about:

•

our pending merger with First Citizens,

•

our liquidity risk and capital management, including our capital plan, leverage, capital ratios, and credit ratings, our liquidity plan, and our plans and the potential transactions designed to enhance our liquidity and capital, to repay secured and unsecured debt, to issue qualifying capital instruments, including Tier 1 qualifying preferred stock and Tier 2 qualifying subordinated debt, and for a return of capital,

•

recent accounting pronouncements and their estimated impact on our business or financial performance.

•

our plans to change our funding mix, to access new sources of funding, and to broaden our deposit taking capabilities, and expand our treasury management services,

•

our pending or potential acquisition and disposition plans, and the integration and restructuring risks inherent in such acquisitions,  

•

our credit risk management and credit quality,

•

our asset/liability risk management,

•

our funding, borrowing costs and NFR,

•

our operational risks, including risk of operational errors, failure of operational controls, cybersecurity risks, success of systems enhancements and expansion of risk management and control functions,

•

our mix of portfolio asset classes, including changes resulting from growth initiatives, new business initiatives, new products, acquisitions and divestitures, new business and customer retention,

•

our legal risks, including the enforceability of our agreements, the impact of legal proceedings, and the impact of changes in laws and regulations,

•

our growth rates, and

•

our commitments to extend credit or purchase equipment.

Forward-looking statements also include statements relating to our continuing response to the COVID-19 pandemic. These statements include, but are not limited to, statements about:

•

the implementation of our business continuity plan, Including the ability of our employees to work remotely and the effectiveness of our systems and other critical technology;

•

our ability to staff our branches and other operations that cannot be operated remotely;

•

our ability to maintain and operate our systems supporting our customers, including ongoing access to online banking resources;

•

the potential effectiveness of relief measures for customers affected by COVID-19;

•

the anticipated levels at which customers will draw on outstanding lines of credit;

•

the strength of our capital and liquidity positions, the availability of contingent liquidity sources, and our ability to accurately predict capital and liquidity needs;

•

the strength of our lending portfolios and the adequacy of our allowance for credit losses; and

•

future opportunities after the COVID-19 pandemic subsides.

All forward-looking statements involve risks and uncertainties, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements expressed or implied in these statements. Forward-looking statements are based upon management’s estimates of fair values and of future costs, using currently available information. Factors that could cause such differences include, but are not limited to:

•

risks inherent in deposit funding, including reducing reliance on brokered deposits, increasing retail non-maturity accounts, and expanding treasury management services,

•

risks inherent in capital markets, including liquidity, changes in market interest rates and quality spreads, and our access to secured and unsecured debt markets,

•

risks inherent in a return of capital, including risks related to obtaining regulatory approval, the nature and allocation among different methods of returning capital, and the amount and timing of any capital return,

•

risks of actual or perceived economic slowdown, downturn or recession, including slowdown in customer demand for credit or increases in non-accrual loans or default rates,

•

industry cycles and trends, including in oil and gas, power and energy, telecommunications, information technology, and commercial and residential real estate,

•

uncertainties associated with risk management, including evaluating credit, adequacy of reserves for credit losses, prepayment risk, asset/liability risk, interest rate and currency risks, and cybersecurity risks,

•

risks of implementing new processes, procedures, and systems,

•

risks associated with the value and recoverability of leased equipment and related lease residual values, including railcars, telecommunication towers, technology and office equipment, information technology equipment, including data centers, and large and small ticket industrial, medical, and transportation equipment,

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•

risks of failing to achieve the projected revenue growth from new business initiatives or the projected expense reductions from efficiency improvements,

•

application of goodwill accounting or fair value accounting in volatile markets,

•

regulatory changes and developments, including changes in laws or regulations governing our business and operations, or affecting our assets, including our operating lease equipment or changes in the regulatory environment, whether due to events or factors specific to CIT, or other large multi-national or regional banks, or the industry in general, including developments that could negatively affect our pending merger with First Citizens,

•

risks associated with dispositions of businesses or asset portfolios, including how to replace the income associated with such businesses or asset portfolios and the risk of residual liabilities from such businesses or portfolios,

•

risks associated with acquisitions of asset portfolios or businesses, including integrating technology and operations, merging cultures, and reducing duplication in personnel, policies, internal controls, and systems,

•

the duration, extent and severity of the COVID-19 pandemic, the responses of federal, state and local governments to the pandemic, and the speed and success of vaccination efforts worldwide, including the impact across our business, operations and employees as well as the effect on our customers and service providers and on the economy and markets more generally, and on First Citizens’ and/or CIT’s ability to complete the proposed merger,

•

risks and uncertainties relating to our pending merger with First Citizens, including, among others,

 

•

the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed merger may not be realized or may take longer than anticipated to be realized, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the condition of the economy and competitive factors in areas where First Citizens and CIT do business,  

 

•

disruption to the parties’ businesses as a result of the announcement and pendency of the proposed merger and diversion of management’s attention from ongoing business operations and opportunities,

 

•

the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement,

 

•

the risk that the integration of First Citizens’ and CIT’s operations will be materially delayed or will be more costly or difficult than expected or that First Citizens and CIT are otherwise unable to successfully integrate their businesses,

 

•

the outcome of any legal proceedings that may be instituted against First Citizens and/or CIT,

 

•

the failure to obtain required governmental approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction),

 

•

reputational risk and potential adverse reactions of First Citizens’ and/or CIT’s customers, suppliers, employees or other business partners, including those resulting from the announcement or completion of the proposed merger,

 

•

the failure of any of the closing conditions in the definitive merger agreement to be satisfied on a timely basis or at all,

 

•

delays in closing the proposed merger,

 

•

the possibility that the proposed merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events, and

 

•

any of the foregoing risks or other factors that may affect CIT’s future results of operations.

Any or all of our forward-looking statements here or in other publications may turn out to be wrong, and there are no guarantees regarding our performance. We do not assume any obligation to update any forward-looking statement for any reason.

Item 4. Controls and Procedures

 

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision of and with the participation of management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, (the “Exchange Act”) as of September 30, 2021. Based on such evaluation our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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Part Two — Other Information

 

Item 1.  Legal Proceedings

See Note 14 — Contingencies, in the Notes to the unaudited interim Condensed Consolidated Financial Statements in Part One, Item 1 — Financial Statements, which is incorporated by reference into this item.

 

Item 1A.  Risk Factors

Risk factors remain unchanged during the quarter. For a discussion of risk factors, see Part I, Item 1A. Risk Factors, of CIT’s 2020 Form 10-K, and Forward-Looking Statements of this Form 10-Q.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no repurchases of our common stock during the quarter ended September 30, 2021.

 

 

Item 4.  Mine Safety Disclosure

Not applicable

 

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Item 6.  Exhibits

 

(a)

Exhibits

2.1

 

Agreement and Plan of Merger, by and among CIT Group Inc., IMB HoldCo LLC, Carbon Merger Sub LLC and JCF III HoldCo I L.P., dated as of July 21, 2014 (incorporated by reference to Exhibit 2.1 to Form 8-K filed July 25, 2014).

2.2

 

Amendment No. 1, dated as of July 21, 2015, to the Agreement and Plan of Merger, by and among CIT Group Inc., IMB HoldCo I L.P., Carbon Merger Sub LLC and JCF III HoldCo I L.P., dated as of July 21, 2014 (incorporated by reference to Exhibit 2.1 to Form 8-K filed July 27, 2015).

2.3

 

Agreement and Plan of Merger among Mutual of Omaha Insurance Company, Omaha Financial Holdings, Inc. Mutual of Omaha Bank, CIT Group Inc. and CIT Bank National Association, dated as of August 12, 2019 (incorporated by reference to Exhibit 2.1 to Form 8-K filed August 16, 2019).

2.4

 

Agreement and Plan of Merger, dated as of October 15, 2020, by and among First Citizens BancShares, Inc., First-Citizens Bank & Trust Company, FC Merger Subsidiary IX, Inc., and CIT Group Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed October 20, 2020).

3.1

 

Fourth Restated Certificate of Incorporation of the Company, as filed with the Office of the Secretary of State of the State of Delaware on May 17, 2016 (incorporated by reference to Exhibit 3.1 to Form 8-K filed May 17, 2016).

3.2

 

Amended and Restated By-laws of the Company, as amended through April 15, 2020 (incorporated by reference to Exhibit 3.2 to Form 10-Q filed May 5, 2020).

3.3

 

Certificate of Designation of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A of CIT Group Inc., dated June 6, 2017 (incorporated by reference to Exhibit 3.1 to Form 8-K filed June 7, 2017).

3.4

 

Certificate of Designation of 5.625% Non-Cumulative Perpetual Preferred Stock, Series B of CIT Group Inc. (incorporated by reference to Exhibit 3.3 to our Form 8-A filed November 12, 2019).

4.1

 

Indenture, dated as of January 20, 2006, between CIT Group Inc. and The Bank of New York Mellon (as successor to JPMorgan Chase Bank N.A.) for the issuance of senior debt securities (incorporated by reference to Exhibit 4.3 to Form S-3 filed January 20, 2006).

4.2

 

Indenture, dated as of March 15, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (incorporated by reference to Exhibit 4.1 of Form 8-K filed March 16, 2012).

4.3

 

Third Supplemental Indenture, dated as of August 3, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.25% Senior Unsecured Note due 2017 and the Form of 5.00% Senior Unsecured Note due 2022) (incorporated by reference to Exhibit 4.2 to Form 8-K filed August 3, 2012).

4.4

 

Fourth Supplemental Indenture, dated as of August 1, 2013, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 5.00% Senior Unsecured Note due 2023) (incorporated by reference to Exhibit 4.2 to Form 8-K filed August 1, 2013).

4.5

 

Seventh Supplemental Indenture, dated as of March 9, 2018, by and among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.125% Senior Unsecured Notes due 2021 and Form of 5.250% Senior Unsecured Notes due 2025) (incorporated by reference to Exhibit 4.2 to Form 8-K filed March 12, 2018).

4.6

 

Subordinated Indenture, dated as of March 9, 2018, between CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (incorporated by reference to Exhibit 4.3 to Form 8-K filed March 12, 2018).

4.7

 

First Supplemental Indenture, dated as of March 9, 2018, between CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 6.125% Subordinated Notes due 2028) (incorporated by reference to Exhibit 4.4 to Form 8-K filed March 12, 2018).

4.8

 

Eighth Supplemental Indenture, dated as of August 17, 2018 by and among CIT Group Inc., Wilmington Trust National Association as trustee and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.750% Senior Unsecured Notes due 2024) (incorporated by reference to Exhibit 4.2 of Form 8-K filed August 17, 2018).

4.9

 

Second Supplemental Indenture, dated as of November 13, 2019, between CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.125% Fixed-to-Fixed Rate Subordinated Notes due 2029) (incorporated by reference to Exhibit 4.2 on Form 8-K filed November 13, 2019).

4.10

 

Description of CIT Group Inc.’s Securities Registered under Section 12 of the Exchange Act Certain instruments defining the rights of holders of long-term debt securities of CIT and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K (incorporated by reference to Exhibit 4.10 to Form 10-K filed on February 20, 2020). CIT hereby undertakes to furnish to the SEC, upon request, copies of such instruments.

4.11

 

Ninth Supplemental Indenture, dated as of June 19, 2020, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 3.929% Senior Unsecured Fixed-to-Floating Rate Note due 2024). (incorporated by reference to Exhibit 4.2 to Form 8-K filed June 19, 2020).

10.1*

 

CIT Group Inc. Omnibus Incentive Plan (incorporated by reference to exhibit 10.1 to Form 10-Q filed November 2, 2018).

10.2*

 

CIT Group Inc. Supplemental Retirement Plan (As Amended and Restated Effective as of January 1, 2008) (incorporated by reference to Exhibit 10.27 to Form 10-Q filed May 12, 2008).

10.3*

 

CIT Group Inc. Supplemental Savings Plan (As Amended and Restated Effective as of January 1, 2008) (incorporated by reference to Exhibit 10.28 to Form 10-Q filed May 12, 2008).

10.4*

 

 

New Executive Retirement Plan of CIT Group Inc. (As Amended and Restated as of January 1, 2008) (incorporated by reference to Exhibit 10.29 to Form 10-Q filed May 12, 2008).

10.5*

 

Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Unit Director Award Agreement (Annual Grant) (incorporated by reference to Exhibit 10.40 to Form 10-Q filed August 9, 2010).

10.6

 

Stockholders Agreement, by and among CIT Group Inc. and the parties listed on the signature pages thereto, dated as of July 21, 2014 (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 25, 2014).

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10.7*

 

Offer Letter, dated October 26, 2015, between CIT Group Inc. and Ellen R. Alemany, including Attached Exhibits. (incorporated by reference to Exhibit 10.39 to Form 10-Q filed November 13, 2015).

10.8

 

CIT Employee Severance Plan (As Amended and Restated Effective January 1, 2017) (incorporated by reference to Exhibit 10.40 to Form 10-Q filed November 9, 2016).

10.9

 

Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Director Award Agreement (Three Year Vesting) (incorporated by reference to Exhibit 10-48 to Form 10-K filed on March 16, 2017).

10.10

 

Form of CIT Group Inc. Omnibus Incentive Plan Performance Share Unit Award Agreement (2018) (incorporated by reference to Exhibit 10.23 to Form 10-Q filed May 4, 2018).

10.11

 

Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Award Agreement (with performance Based Vesting) (2018) (incorporated by reference to Exhibit 10.24 to Form 10-Q filed May 4, 2018).

10.12

 

Amendment No. 4 to Second Amended and Restated Revolving Credit and Guaranty Agreement, dated as of March 9, 2020, among CIT Group Inc., certain subsidiaries of CIT Group Inc., as Guarantors, the Lenders party thereto from time to time and Bank of America, N.A., as Administrative Agent and L/C Issuer (incorporated by reference to Exhibit 10.14 to Form 10-Q filed May 5, 2020).

10.13

 

Form of CIT Group Inc. Omnibus Incentive Plan Performance Share Unit Award Agreement (2019) (incorporated by reference to Exhibit 10.19 to Form 10-Q filed May 3, 2019).

10.14

 

Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Award Agreement (with performance Based Vesting) (2019) (incorporated by reference to Exhibit 10.20 to Form 10-Q filed May 3, 2019).

10.15

 

Form of CIT Group Inc. Omnibus Incentive Plan Performance Share Unit Award Agreement (2020) (incorporated by reference to Exhibit 10.17 to Form 10-Q filed May 5, 2020).

10.16

 

Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Award Agreement (with performance Based Vesting) (2020) (incorporated by reference to Exhibit 10.18 to Form 10-Q filed May 5, 2020).

10.17

 

Voting Agreement, dated as of October 15, by and among CIT Group Inc., Frank B. Holding, Jr., Hope H. Bryant, Peter M. Bristow, and Claire H. Bristow (incorporated by reference to Exhibit 10.1 to Form 8-K filed October 20, 2020).

10.18

 

Form of Severance Amendment Letter, dated October 19, 2020, from CIT Group, Inc. (incorporated by reference to Exhibit 99.1 to Form 8-K filed October 20, 2020).

10.19

 

Form of CIT Group Inc. Retention Award Agreement (incorporated by reference to Exhibit 10.21 to Form 10-K filed February 19, 2021).

 

 

 

 

31.1

 

Certification of Ellen R. Alemany pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Commission, as promulgated pursuant to Section 13(a) of the Securities Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002. (filed herein)

31.2

 

Certification of John Fawcett pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Commission, as promulgated pursuant to Section 13(a) of the Securities Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002. (filed herein)

32.1**

 

Certification of Ellen R. Alemany pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herein)

32.2**

 

Certification of John Fawcett pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herein)

101

 

The following materials from CIT Group Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Changes in Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.

104

 

The cover page from CIT Group Inc.’s Form 10-Q for the quarterly period ended September 30, 2021, formatted inline XBRL (contained in exhibit 101.1).

 

*

Indicates a management contract or compensatory plan or arrangement.

** 

This information is furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any filing under the Securities Act of 1933.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

November 5, 2021

CIT GROUP INC.

 

 

 

/s/ John Fawcett

 

John Fawcett

 

Executive Vice President and

 

Chief Financial Officer

 

 

 

/s/ Edward K. Sperling

 

Edward K. Sperling

 

Executive Vice President and Controller

 

81

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
12/31/22
6/20/22
6/15/22
3/1/22
1/1/22
12/31/21
12/20/218-K
12/15/21
11/30/21
11/12/21
Filed on:11/5/21
11/1/214
10/29/214
10/22/21
10/18/218-K
10/15/21
For Period end:9/30/218-K
9/15/21
8/17/21
8/13/21
7/31/21
7/19/218-K
7/14/218-K
6/30/2110-Q
6/24/21
6/15/21
5/21/21
4/20/218-K
3/15/214
2/19/2110-K
2/12/21
2/9/214,  8-K
1/25/21
1/22/218-K
1/1/21
12/31/2010-K,  10-K/A,  4,  5
12/8/20
11/30/204
10/23/20
10/20/20425,  8-K,  DEFA14A
10/16/20425,  8-K,  DEFA14A
9/30/2010-Q
8/8/20
6/30/2010-Q
4/10/20
4/7/20
3/27/20
3/12/20
1/1/208-K
12/31/1910-K,  5
10/15/19
10/21/16
 List all Filings 

26 Previous Filings that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/19/21  Cit Group Inc.                    10-K       12/31/20  214:68M                                    ActiveDisclosure/FA
10/20/20  Cit Group Inc.                    8-K:1,5,9  10/15/20   14:1M                                     Donnelley … Solutions/FA
 6/19/20  Cit Group Inc.                    8-K:1,9     6/16/20   14:630K                                   Donnelley … Solutions/FA
 5/05/20  Cit Group Inc.                    10-Q        3/31/20  147:47M                                    ActiveDisclosure/FA
 2/20/20  Cit Group Inc.                    10-K       12/31/19  197:58M                                    ActiveDisclosure/FA
11/13/19  Cit Group Inc.                    8-K:1,3,5,911/07/19   16:788K                                   Donnelley … Solutions/FA
11/12/19  Cit Group Inc.                    8-A12B                 2:64K                                    Donnelley … Solutions/FA
 8/16/19  Cit Group Inc.                    8-K:1,3,9   8/12/19   11:765K                                   Donnelley … Solutions/FA
 5/03/19  Cit Group Inc.                    10-Q        3/31/19  124:37M                                    ActiveDisclosure/FA
11/02/18  Cit Group Inc.                    10-Q        9/30/18  109:41M                                    ActiveDisclosure/FA
 8/17/18  Cit Group Inc.                    8-K:1,8,9   8/14/18    5:343K                                   Donnelley … Solutions/FA
 5/04/18  Cit Group Inc.                    10-Q        3/31/18  112:25M                                    Workiva Inc Wde… FA01/FA
 3/12/18  Cit Group Inc.                    8-K:1,8,9   3/06/18    9:1.1M                                   Command Financial
 6/07/17  Cit Group Inc.                    8-K:3,5,8,9 6/06/17    3:100K                                   Command Financial
 3/16/17  Cit Group Inc.                    10-K       12/31/16  214:65M                                    Doremus Fin… Printing/FA
11/09/16  Cit Group Inc.                    10-Q        9/30/16  129:36M                                    Doremus Fin… Printing/FA
 5/17/16  Cit Group Inc.                    8-K:5,9     5/17/16    3:235K                                   Doremus Fin… Printing/FA
11/13/15  Cit Group Inc.                    10-Q        9/30/15  155:32M                                    Doremus Fin… Printing/FA
 7/27/15  Cit Group Inc.                    8-K:1,5,8,9 7/21/15    5:267K                                   Doremus Fin… Printing/FA
 7/25/14  Cit Group Inc.                    8-K:1,3,5,9 7/21/14    6:1M                                     Doremus Fin… Printing/FA
 8/01/13  Cit Group Inc.                    8-K:1,9     8/01/13    4:359K                                   Command Financial
 8/03/12  Cit Group Inc.                    8-K:1,9     7/31/12    4:315K                                   Command Financial
 3/16/12  Cit Group Inc.                    8-K:1,8,9   3/12/12    5:712K                                   Command Financial
 8/09/10  Cit Group Inc.                    10-Q        6/30/10   44:6.8M                                   Doremus Fin… Printing/FA
 5/12/08  Cit Group Inc.                    10-Q        3/31/08   14:1.5M                                   Doremus Fin… Printing/FA
 1/20/06  Cit Group Inc.                    S-3ASR      1/20/06    6:943K                                   Command F… Self-Filer/FA
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