Good morning and welcome to CIT's Third Quarter 2016 Earnings Conference Call. My name is Keith and I will be your operator today. At this time all participants are in listen-only mode. There will be a question-and-answer session later in the call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Ms. Barbara Callahan, Head of Investor Relations. Please proceed, ma'am.

Great. Thank you Keith. Good morning and welcome to CIT's third 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 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'll turn the call over to Ellen Alemany.

Thank you, Barbara. Good morning and welcome to CIT's third quarter 2016 earnings conference call. As you know, we had a lot going on this quarter as we announced earlier this month the agreement to sell Commercial Air to Avolon for $10 billion, which has been a key priority for me, the board, and the management team. We also recently closed on the sale of the Canadian equipment and corporate finance business. In our core businesses, the third quarter results reflect stable operating trends as we continue to focus on strengthening our franchises to improve returns. Despite a challenging operating environment, our net finance margin was stable, and our credit metrics remained strong, while total financing and leasing assets declined only slightly in spite of higher prepayments and asset sales. We also made meaningful progress in our strategy to simplify the business and return capital to shareholders. and I will discuss our strategic initiatives later in this call. In our Commercial Banking segment, we continue to focus on improving risk adjusted returns. In Commercial Finance, we're finding good opportunities in the middle market lending environment that remains challenging from persistent low interest rates and low activity. Year-to-date, we funded 115 deals, leading 50% of them, in the third quarter. We led over 70% of our new deals, resulting in almost $800 million of new origination volume and higher capital market fees. And at the same time, we continue to focus on staying highly selective and disciplined with new origination activity, especially in the leveraged lending space, where pricing has continued to compress and structures have become more aggressive. We are achieving this through our strategy that builds on our specialty lending expertise across industry verticals and deepening relationships with clients and customers where we have the opportunity to provide credit,…

Thank you, Ellen, and good morning, everyone. Third quarter income from continuing operations was $148 million, or $0.73 per share, reflecting a combination of stable operating trends and charges related to our strategic initiative that totaled $28 million, or $0.14 per share after tax. Net income was $133 million, or $0.65 per share, which included a $16 million loss in discontinued operations. This loss was related to an impairment of the reverse mortgage servicing liability. Separately, we continue working through the remediation of the material weakness related to the interest curtailment issue in the reverse mortgage servicing business that we discussed last quarter, and there was no P&L impact this quarter. Turning to the results from continuing operations, there was a slight decrease in financing and leasing assets in the quarter driven by Commercial Banking while Transportation and Consumer and Community Banking assets were essentially unchanged. Slide three shows the key performance metrics, and provides commentary on the near-term outlook which remains relatively consistent with what we have said previously. Net finance margins remained stable at 3.63%. Commercial Banking margins declined from the prior quarter, which included a $6 million interest recovery. In Transportation, margin was down slightly as an increase in Commercial Air from lower operating lease expense largely offset the reduction in Rail from lower rental income and higher maintenance expenses. In the near-term, we expect net finance margin to trend towards 3.5% as we continue to face headwinds from lower rental revenue in Rail and runoff in the legacy consumer mortgages. The provision for credit losses increased to $46 million from last quarter's low $28 million. Overall, portfolio quality remains relatively stable, and we expect the full year 2016 provision to be in the middle of our target range of 25 basis points to 50 basis points…

Yes. Thank you. We will now begin the question-and-answer session. [Operators Instructions] And today's first question comes from Eric Wasserstrom from Guggenheim Securities.

Thanks and good morning. Two questions, please. One is a strategic question. To the extent now that you have made such excellent progress on the separation of the aircraft business, how are you thinking about the Rail business, particularly with respect to the financial implications of the deferred tax liabilities that are generated in that business?

Good morning, Eric. It's Carol. So, I think, Ellen has articulated several times in the past that we feel Rail is a good portfolio. It's got good returns. There are headwinds in the business, but we do have a great management team, and feel we're best positioned to manage this through the cycle. As we said in March, selling Rail would not actually benefit the company from a regulatory capital perspective because of the deferred tax liability that we have that is kind of supporting the deferred tax assets, which we still have post the separation of Air because of the restricted NOL. So from that perspective, if it was a part sale, obviously with the premium it would help a bit, but as a part sale, there is no real regulatory capital freed up; in actual fact it's detrimental. So for various reasons, we still think Rail is a good business for the company.

Yeah. Just a few more comments on Rail, Eric. So we do expect the environment to remain weak, and it's going to impact utilization and lease rates, particularly in the oil, coal and steel industries. A few markets have stabilized, like grain and plastics and lumber. We also have railroad velocity that's going to continue to put increased pressure on the market, but I do think that we will expect to return pre-tax double-digit returns during this cycle despite some of these headwinds, and we have managed this business, historically, through all of these cycles. And we've been excellent at working with customers to restructure and renegotiate lease terms. We've been scrapping and selling underperforming cars. As I mentioned before, we have one of the youngest fleets. Customers want new cars, and they have less maintenance and service issues. And most importantly, we have really long-term customer proposition here. We've been serving our customers for over 40 years. We have strong relationships with the railroads and the shippers. And we recently performed an independent customer survey, which just reinforced that our customer service is great, which is a very good differentiator here.

Thank you for that. And just on the issue of risk adjusted margin, as I looked at the 2018 targets on page three, and I just did a quick back of the envelope, it looks like they imply a risk adjusted margin of around, call it, 3.75%ish, which is fairly similar to what you did in the third quarter. So, I guess, my question is is my math correct, or is the expectation about the emergence of those benefits more medium term?

I think in the risk adjusted margin, we have a range of 3% to 3.5%. So didn't really follow the math there. But we haven't really changed our outlook on that post the separation of Air. Maybe I didn't understand the question, Eric.

Sure. Carol, maybe I'll touch base with you later.

Okay. All right.

Great. Thanks very much.

Thanks.

Thank you. And the next question comes from Arren Cyganovich with D.A. Davidson. Arren Cyganovich - D. A. Davidson & Co.: Thanks. You referenced hiring a consulting firm to look at areas to improve the returns over time. Are you looking more in terms of revenue opportunities, asset growth, or is it more along the lines of further efficiency improvements, or all of the above?

Sure. It's really all of the above. I just wanted to make sure that everyone completely understands that it's our objective to improve the performance of the company, and we had told everyone that after we had clarity on the Air separation that we would really look at updating our plan. Earlier in the year, we laid out a plan, and we, as I said with now knowing which way Air is going, we're going to update our plan. And so, what we did was we hired Boston Consulting Group to really further review any opportunities to enhance our performance. We are leaving no stone unturned in the company. We are almost complete with our review. And as part of the annual planning process and strategy process, we are planning to roll this out to everyone shortly. Arren Cyganovich - D. A. Davidson & Co.: Okay, thanks. And so the targets that you have on slide three for post separation, those haven't changed from the March – are you saying that after this process that those could change? And do you still actually expect to have that 10% ROTCE in 2018, because you are obviously much more capitalized than you'd initially expected?

Yes, those targets are still what we are going after. You're right. We do have excess capital, and that is part of the equation as we go into the 2017, 2018 capital plan. But the target ranges are pretty consistent with what we've said in the past. Arren Cyganovich - D. A. Davidson & Co.: Okay. And then just very quickly, lastly. The shrinking, I guess not really shrinking, but the leveling off of the Commercial Finance business, you've been talking about, I guess, removing some risks there. What areas are you looking to reduce the cash flow loans? I'm just trying to understand, as we think about you as a bank after the Aircraft Leasing sale, and obviously most folks want to see some growth. I'm trying to understand the balance of how much you need to continue to kind of prune out of the portfolio before you get onto a growth path after that point.

So we've been taking actions in our commercial banking business to reduce exposures in some areas, particularly in the leveraged loan area, and really just focusing on growing our industry verticals. We are also culling out the portfolio and exiting very low return portfolios. Our strategy is really to build on our specialty lending expertise here, and also to take leadership roles in more transactions. So I mentioned before, year-to-date we funded 115 deals, 50% of those were lead roles. And just in quarter three alone, we did 35 deals of which 25 were lead roles. That, combined with cross-selling more deposit products, leasing products to our Commercial Finance customers. So that's really the strategy in the commercial finance business. We're also seeing very good growth in Business Capital. Direct Capital, which is our FinTech business, we've been working to lever this capability in our branch networks, so we could reach more small business customers. And we're benefiting right now from some of the challenges that the other online lenders have. In our Equipment Finance business, although leasing volumes are down in the industry, we have really good initiatives in office imaging, industrial and healthcare. And we continue to leverage our industry vertical expertise here. And then, in our factoring business, we had seasonally strong quarter, and we are seeing some firming in the retail sector. So the strategy around Commercial Banking is really shrinking, as I said, exiting a lot of – some of the leverage loans, the low performing assets, and then growing the core, which is leading with our specialty industry verticals. Arren Cyganovich - D. A. Davidson & Co.: It's very helpful. Thanks Ellen.

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

Good morning. As it relates to some of the recent CCAR proposals out there, how does that change your views on expenses, sizing, you mentioned some additional costs related to the CCAR submission, presumably on kind of the quality of assets. How do you think about that?

Sure. One is we – I still want to say that our strategy of the company shouldn't be driven by asset size, but our asset size -- our strategy should drive our asset size not that asset size should drive the strategy of the company. And when we laid out our plan in the beginning of the year, we did have some SIFI costs budgeted in our expenses going forward. I still want to make sure that everybody understands that even if we wanted to de-SIFI, the earliest we could de-SIFI is 2018, and also make sure everyone understands though that we still have to go through the CCAR process in 2018 just because the way the fourth quarters work. The team is focused on the CCAR process. We received our findings from the Federal Reserve Bank in August. We put together a remediation plan. We've established a dedicated CCAR office with external advisers. And we are working diligently and expect to make significant progress in this area. Now, recently the Fed came out with an NPR regarding the qualitative exam, and I think it's still too early to tell, but it looks like we'll be subject to the quantitative test at lease during this year. But we still have to remediate a lot of the – remediate the items that the Federal Reserve Bank brought up with us. We need work to do on our capital processing. We were planning to do this work anyway. So I don't think it's going to make a tremendous difference on the expense side.

Yeah. I just add, the comment I made about the near-term costs are really in preparation for our submission in 2017. It doesn't change our commitment to the reduction of the $125 million, but where we think the expense base will be in 2018. It's just about the very near term in preparing for this first quantitative submission.

Okay, that's helpful. And then the recent retention of BCG, you obviously will be looking at capital optimization as one of the stones that they will hopefully unturn relative to your risk profile as well as some of the new developments in the business.

Well, I would say that it's our job to look at the capital levels in the company. I think BCG has focused on, more on the revenue and expense optimization.

Okay.

We laid out a plan earlier in this year that had several components, looking at revenue, expenses, capital et cetera. And it's really the whole initiative we have against the CCAR office that's going to be the key in unlocking capital here.

Okay, thank you.

Thank you. And the next question comes from Eric Beardsley with Goldman Sachs. Eric Beardsley - Goldman Sachs & Co.: Hi, thank you. Just wanted to touch on what the business is going to look like following the sale of aircraft leasing. I guess, if you were just to look at whether it's this quarter or your year-to-date run rate, how do we think about the aircraft leasing contribution to that, and what the pro-forma earnings power could be?

Yeah. So as we're going through this process, we haven't really come off the walk from March, but still is a pretty representative of what we think the post separation earnings would be. Air contributes 85% to 95% pre-tax a quarter. It's variable depending upon operating lease expenses and gains, impairments on the assets, that it's contribution. And as we go through the walk and everything, we haven't really identified any reason to change what we said earlier in the year. Eric Beardsley - Goldman Sachs & Co.: Got it. That's helpful. And I guess, if we look at the railcar margins here, you noted that you expect utilization rate to come down still, and still have some pressure on the lease rate. Any thoughts just on where that net finance margin could bottom out for the Rail business?

Well, in aggregate, the range that we put out, the 3% to 3.5% does incorporate some thinking around the headwinds in Rail. So in aggregate that's where we are going, haven't really gone into specifically on Rail. Other than we do expect the utilization rate to continue, and these rental renewals will be a headwind to the margin going forward. Eric Beardsley - Goldman Sachs & Co.: Got it. And then just lastly, I guess the better provision performance this year. I think you had originally guided for it to be at the high end of the range, and now you're expecting to be in the middle. I guess, what would you attribute that to, I guess, what specifically has been coming in better than your prior expectations?

Well, Eric, I would say it's primarily energy related that we feel that the portfolio has now stabilized, given the current market conditions. Although there could be a loan or two that would be worse than we expect, there probably would be a loan or two that would be better. And at our current level of reserves and marks, we feel very comfortable with the overall dollar reserves on that portfolio. So that's kind of putting that to the side. Eric Beardsley - Goldman Sachs & Co.: Okay. Great. Thank you.

Thank you. And that concludes our question-and-answer session. I would like to return the call to management for any closing comments.

Great, thank you. And 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.