First Citizens BancShares, Inc. (FCNCA) Q4 2016 Earnings Report, Transcript and Summary

Good morning and welcome to CIT’s Fourth Quarter 2016 Earnings Conference Call. My name is Keith and I will be your operator today. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Barbara Callahan, Head of Investor Relations. Please proceed, ma’am.

Thank you, Keith. Good morning and welcome to CIT’s fourth quarter 2016 earnings conference call. Our call today will be hosted by Ellen Alemany, Chairwoman and CEO and Carol Hayles, our CFO. After Ellen and Carol’s prepared remarks, we will have a question-and-answer session. Also, joining us for the Q&A discussion is our Chief Risk Officer, Rob Rowe. As a courtesy to others on the call, we ask that you limit yourself to one question and a follow-up and then return to the call queue, if you have additional questions. We will do our best to answer as many questions as possible in the time that we have this morning. Elements of this call are forward-looking in nature and may involve risks, uncertainties and contingencies that may cause actual results to differ materially from those anticipated. Any forward-looking statements relate only to the time and date of this call. We disclaim any duty to update these statements based on new information, future events or otherwise. For information about risk factors relating to the business, please refer to our 2015 Form 10-K. Any references to non-GAAP financial measures are meant to provide meaningful insights and are reconciled with GAAP in our press release. Also, as part of the call this morning, we will be referencing a presentation that is available in the Investor Relations section of our website at www.cit.com. Now, I will turn the call over to Ellen Alemany.

Thank you, Barbara. Good morning, everyone and thank you for joining the call. 2016 was certainly a pivotal year for CIT. We established the strategic direction for the company and launched a 3-year plan to drive shareholder value. We made substantial progress in the first year and clearly we have more work yet to do. First, let me start with the progress. We have focused on positioning our core business for growth and enhanced profitability by targeting more strategic relationships in our specialty verticals and offering those clients a broader set of products and services and that the foundation of this business model is our stable and growing base of deposits. We made the decision to divest businesses that were not strategic to our go-forward plan and most notably reached an agreement to sell Commercial Air business for $10 billion and return up to $3.3 billion of capital to shareholders. We integrated OneWest Bank and have been addressing the legacy issues that were, frankly, more challenging than originally expected. We have been driving more efficiency in our funding profile by terminating the Canadian total return swap and growing lower cost deposits. As of year end, deposits comprised nearly 70% of our total funding and the weighted average deposit coupon decreased 7 basis points from the prior year. We have maintained strong risk management and further reduced our risk profile by selling certain loans in the Commercial Finance business. Capital levels were solid and we plan to return capital to shareholders following the sale of Commercial Air. And lastly, we have made a number of changes to the management team to ensure we have the leadership and expertise to deliver for our clients, customers and shareholders. Many of the efforts we embarked on in 2016 were transformational and designed to strengthen the organization for the future. Advancing these efforts, however, has significantly impacted this quarter. We recorded $1.3 billion in net charges in the fourth quarter, which drove a net loss of $1.2 billion. Excluding all the noteworthy items, net income for the quarter was $196 million or $0.97 per share. We realized the net loss was significant, but the steps we have taken to address legacy and operational issues as well as advance the strategic initiatives were necessary for us to deliver our plan. Carol will you through the details on the noteworthy items and results, but the largest items were approximately $900 million of tax expense related to the announced divestitures and goodwill impairment of approximately $327 million, which was mainly related to the OneWest Bank acquisition. Important to note that both of these items are non-cash and had minimal impact on regulatory capital. Despite the significant charges in the quarter, the core operating trends remained solid. The Commercial Finance business continues to make great progress migrating towards a more strategic customer base with lead roles in 60% of new business last year compared to 40% in the prior year. Our digital small business lending platform, Direct Capital, had its best year ever with a 14% increase in volume from 2015. And our efforts to deepen our customer relationships are underway with greater collaboration throughout the organization to make services such as treasury management available across the lines of business. In 2016, we sold these services to more than 70 commercial clients. We have also made key progress on our strategic initiatives. We have $600 million of the purchase price on deposit for the Commercial Air transaction and progress continues. On the cost front, we have achieved about one third of our operating expense goals for 2018. The cost reduction plan is focused in three main areas. Organization simplification, which is where most of the progress has been made thus far and we will continue to work on structuring the company to be more efficient, but also ensure we have the talent and resources in the right places. Third-party efficiencies, which will include evaluating vendor agreements, improving our processes and reducing travel costs to name a few. And technology and operational improvements, such as reengineering some processes and automating certain functions, as well as standardizing technology where it makes sense. While this may include some investments, it will also drive lower costs going forward. In total, we plan to take out $150 million of operating expense by 2018 and this includes our original target of $125 million plus the additional $25 million of indirect cost associated with the Commercial Air sale. While we made significant progress on our longer term expense goal, you will see that costs are elevated in the fourth quarter primarily due to the noteworthy items, but the core run-rate is down. Overall, we understand the quarter had a lot of complexity, but we remain optimistic about the potential in the core businesses and the ability to achieve the targets we have established in the strategic plan. With that, let me turn it over to Carol for a more detailed account of results.

Thank you, Ellen and good morning everyone. I want to first remind you that we changed our segments this quarter, a summary of which is on Slide 28. As a result, all my remarks refer to the new segmentation. Turning to our results which are on Slide 4, the fourth quarter net loss of just under $1.16 billion consisted of a loss from continuing operations of $424 million and a $731 million loss from discontinued operations. Included in the loss are certain noteworthy items that net to a charge of $1.35 billion. Absent which, income would have been $196 million or $0.97 per share. While the reported loss is significant, our regulatory capital ratios increased slightly as many of the items that drove the loss were non-cash and did not impact regulatory capital. Our preliminary common equity Tier 1 ratio increased by 10 basis points from the prior quarter to 13.8%. Excluding the items noted, fourth quarter income from continuing operations was $120 million or $0.59 per share reflecting underlying stable operating performance. Before I turn to the business update, let me elaborate on some of the items on Slide 4 that aggregates to a net charge of $544 million in continuing operations. We made a lot of progress on our strategic initiatives and other matters. We completed the sale of our equipment and corporate finance businesses in Canada, which generated an after-tax gain of $16 million. As a result of the sale and other factors, we concluded we would no longer assert indefinite reinvestment of earnings in Canada, resulting in a charge of $54 million to income taxes. As noted earlier, we terminated the Canadian TRS resulting in an after-tax charge of $146 million. We re-mediated or significantly advanced several legacy OneWest Bank matters. We recorded a $16 million after-tax reserve related to sales tax in equipment finance after identifying gaps in pre-2015 documentation. Since this charge largely pertains to prior periods, we will be revising our financial statements when we file our 10-K. And we recorded goodwill impairments in our consumer and commercial services businesses. These amounts are preliminary and therefore may be updated when we file our 10- K. The process for evaluating goodwill is fairly prescriptive and our annual assessment date is September 30, therefore assumptions used in the process reflects market conditions at that time. As a reminder, we recorded goodwill when we acquired OneWest based on a purchase price that reflected several factors including the U.S. taxable earnings that were expected to allow us to realize the benefit of our NOL. The acquisition resulted in total goodwill of $663 million, of which $363 million was allocated to consumer banking. The consumer impairment of approximately $300 million was primarily the result of lower forecasted earnings reflecting higher regulatory related costs and higher internally allocated capital. Goodwill for commercial services of $43 million was attributed at the time of emergence from bankruptcy in 2009. Since then, the fundamentals of the factoring business have come under pressure from a challenging retail environment and competitive pricing. Although we are seeing volume stabilize, we expect commissions to remain under pressure. And given the impact this has on our forecast, we impaired goodwill by $35 million. Now turning to continuing operations on Slide 8, financing and leasing assets decreased $1 billion in the quarter driven by the completion of the sale of our Canadian businesses in NSP and a slight reduction in both commercial and consumer banking. and in 0430: Non-accrual loans decreased slightly from the third quarter to $275 million as the reductions from the sale of the Canadian businesses was partially offset by increases in commercial banking. Energy makes up about a third of the non-accrual balance, consistent with the prior quarter. Our oil and gas loan exposure, the details of which can be found on Slide 26, continued to decrease. Market conditions have stabilized and we remain comfortable with the 10.8% loss coverage on this portfolio. Moving to other income on Slide 11, absent the $216 million of noteworthy items, other income was $104 million, reflecting a $22 million gain on the sale of an equity investment related to a loan workout in commercial finance and lower factoring commissions due to a decline in the commission rate. Turning to fourth quarter expenses on Slide 12, excluding intangible amortization and restructuring charges, operating expenses were $369 million. This is comprised of $286 million of base operating costs and $83 million of elevated expenses related to the noteworthy items of $52 million discussed earlier; higher net operational costs of $9 million, primarily driven by a $13 million charge related to a servicing advance write-off in consumer banking, an elevated third-party costs, primarily related to improvements in our CCAR capabilities and other strategic initiatives. We expect these costs to remain elevated in the third quarter as we prepare for the capital plan submission and decline thereafter. Turning to expense initiatives on Slide 13, while the aggregate reduction target has not changed, we need to recast the way we are tracking the save as a result of transferring Commercial Air to discontinued operations. The $80 million reduction in expenses associated with the Commercial Air business are now split, with $55 million of direct costs in discontinued operations and the remaining $25 million of indirect costs in continuing operations. These indirect costs will decline as we complete the Transition Services Agreement. Given this, we have aggregated the $25 million with the original target save of $125 million and we will track progress against a continuing operations target of $150 million. While operating expenses were elevated, our core run rate was consistent with last quarter and is down $13 million from the normalized levels a year ago. This equates to just over $50 million on an annualized basis or about one-third of the target. Moving to funding, deposits decreased by $500 million to $32.3 billion, primarily due to a reduction of higher cost broker deposits, partially offset by an increase in commercial deposits. As a result, the weighted average coupon decreased 3 basis points from the prior quarter to 119 basis points. We took advantage of the increase in rates after the elections and grew our investment portfolio by about $1 billion. New investment yields were around 2.5%. And the overall portfolio yield is now approximately 2% with a duration of 3.5 years. We are targeting an increase of $0.5 billion a quarter over the course of 2017 depending upon market opportunities. Turning to our business segments on Slide 14, commercial banking reported pretax income of $137 million, a pretax ROA of 1.9%, reflecting higher net finance revenue and lower credit costs. This was partially offset by the goodwill impairment and sale tax charge in business capital, which aggregates to $60 million. As Ellen mentioned, the underlying results reflect stable operating trends. Commercial finance assets of $10.3 billion decreased 4% due to prepayments in asset sales, as we continue to execute on our portfolio management strategies to improve risk adjusted return. Portfolio yields were up 19 basis points driving a similar increase in margin benefiting from prepayments and the increase in LIBOR. As rates increased, we expect to see a benefit in yields from our floating rate loan as the majority of the portfolio is now above the LIBOR floor. Rail assets of $7.2 billion were up 1% driven by new deliveries. Utilization remained at 94%. However, demand for crude, coal and steel cars remained weak and we continue to expect utilization to move towards the low-90%, with rental rates declining as leases renew. Rail’s net finance margin declined slightly to 4.29%, as the reduction in yield of 16 basis points were somewhat mitigated by lower funding costs as a result of more cars being in the bank. The decline in portfolio yield reflects lower renewal rate that on average re-priced down 20% to 30%, in many cases from historical highs. This rate will fluctuate depending upon the number and type of cars renewing. Given current conditions, we expect to see continued deterioration in portfolio yields in 2017 and expect renewal rates to re-price down in the same 20% to 30% range. Real Estate Finance assets of $5.6 billion increased 3% reflecting new business volume and the lower level of prepayment. Portfolio yields increased 11 basis points benefiting from higher rate and yield-related fee. The portfolio will continue to benefit as the rates rise, but this will be mitigated by run-off in the higher yielding legacy portfolio. Business Capital assets of $7.3 billion were relatively flat as growth in equipment finance was partially offset by lower seasonal borrowings in Commercial Services. Portfolio yields and margin increased approximately 17 basis points primarily due to reduction of restricted cash balances. Turning to Slide 15, consumer banking generated a pre-tax loss of $315 million driven primarily by the goodwill impairment and elevated expenses I mentioned earlier. Financing and leasing assets of $7 billion declined 2% reflecting expected runoff in the legacy consumer mortgages and the margin increased due to high purchase accounting accretion. The loss in discontinued operations reflects $23 million from Financial Freedom and $708 million in Commercial and Business Air. The Financial Freedom loss was driven by a net increase in the interest curtailment reserve of $21 million after-tax. We continue to make progress both on remediating the material weakness and bringing closure to masses with third-parties related to historical servicing defects. The air related loss was driven by a discrete tax charge of approximately $845 million. It was included in the charge as communicated with the transaction announcement. As a result of steps taken to prepare for the sale and the move of assets into held-for-sale, we triggered a significant portion of the anticipated tax expense in the fourth quarter. Pre-tax income for Commercial Air was approximately $200 million, which included $100 million from the benefit of suspended depreciation. As Ellen mentioned, we have made significant progress towards closing the Commercial Air sale. While the economics of the transaction are expected to be the same, we thought it will be helpful to provide an update regarding the various components on Slide 16. As I mentioned, this quarter’s discontinued operations reflected a significant portion of the expected tax charge and the benefit of suspended depreciation which will reduce the gain when the transaction closes. In addition, we had assumed terminating a portion of the Canadian TRS. However, we were able to terminate the entire Canadian facility without a significant increase to the total estimated cost of liability management. Prior to the transaction closing, we will continue to have the benefit from suspended depreciation and will incur transaction cost associated with the extinguishment of secured debt. At close, we will record the remaining premium, net of other items, under remaining transaction-related taxes. And after close, we will complete the liability management incurring the associated debt extinguishment cost net of taxes and execute on our capital return strategy. This activity will add variability to our results over the next couple of quarters, but doesn’t change the aggregate economics. Before I turn the call back to Ellen, I wanted to cover our key performance metrics and outlook for continuing operations shown on Slide 17. Average earning assets are expected to grow in the low single-digits as mid single-digit growth in our core businesses will be offset by runoff in legacy portfolios and NSP. Net finance margin is expected to trend to the middle to upper end of the 3% to 3.5% of AEA range, as highly yielding portfolio runoff and rail headwinds are partially offset by the benefits from increased rate. Credit provision and other income are expected to be in the targeted range. Base operating expenses are expected to improve as cost reduction initiative has progressed and the tax rate is expected to be in the mid-30s, excluding discrete items. With that, I will turn the call back over to Ellen for some closing remarks.

Thanks Carol. To wrap up, 2016 was a significant year and progress did not necessarily come in a straight line, but the groundwork is laid and improvements were achieved. As we head into 2017, our focus is on successfully completing the divestiture, most notably, the Commercial Air transaction and returning capital to shareholders, continuing to grow our core operations in specialty lending, broadening our relationships with existing clients and leveraging our digital platforms in consumer banking and small business lending, continuing to make progress on our expense targets, reducing our funding costs through deposit growth and other liability management strategies, and maintaining strong capital and risk management processes. We are committed to delivering on our plan and driving shareholder value. We believe in the strength of our businesses our unique market position to serve middle-market and small business clients and we believe there are meaningful opportunities ahead. So with that, let me open it for Q&A.

Yes, thank you. [Operator Instructions] And today’s first question comes from Arren Cyganovich with D.A. Davidson.

Thanks. Looking at your 2017 outlook and your post separation of air 2018 targets, you still have a 10% ROATCE, do you have an update in terms of what the capital – expected capital level is that’s supporting that 10%?

Yes, good morning Arren. This is Carol. We are going through the capital plan process as we speak and haven’t changed our longer term target, but I think going through the process this year, the quantitative process this year for the first time, will inform the pace of capital return post the Commercial Air distribution. So, I think that’s something we need to work through in the next couple of months. And the target, we haven’t changed those.

Okay, thanks. And then in terms of the goodwill charge in the consumer bank side, can you speak a little bit to or drill down into what specifics you were looking that were somewhat impaired and how that changes your outlook for the consumer banking segment going forward?

Yes. So as I said, the $663 million was determined at the time the acquisition closed based on a price that was determined the year before that, so 2.5 years ago. Rolling forward to today, as we went through the process this year end which is fairly prescriptive and we looked at the forecast and some of the higher cost associated with being a regulatory SIFI bank and the fact that data used, the assumptions used were September 30, the forecast was lower than previously expected. And when you go through the mechanics of the process and calculated the impairment, the $300 million was the outcome of that work.

Were there any particular areas of the consumer business, different types of assets or I was just trying to get a better understanding of what necessarily changed besides the regulatory assets?

Yes. So I think it’s just a function of time. The consumer business really is the legacy consumer mortgages and the jumbo loan and the deposit base. We have allocated more capital to the business this year. Over time, we are approaching the timing of the expiry of the loss share in 2019, so building capital over time. So, it’s really just the passage of time in that respect that caused that increase. We haven’t changed the composition really of what we are doing in consumer banking from a business perspective.

Okay, thank you.

Thank you.

Thank you. And the next question comes from Moshe Orenbuch with Credit Suisse.

Great. Could you maybe just go through the steps that we are likely to see from the outside in terms of the air business from here until closing like what sort of things should we be – milestones should we be looking at?

I think that while we have already achieved several key milestones towards closing the transaction, but I think one of the key remaining milestones includes the receipt of the Chinese regulatory approvals as well as the Bohai shareholder approval, which requires clearance of a shareholder notice in China. Both we and Avolon are continuing to work towards the first quarter closing and Avolon has advised us that they are working towards completing these milestones by the end of the first quarter. So I would – it’s the Chinese and Bohai regulatory approvals that are the next key milestones.

And when those are received kind of may be what happens next, what’s the timeframe from there?

Yes. Then I think we should be closing, right?

Certainly, shortly thereafter, those are the kind of the last key things to be completed.

Okay. Thanks very much.

Thank you. And the next question comes from Mark DeVries of Barclays.

Yes. Thank you. If I look at the remaining impacts from the sale of Commercial Air of about $125 million, it seems to imply pro forma tangible book of around $45 million prior to capital returns, I understand you are going to get back to us with details around capital returns once the sale closes, but just hoping you could give us some color on your appetite for buying stock at a premium to tangible book here as we expect you might need to do, if you wanted to do it, on some type of an accelerated basis?

Yes. Good morning Mark, we will go through that process with our Board as you would imagine in advance of making any decisions on the form and timing of capital return and we will announce when that – what we are doing when that process is complete. It will be little premature for us to be talking about that right now.

Okay, fair enough. If I can just ask a follow-up then, it’s interesting, it doesn’t sound like there has been much of a change in your expectation for kind of lease renewals rates in rail and also kind of the impact on margin, given what we have seen in terms of higher oil prices, at what point, if oil price continue to rise, would you expect to see some kind of relief on those trends?

Well, when you think about the rail business, the energy related cars are shipping crude and they are also shipping sand. So what we are looking for is the rig count to rise and as it has been doing recently, but it needs to rise at a pace that it’s been doing most recently and has to do that probably another year or so. At that point in time, we would expect that the sand deliveries would be back to their peak that they were in 2014 and that would mean the renewal rates at that point in time for the sand cars would be pretty reasonable and they would not be dropping like they are at this point. The crude cars is based on North American production of oil, but we are very sensitive to the Bakken. As you know, the Bakken was shipping East and West and the Bakken is taking a little bit longer than the Permian to rebound. I would say oil prices need to move up from $55, probably need to get in the $60 for the Bakken to start producing again the way it once was.

Okay, great. Thank you.

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

Yes. I also just wanted to kind of nail down the triangulation between the October 6 presentation, the famous Page 5 in that presentation, I guess – and then Page 16 that you have here and I mean I guess the only real change what you are saying is in terms of the net impact is that given the earnings accretion since mid-year, we are starting with $10.0 billion in tangible common as opposed to $9.8 billion, but that the other – the rest of the exhibit would look the same?

Yes, exactly, the economics of the transaction and we thought it was important to put this clearly on the Page 4, you haven’t change. The timing of certain of the items – recognition of certain of the items changed, but in aggregate, the bottom line impact is no different.

And assuming it closes in the first quarter, what – is there any reason to think any of the charges would drag beyond 1Q or will we – starting in 2Q, should we get kind of what the clean company looks like going forward without all the charges?

That’s very fair question. So if this closes say the end – let’s just use the end of the first quarter, for example, liability management and capital distribution would occur in the second quarter. So costs associated with those actions and the impact of those actions wouldn’t get reflected until they were completed. And of course there will be certain things that we can and can’t do during blackout, there will be timing there, so I think it’s really the third quarter and just that scenario is kind of the third quarter. I will say that most of these items will be reflected in discontinued operations, although the liability management charges will be in continuing operations. So it will be very discreet. We will make sure that it’s clear what the impact is when it happens. So I think for the most part, continuing operations going forward, is going to reflect the results of the underlying business.

Okay, alright, that’s it from me. Thank you.

Thank you. And the next question comes from David Ho with Deutsche Bank.

Hi. Good morning. Given some of the rhetoric around lower corporate taxes and the timing of which was obviously unknown, but how does that impact your views on DTA and indirectly on the potential strategic actions on the railcar business?

Well, I think it’s a little early to be thinking about the impact of the tax rate. Of course, should the rates come down post Air will be in a net DTL position and would expect any reduction in rate to have benefit to our bottom line, but both assets and liabilities will price down together. So net-net, depending upon the rate, I don’t know that it will change our conclusion very much. But obviously we will take a look at all of that as we get more information.

Alright. And then separately, the BCG consulting review, any update there?

No, just this is Ellen. When going back to the taxes though I mean we may get – we may have a positive impact more so than other banks, because after we complete the Air transaction, we will be a full taxpayer. So we may benefit slightly more if there is any change in the corporate tax rate. And then in terms of the BCG work that’s being done, as we previously mentioned, they have been doing some work in terms of revenue optimization. I would say that it would really just be a refinement to our plan. There are no really major changes to the strategic plan.

Got it. Thanks.

Thank you. And the next question comes from Vincent Caintic with Stephens.

Hey, thanks. Good morning guys. And actually, I just wanted to touch on the rail portfolio again and may be a two-part question here, just when you think about the rail portfolio and organic growth there, you provided a good slide on the appendix about your upcoming orders, I am just wondering how – in this environment, how much you would want to grow the portfolio, if you are adding anymore to your order book for railcars. And then the second part of the question is on the portfolio side and perhaps opposite may be selling pieces of the portfolio, I think we have seen some recent transactions with some other banks buying railcar books above book value, so I think PNC bought a book for 1.6x book and we got Sumitomo buying for over 2x book, the American railcar leasing business, so just wondering how you think about, on one hand, the growth aspect, on the other hand, maybe monetizing some of the assets irrespective of the taxes? Thanks.

Yes. This is Carol. The order book remaining in rail is just over $200 million now, down for over $1 billion a year ago. And I don’t think we wouldn’t be thinking about adding to that in the near-term. I think we are comfortable with the level of the assets, but wouldn’t want to be growing that in the near-term. We as of course seeing the transactions that happen in the market, Sumitomo transaction looked well priced, but we don’t have all the details behind the rational or the thinking there. And we talked a lot about our rail business our view on that business hasn’t changed at that time.

Okay, understood. Thank you.

Thank you.

Thank you. And the next question comes from Chris Brendler with Stifel.

Hi. Thanks. Good morning. Just stepping back a bit, just can you – just comment on the core continuing ops business, it looks like volume was down this quarter, as far as I can tell and I have sort of been wondering given what’s happening from a macro standpoint and U.S. economy, are we seeing any signs of life from loan demand, how do you feel about your position from a competitive standpoint, can you grow this balance sheet in 2017?

Sure, this is Ellen. We feel very good about the core business and we have been really focusing our commercial lending businesses around our specialty lending franchises, leading with our industry verticals and selling more products to those industry verticals and also focusing on risk adjusted returns. We have seen good volumes in direct capital, which is our direct lending business and we have seen good volumes in business capital. And as I said, with our specialty lending verticals, we have been focusing on risk adjusted returns. So we feel good about the core and we are going to continue to just work on focusing on that.

And then Chris, this is Rob. I will also remind you that 5 years ago, we decided to build the buy-side floating rate loan leverage book, right, because we had excess capital. And that was not necessarily core to our strategy but it was core to deploying some excess capital. Now, as we are leading more and more deals in the middle market, which is our core strategy in leveraged lending, we are letting that buy side book runoff. So there is a fair amount of activity in that marketplace as pricing of the deals has re-priced down and so in the third and fourth quarter, we have a lot of those deals go away, so that impacts the volume numbers as well, more so than actually the quarter-over-quarter assets.

That’s very helpful. Just can you size that book at all for us and then an unrelated or I mean partially related question, I think I ask this every quarter, but another weak quarter in the factoring business, how core is that business to your long-term strategy and are there any prospects for turnaround? Thanks so much.

So I will jump in before the other, the factoring question. So that portfolio is down to about $0.5 billion at this point in time.

Yes. I will take the factoring business, because a little bit some of the comments that I made. In actual fact, the volume both sequentially and year-over-year was up and was gaining traction with customers and everything. But the commissions were down reflecting the competitive pressure and another factor quite frankly, there is the credit. In this kind of credit environment, the commissions are typically part of what you get paid for taking credit risk. And in this environment, people don’t need to do that. So there is a confluence of events here. We think the volume is picking up as you can see and I am feeling good about some of the underlying trends in the business.

Okay, great. Thanks so much.

Thank you.

And as that was the last question, I would like to return the call to management for any closing comments.

Great. Well, thank you, everyone for joining us this morning. If you have any follow-up questions, please feel free to contact me or any member of the Investor Relations team. You can find our contact information, along with other information on CIT in the Investor Relations section of our website at www.cit.com. Thank you again for your time, and have a great day.

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