CIT Group reported net income from continuing operations for Q4/14 was $252 million, $1.37 per diluted share compared to $123 million in the year-ago quarter. Q4/14 net income included a $44 million reversal of an international tax related valuation allowance and the benefits from the sale of $800 million of assets in its Commercial franchises.

Net income from continuing operations for 2014 was $1,078 million compared to $644 million a year earlier. CIT said 2014 net income included $419 million of income tax benefits associated with the partial reversals of the valuation allowances on certain domestic and international deferred tax assets.

Highlights from the news release included the following:

• Funded new business volume in Q4/14 and full-year 2014 of $2.9 billion and $11.4 billion, respectively compared to $3.1 billion and $10.5 billion for the same year-earlier periods. Most of the year/year improvement resulted primarily from an increase of 40% or $1.4 billion attributed to the Transportation & International Finance segment.
• The average gross yield and net finance margin reported by CIT for its Transportation & International Finance segment in 2014 of 12.33% and 4.84%, respectively was down from 12.55% and 4.89% a year earlier. The Aerospace, Rail and Maritime Finance gross yields of 12.00%, 14.75% and 5.18%, respectively compare to 12.23%, 14.69% and 7.83% a year earlier.
• The average gross yield and net finance margin reported by CIT for its North American Commercial Finance segment in 2014 of 6.49% and 3.93%, respectively was down from 7.22% and 4.44% a year earlier. The Equipment Finance segment gross yield of 9.53% in 2014 was down from 10.82% for 2013.

“We made good progress in 2014 building our commercial franchise,” said John Thain, chairman and CEO. “In addition to growing our assets organically, we made two key acquisitions that will strengthen our commercial franchises and improve returns. Our focus on increasing shareholder value was reflected in the repurchase of more than $775 million of common shares and the increase in our dividend. In 2015, we will continue to build long-term value by focusing on closing and integrating the acquisition of OneWest Bank, returning additional capital to our shareholders, and meeting the financing needs of our small and middle market customers.”

The following segment highlights were excerpted from the news release:

Transportation & International Finance – Includes commentary on the Aerospace, Rail, Maritime and International Finance segments:

Pre-tax earnings for the quarter were $185 million, up from $117 million in the year-ago quarter and $162 million in the prior quarter. The increase from the year-ago quarter primarily reflected asset growth and higher gains on asset sales. The increase from the prior quarter largely reflected higher gains on asset sales and increased rental revenue.

Financing and leasing assets at December 31, 2014 were $19.0 billion, flat sequentially and up 16% from $16.4 billion at December 31, 2013. The increase from the prior year reflected growth in all transportation divisions, while the sequential trend was impacted by sales of aircraft to the TC-CIT Aviation joint venture, and the sale of the UK corporate lending portfolio.

Annual asset growth reflected increases of $1.5 billion in Aerospace, $1.2 billion in Rail, which included the Nacco acquisition in the first quarter of 2014, and $0.6 billion in Maritime, partially offset by a reduction in International Finance. The Maritime Finance portfolio now exceeds $1.0 billion in assets. Assets Held for Sale totaled $0.8 billion, and included the $0.4 billion UK equipment finance portfolio transferred at year end as well as the remaining $0.2 billion of additional aircraft to seed the joint venture.

New business volume was $1.2 billion and consisted of $0.6 billion of operating lease equipment, including the delivery of eight new aircraft and approximately 500 new railcars, and the funding of $0.6 billion of finance receivables.

Net finance revenue was $233 million, up $41 million from the year-ago quarter and up $7 million sequentially primarily due to growth in earning assets. Net finance margin was 4.88% compared to 4.83% in the year-ago quarter and 4.82% in the prior quarter. The increases from prior periods were driven by higher rental yields in Rail. Gross yields in Aerospace decreased to 11.5%, reflecting lower rental receipts and lease re-pricings, while gross yields in Rail increased to 15.3% reflecting re-pricing and elevated usage.

Utilization remained strong with 99% of both commercial aircraft and rail equipment on lease or under a commitment at quarter-end. All new aircraft scheduled for delivery in 2015 and approximately 83% of total railcars on order, have lease commitments.

North American Commercial Finance – Includes commentary on Real Estate, Corporate, Equipment Finance and Commercial Services (factoring):

Pre-tax earnings for the quarter were $122 million, down from $135 million in the year-ago quarter and up from $62 million in the prior quarter. The decrease from the year-ago quarter was largely attributable to higher operating expenses, while the sequential increase reflected higher gains on sales and lower credit costs.

Financing and leasing assets ended the year at $16.2 billion, up 8% from $15.0 billion at December 31, 2013. The increase from the prior year reflected solid new business volumes and the acquisition of Direct Capital in the third quarter while the sequential trend was impacted by prepayment activity and loan sales.

Funded loan and lease volume of $1.6 billion was down from $1.8 billion in the year-ago quarter, and unchanged from the prior quarter.

Net finance revenue of $145 million increased from the year-ago quarter reflecting higher average earning assets, and decreased slightly from the prior quarter. Net finance margin was 3.94% compared to 4.14% in the year-ago quarter and 3.91% in the prior quarter. The decline in net finance margin from the year-ago quarter primarily reflects lower portfolio yields. Other income of $115 million, which included $50 million of gains on asset sales, was up from $107 million in the year-ago quarter and $71 million in the prior quarter. Operating expenses were $132 million and included a full quarter of Direct Capital expenses. This amount is up from $113 million in the year-ago quarter, which included a benefit from a workout-related claim, and from $126 million in the prior quarter.

Credit metrics remained at or near cycle lows. Non-accrual loans of $101 million (0.63% of finance receivables) were improved from $134 million (0.83%) at September 30, 2014, and from $147 million (1.00%) a year ago. The current quarter provision for credit losses reflected a reversal in specific reserves of which $12 million related to the resolution of one problem loan. Net charge-offs were $15 million (0.38% of average finance receivables), compared to $2 million of net recoveries in the year-ago quarter and net charge-offs of $16 million (0.40%) in the prior quarter.

CIT Bank

Total assets were $21.1 billion at December 31, 2014, up from $20.3 billion at September 30, 2014, reflecting new business volumes, and $16.1 billion at December 31, 2013, also reflecting the Direct Capital acquisition in the third quarter. CIT Bank funded $1.9 billion of new business volume in the current quarter and $7.8 billion for the year.

Loans totaled $15.0 billion, up from $14.7 billion at September 30, 2014 and $12.0 billion at December 31, 2013. Operating lease equipment was $2.0 billion, primarily railcars and some aircraft, unchanged from the prior quarter and up from $1.2 billion at December 31, 2013. Cash totaled $3.7 billion at December 31, 2014, up from $3.2 billion at September 30, 2014, and from $2.5 billion at December 31, 2013. Preliminary Tier 1 and Total Capital ratios were 13.0% and 14.2%, respectively, at December 31, 2014 compared to 13.0% and 14.3% at September 30, 2014 and 16.8% and 18.1% at December 31, 2013, reflecting increases in risk weighted assets and a decline in regulatory capital resulting from goodwill and other intangibles recorded from the acquisition of Direct Capital.

Deposits at quarter-end were $15.9 billion, up from $14.4 billion at September 30, 2014 and $12.5 billion at December 31, 2013. The weighted average rate on outstanding deposits was 1.63% at December 31, 2014.

To view the full CIT Group news release, click here.