Barbara Callahan - Head of IR, SVP John Thain - Chairman, CEO Scott Parker - CFO, EVP

Mark DeVries - Barclays Brad Ball - Evercore Ken Bruce - Bank of America Merrill Lynch Chris Kotowski - Oppenheimer Henry Coffey - Sterne, Agee Moshe Orenbuch - Credit Suisse Eric Beardsley - Goldman Sachs David Hochstim - Buckingham Research Bill Carcache - Nomura Cheryl Pate - Morgan Stanley Sameer Gokhale - Janney Capital Markets Matt Schultheis - Boenning Chris Brendler - Stifel, Nicolaus Vincent Caintic - Macquarie

Good morning and welcome to CIT's Third Quarter 2014 Earnings Conference Call. My name is Drew and I will be your operator today. At this time, all participants are in a listen-only-mode. There will be a question-and-answer session later in the call. (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, Drew. Good morning and welcome to CIT's third quarter 2014 earnings conference call. Our call today will be hosted by John Thain, our Chairman and CEO, and Scott Parker, our CFO. After John and Scott's prepared remarks, we will have a question-and-answer session. 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 any 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 2013 10-K that was filed with the SEC in March. 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 representing a presentation that is available on the Investor Relations section of our Web site at www.cit.com. I'll now turn the call over to John Thain.

Thank you, Barbara. Good morning, everyone and thank you, all for being on the call. We reported solid results for the quarter from our core businesses with some noise in the numbers. Our financing and leasing assets from our core segments grew 17% from a year ago and 4% from the prior quarter. Our core segments originated funded volume of $2.9 billion, up 22% from a year ago. We completed the acquisition of Direct Capital and then our credit metrics remained at or near cyclical lows. Our Transportation & International Finance segment earned $162 million pre-tax in the quarter. Financing and leasing assets in that segment grew to $19.1 billion, up 22% from a year ago and up 4% sequentially. We've ordered 30 new aircraft. Our commercial air fleet and our railcar fleets were both 99% utilized. The segment's net finance margin was 4.82%. And we announced a strategic partnership with Century Tokyo Leasing, which will give us another tool to provide attractive financing solutions to our key airline customers. Our North American Commercial Finance segment earned $62 million pre-tax for the quarter. Financing and leasing assets grew to $16.4 billion, up 12% from a year ago and up 5% sequentially. We originated funded loan and lease volume of $1.6 billion. North American Commercial Finance's net finance margin was 3.91%. The credit quality of the portfolio in the North American Commercial Finance segment remains stable with reserve build due to growth and higher reserves on a small number of accounts. Expenses in the segment were up due to the addition of Direct Capital. Scott will cover this in more detail, but the noise in the quarter was from the partial reversal of the tax related valuation allowance, the impairment on the non-strategic portfolios that we're in the process of selling and some other tax and restructuring items. And the impact of these items are highlighted in our presentation deck. On the acquisition of OneWest, we continue to work through the regulatory approval process. We are actively involved in integration planning, and we continue to expect the transaction to close in the first half of 2015. On the U.S. economy, one of the better indicators of how the U.S. economy is doing is the utilization of our railcars, and at 99%, the implication is the U.S. economy is growing probably in excess of 3%. And with that, I'll turn it over to Scott.

Thank you, John, and good morning, everyone. We continue to make progress on the strategic initiatives we highlighted at Investor Day in June. The underlying performance of our core segments has been in line with our near-term profitability outlook, with most of the quarterly variability coming from our portfolio repositioning activities. Here are some highlights for the quarter. John mentioned net income was $515 million or $2.76 a share, which included a $375 million reversal of the valuation allowance-related to the U.S. Federal Net DTA, as well as a few other noteworthy items we highlight in the presentation. Our commercial franchises had strong asset growth of 4% sequentially and 17% from a year ago. We completed the acquisition of Direct Capital, which added over a $0.5 billion to our portfolio, and we continue to work on the integration of OneWest. We've made significant progress towards the exit of our remaining non-strategic portfolios. And we returned approximately $135 million to our shareholders this quarter. We've repurchased nearly 2.2 million shares for about a $106 million and we increased the quarterly dividend to $0.15. Turning to Slide 2 of the presentation, we'd like to discuss – before I discuss the third quarter results, I want to recap the performance of our commercial franchises and the impact that portfolio repositioning activities have had on our financial metrics. Our core commercial franchises North America Commercial Finance and Transportation & International Finance have had double-digit asset growth from a year ago, 13% organically and 17% including acquisitions and had a pre-tax ROA of over 2%. Portfolio repositioning activities have driven most of the quarterly variability and also reduced our earnings. This month, we signed an agreement to sell about $100 million of our European non-strategic portfolio. In addition, we are in the advance stages of negotiating sales in Mexico and Brazil, and recorded an impairment of $48 million after tax this quarter. We expect to conclude the sale of Mexico by the end of the year, and Brazil in 2015 due to the required regulatory approvals. And as we exit these portfolios, we will improve our profitability and free up cash that can be redeployed in our commercial franchises. As I've previously mentioned, there is over $60 million of currency translation adjustment related to our investments in these countries and has already recognized an equity through AOCI. As we complete these exits, we will recognize the associated CTA as a charge to earnings, some of which will likely occur in the fourth quarter. Moving onto our operating segments. Transportation & International Finance reported pre-tax income of $162 million or 3.5% pre-tax ROA. The sequential increase in pre-tax income primarily reflects asset growth and higher gain on asset sales. Assets grew 4% sequentially and 22% from a year ago to slightly over $19 billion with strong sequential growth in aerospace and maritime. We originated $1.3 billion of volume, including about $600 million of operating leases and $700 million of loans. And we continue to make strategic investments in our order book to position the commercial air and rail franchises for the future. John mentioned the joint venture with Century Tokyo Leasing, which combines our commercial aircraft originations and asset management expertise with their relationships and funding. We expect to sell a $0.5 billion of aircraft to this joint venture in the fourth quarter, and we will start earning recurring management fees. In addition, in the fourth quarter, we expect to complete the sale of about $350 million of international loans currently held for sale. While these initiatives will enhance returns, it will dampen the near-term asset growth. Contractual utilization in aerospace continues to be strong. Lease rates on new aircraft are attractive and renewal yields are generally stable. In addition, our commercial customers have performed well, and we have seen a good demand for lease renewals and extensions which has resulted in lower operating lease expense than previously anticipated. Rail utilization was over 99%, which is a near all time high, reflecting strong demand across most industries with renewal rents averaging above expiring rates. Overall, we continue to enhance the franchise by managing our core leasing portfolio, investing in new technologies through the order book, growing maritime and originating more assets in CIT Bank. North American Commercial Finance reported pre-tax earnings of $62 million or 1.7% pre-tax ROA. The decline from last quarter was mainly driven by higher credit loss provision, primarily reflecting a reserve build due to asset growth. Assets grew to over $16 billion, up 5% sequentially and 12% from a year ago and included the acquisition of Direct Capital. Despite a competitive market environment, we originated over $1.6 billion of loans and leases this quarter. While new business volume was strong in real estate finance, prepayments were also higher this quarter, as several deals paid-off due to good market demand. Commercial Services also had a good quarter, as factored volume rose both sequentially and from a year ago. We continue to have success retaining clients and growing in non-apparel sectors. In Corporate Finance, new business pricing remains stable, and we continue to win more agency roles, despite pressure on deal terms and structures. And new business yields and equipment finance have stabilized as we maintain pricing discipline. We are excited about the opportunity to leverage Direct Capital's technology and business platform to enhance our profitability and returns. In summary, the segment had organic growth of 8%, year-over-year in a competitive market, while maintaining credit discipline, effectively managing expenses and delivering double-digit pre-tax returns. Now I'd like to turn to Page 12 in the investor presentation to discuss our key profitability metrics. Adjusted net finance margin remained at the high-end of the near-term outlook, as a benefit of lower funding cost was offset by portfolio repricing. Credit metrics continue to be near cycle lows, while net charge-offs and reserve coverage were unchanged sequentially, the provision increased to reflect the higher reserves primarily related to asset growth. Excluding the impairments on the non-strategic portfolios, other income was at the low end of the near-term outlook, consistent with the current middle market deal environment. Operating expenses before restructuring changes was flat sequentially at about 260 basis points of average earning assets, and improved by about 30 basis points from a year ago, reflecting progress on several initiatives. In summary, our commercial franchises delivered over 2% pre-tax ROA. Turning to Slide 13 on taxes, we started the year with $1.3 billion domestic net deferred tax asset that was fully reserved through a valuation allowance, of which about $900 million related to U.S. Federal income taxes. This quarter, we met the cumulative profitability and other criteria and reserved $375 million of the $900 million valuation allowance, against the U.S. Federal Net DTA. The amount reversed did not incorporate the announced acquisition of OneWest. Once that deal closes, we anticipate the taxable income profile of the company will support to reversal of the remaining valuation allowance against the U.S. Federal Net DTA. As a result of this action, our book value increased by $375 million, but there was minimal impact on our regulatory capital ratios. We expect our reported tax expense for the fourth quarter to remain around $10 million to $15 million excluding any discrete items and our global effective tax rate for 2015 to be around 30% and cash taxes will continue to be around 10% of pre-tax earnings. In summary, we have made good progress this quarter on our strategic priorities. We achieved strong asset growth and profitability in our core commercial franchises, while maintaining underwriting discipline. We made significant progress towards exiting non-strategic portfolios. We grew CIT Bank, which now represents nearly half of our financing and leasing assets. And we continue to deploy capital for organic growth and accretive acquisitions and return capital to our shareholders through repurchases and dividends. With that, I'll turn it back to Drew, and we will take your questions.

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Mark DeVries of Barclays. Please go ahead. Mark DeVries - Barclays: Yes, thanks. Could you give us a little bit more clarity on kind of why you saw the net finance margin near the high-end of your long-term, or your near-term expectations and kind of where you expect that trend from here?

Yes, Mark, I would say that in the quarter we had continued the portfolio repricing, but that was offset by the improvement on the funding cost. So I'd say that given where we are utilization's kind of at an all time high. So we do see some pressure there in the fourth quarter, but we think we're going to be – continue to be above the midpoint. Mark DeVries - Barclays: Okay. That's helpful. And just one quick follow-up on John's comments about approval of the OneWest transaction. Are you far enough down the road with that, that you'd have some sense as to whether there'll be any issues with the approval?

No. We're just going through that process. There is nothing to lead us to believe there'd be any issues, but we wouldn't necessarily, no. Mark DeVries - Barclays: Okay. Thank you.

The next question comes from Brad Ball with Evercore. Please go ahead. Brad Ball - Evercore: Thanks. Scott, I wonder if you could talk about what initiatives you have that would drive OpEx into your targeted range 200 basis points to 250 basis points. Obviously, you're still above that, you've been running above that and working to get below. But, what do you think will get us down into that 200 basis points to 250 basis points in the next 12 months to 18 months?

Yes. It's mainly, Brad, the non-strategic portfolios. So as I mentioned, as we've embarked on that initiatives that we thought there was about $15 million a quarter associated with the non-strategic portfolio. So we sold the student loan and the SBA portfolio. Student loan didn't have a lot of direct costs, because we outsourced most of that. But the student loan or the SBA business benefited us in the third quarter. And as we get through the remaining, we think that that's going to be the main driver to get down into the expense ratio on top of our good asset growth. Brad Ball - Evercore: Got it. And then, my follow-up related to the tank car issues, I know there is some new standards that have come out. How should we think about the costs associated with the potential replacement or upgrade of your existing tank cars?

So the regulations haven't been totally finalized yet. So we're still waiting to see what the final regs are, but I think the way to think about it is, our tank car fleet is relatively new and it has an average age of about four years. And so whatever the final regulations come out to be, it's likely that we will in fact retrofit all of our cars, and we'll capitalize the cost to do that and there's plenty of life left in those cars to earn the return back on those capital expenditures. Brad Ball - Evercore: Do you have a sense as to what the cost of retrofitting is?

It's different for each type of car depending upon the – when the car was built. And so it's – and also those numbers – the final specs haven't really come out yet. So it's a wide range right now. Brad Ball - Evercore: But, you will be able to capitalize and pass on some of those costs to your lease partners?

Yes. And also, when you compare our cars even after the retrofits, they'll still be attractive versus what we estimate the cost of a new car will be. Brad Ball - Evercore: Great. Thank you.

The next question comes from Ken Bruce of Bank of America Merrill Lynch. Please go ahead. Ken Bruce - Bank of America Merrill Lynch: Thank you. Good morning. Scott, you mentioned in your comments that there's been a pickup in new agency mandates, yet the actual fee income associated with the middle market business remains kind of low relative to your targets. What is it that you're thinking is going to get that moving? Is it just more M&A deals that are actually consummated or what's kind of, if you will, lagging on that particular line item.

Yes. I think it's a combination of M&A activity, it would be the main driver on the capital market fees. As we've talked before, a lot of the transaction today are kind of club deals, and there is not a lot of opportunities to underwrite and then syndicate. So I think being continuing to build our relationships with our clients and being in that position when the market starts to pickup is kind of what we're looking for. Ken Bruce - Bank of America Merrill Lynch: Okay. And then, maybe just a clarifying comment just on the OneWest approval. Is there anything – are there any visible milestones that we'll have to look at prior to the actual approval or non-approval or is it – is there anything that you can kind of look at that's going to give you some indication that things are progressing towards a favorable outcome there?

So the process is a continual one, so we have an ongoing dialogue with the regulators. And as I said, there is nothing to indicate at least at the moment that there is any issue. But that ongoing dialogue will take place really between us and the regulators. So there really isn't a very good milestone for you to look at, other than you can see whether we continue to reiterate that we expect the deal to close in the first half of 2015, which of course we did say that today. Ken Bruce - Bank of America Merrill Lynch: Okay. Thank you. I'll get back in the queue.

The next question comes from Chris Kotowski of Oppenheimer. Please go ahead. Chris Kotowski - Oppenheimer: Yes. I just wanted to make sure I got the loan growth metrics right. I mean, you went from roughly $18.6 billion in loans to $19.8 billion, but roughly $550 million of that is the Direct acquisition?

Correct. Chris Kotowski - Oppenheimer: Okay. So that I guess, it still gives me like 3.5% linked quarter loan growth, but when you look at the gross interest income on the loans, it actually went down a little bit. I mean, is the yield compression really that much? Or is there a mix shift? Or is it the exiting of non-strategic portfolios? When should we start expecting to see the loan growth translate into revenue growth?

Yes, Chris. I think it was a combination of what you mentioned. So definitely on the NSP side you're going to have some of that decline especially when we sold the small business portfolio in the second quarter leading into the third quarter. We did have – as we talked about in second quarter, we did have a large prepayment in our Corporate Finance business in the second quarter. But the overall fundamentals, we have – some of the assets came on a little bit later in the quarter, but I think as we kind of go into the fourth quarter, the asset growth plus the utilization in the rail business will help stabilize the revenue line as we get out of the non-strategic portfolios. Chris Kotowski - Oppenheimer: And, I mean, I guess how – can you give us a breakdown on how big is the non-strategic portfolio. I mean, I guess, I feel like it's been almost five years now since CIT emerged from bankruptcy and quite frankly, I guess I would have thought one would get to the end of this a bit sooner. And so how much is left to go and do we think it will all be more or less exited by the end of this year?

Chris, I mentioned in the prepared remarks, we have about $500 million or $600 million remaining in the non-strategic portfolio. We closed about a $100 million, which were multiple countries in Europe earlier this month. And then we have Mexico and Brazil. Mexico is anticipated to close this year, and Brazil since it's a regulated bank requires regulatory approval. So we don't expect that to close this year, hopefully be kind of some time, first half of next year. Chris Kotowski - Oppenheimer: Okay. And would any marks against any of those items; is there enough visibility to know what the final – to market, so that it doesn't disrupt earnings into next year?

What we took is you know and as I call it out as a noteworthy item. We took a $48 million after tax charge on the assets that we have in the non-strategic portfolios. And given, we felt that was based on the best information we had around the value of the assets. So we will have to revisit those on a quarterly basis, but we think we have the majority of that covered with the charges we took in the third quarter. Chris Kotowski - Oppenheimer: Okay. All right. That's it from me. Thank you.

Thanks Chris.

The next question comes from Henry Coffey of Sterne, Agee. Please go ahead. Henry Coffey - Sterne, Agee: Good morning, everyone and thanks for taking my call. You talked earlier about the currency items and the deferred tax related assets. In simple terms, will that impact book value in anyway?

On the CTA item, it's currently in our equity, in the accumulated other comprehensive income. So when it goes through the earnings that will have a net impact of zero on the equity line, so that will not impact it. So that is – that one – in regards to – what was your other part, Henry? Henry Coffey - Sterne, Agee: The rest of the deferred tax.

Yes. The rest of any additional valuation adjustment will be just like in the third quarter will be an increase in both book value and tangible book value. Henry Coffey - Sterne, Agee: And then, in terms of headcount and sort of other going forward actions, do you think your improvement rate, your efficiency will more a function of revenue growth or do you think there is more cost cutting to go?

I think that's going to be more on the revenue side of the asset growth. Henry, as you kind of look at what we've talked about around – once we get out of the non-strategic, we've been continuing to invest in the core franchises. And as we've had a little bit of integration, elevated integration costs for both Nacco and Direct Capital. And as we work on the OneWest, I think it's really going to get the asset growth side, will drive more ex the NACF from NSP. Henry Coffey - Sterne, Agee: All right. Thank you very much and thanks for your help.

Thanks Henry.

The next question comes from Moshe Orenbuch of Credit Suisse. Please go ahead. Moshe Orenbuch - Credit Suisse: Great. Thanks. You had talked a little bit about the impacts of the charges from the non-strategic portfolios. But if you take the non-strategic portfolios in the aircraft JV, what does that do kind of to revenues and expenses as you go forward?

So on the non-strategic portfolio, as we called out Moshe was that, if you look at the size of assets and the profitability, so revenues will go down, but the net profitability was negative. So it actually improved our earnings profile, as well as returned cash from international to the U.S. that we can use to invest in our franchises. So I think that benefit is far outweighs the revenue loss. On the JV structure, it's two things; keeping those assets on our books, we think that with the management fees and the structure that we have that it'll be a good ROE enhancer. As John mentioned, it's strategic also in regards to growing our capabilities and being able to serve more customers, is a benefit to the overall franchise. So there is going to be a little bit of difference between net – rental revenue and that will be supplemented with fee income. Moshe Orenbuch - Credit Suisse: And you had mentioned in the prepared remarks that the increase in the provision was a combination of growth and for some specific credits. Could you kind of flush that out a little bit, I mean what types of credits and how much of it and what should we expect from growth as we go forward?

Yes. So I would say the majority of it came from asset growth in the quarter. And then we always have as we've talked about in our portfolio if we have one or two credits that we needed to put additional reserves up, the overall portfolio is stable and fine, the metrics are very solid. So it's just a nuance of the kind of portfolio that we have. But I think majority of it was asset builds. So as we have – continue to have receivables, loan growth, the reserve coverage as you see stayed around 1.8%, so that's kind of our indicative reserve coverage on new business. Moshe Orenbuch - Credit Suisse: Great. Thanks very much.

The next question comes from Eric Beardsley of Goldman Sachs. Please go ahead. Eric Beardsley - Goldman Sachs: Hi. Thank you. In terms of the OneWest deal, is there any potential for the cash consideration should be funded more from cash on the balance sheet, as opposed to the unsecured debt issuance that you outlined last quarter?

Eric, of course, as we look at – as we get into next year, and we look at our planning around asset growth. If we have the opportunity to issue less debt, that would be advantageous for us. So it's something clearly we're focused on, but it will be both the acquisition plus also commercial growth that we see in our different platforms will decide how much we issue at that time. Eric Beardsley - Goldman Sachs: Got it. Have any of these portfolio sales including the JV increase that probability?

They were part of as we were embarking on just I think, Chris made a comment, it seems like it has been in the multiple years. But yes, that's always been a consideration is to free up that cash to redeploy use for capital returns or to reduce our debt cost. So that's how we look at it. Eric Beardsley - Goldman Sachs: Okay. And how should we think about the pace of share repurchases ahead of the deal? Do you think about the remaining $450 million as last thing you through that or will you have some afterwards as well?

When we committed to the $500 million, it was to complete that prior to the acquisitions. So that's still our plan. So if you kind of look at the first half, as John mentioned, kind of what we're expecting, I think the pacing should be commensurate with that timing. Eric Beardsley - Goldman Sachs: Could you go back to the fed in between now and the deal to do more?

That's a possibility, but I think it really depends on where we are in the process and making sure that we focus on getting the deal closed versus kind of trying to push a little bit too hard on the capital return side. Eric Beardsley - Goldman Sachs: Okay. And then just lastly, do you have any visibility into the income statement impact of all of the one timers and the portfolio sales and exits and the CTA in the fourth quarter?

Well, the CTA is hard, because it's a very technical decision regards to when we have completed substantially the exit of the different entities that we have. And some are equity deals and some are asset deals. So what I think that there is a possibility that we can have up to 50% of that CTA balance could hit in the fourth quarter, but the range is very wide. It's all dependent on meeting specific trigger points. So that's kind of the majority of what's left on the CTA side. I think there was a previous question around the mark we took, so we feel comfortable with the mark we took, there could be a little bit both positive or negative hit on that depending on the final closing. But those would be the items on the non-strategic side. And we will have, as we go through that exit depending on each one of the transactions that we've gone through, there will be some incremental restructuring charges, as we exit some of those non-strategic portfolios. Eric Beardsley - Goldman Sachs: Got it. At this point, you couldn't size a range, whether it's somewhere between X and Y in terms of dollars and millions.

If I did, I'd probably be incorrect. So I'd rather just say that, there is definitely a possibility for both CTA hit, restructuring charge and maybe an incremental charge as we exit the platforms. Eric Beardsley - Goldman Sachs: Got it. All right. Thank you.

The next question comes from David Hochstim of Buckingham Research. Please go ahead. David Hochstim - Buckingham Research: Yes. Hi, thanks. I wonder if you could just provide some color around the maritime loans you booked this quarter, you had pretty good growth. Just wondered about pricing in maritime?

I think pricing continues to be a good spot with maritime the structures are good. And so I think as the team just like the real estate, we were kind of -- I think they're getting good exposure in the marketplace and I would say that we feel good about the growth trajectory at the Maritime business, as the teams had a period of time to really get out in the marketplace as well as kind of get the right type of transactions we're looking for. David Hochstim - Buckingham Research: Was there any change in sort of average size? Or types of loans you are doing?

No. No. David Hochstim - Buckingham Research: Okay. Then could you just give us again kind of an update on the railcars, what kind of cars did you take delivery of in the quarter? And how many tank cars do you have at this point that might need refurbishing?

I think, we said that the numbers of cars again depending on the regulations, but our best estimate is probably around 10,000 railcars. From a perspective of what we're taking deliveries, we continue to take deliveries of both tank cars as well as sand cars. I don't have the split, David, but you can follow-up with Barb if you need the details around that.

Our total tank car portfolio right now is about 25,000. David Hochstim - Buckingham Research: Okay. And what's the prospect for deliveries in Europe with Nacco?

The prospect – the team is doing very well. We're focused on integrating the business, I think, I talked about last quarter that given the size we're able to compete on bigger transactions, bigger customer transactions. We are looking at what the growth trajectory that we're looking for in the business, but we see good opportunities as the economy is kind of stable. But we think, we've got in at a good kind of place in the cycle and expect to grow the portfolio over the next couple of years. David Hochstim - Buckingham Research: Okay. Thanks a lot.

The next question comes from Bill Carcache of Nomura. Please go ahead. Bill Carcache - Nomura: Thank you. Good morning. I was hoping you could give a little bit more perspective on what's accounting for the compression in aircraft leasing rates. And also, discuss how much competition you're facing from private equity companies and BDCs getting into that space?

On the aircraft leasing side? Bill Carcache - Nomura: Yes.

Yes. So I would say that, as we've said before, some of the gross yield decline has really just been the portfolio repricing and the releasing aspects of the business. I wouldn't say, as we saw, we had a very elevated level of remarketing this year. But I think that's – still the yields on the portfolio are very much in line with the industry. So I don't think there is tremendous amount of unusuals there, it's just a normal part of the portfolio repricing. From a perspective of private equity and BDCs, again, that tends to be kind of on the smaller end. I mean people can put money to work in a small size portfolio. But that is something that where we are. We're positioned very well with the manufacturers as we have the order book that we have and our customer diversification and then with the kind of the joint ventures that we announced in the quarter. I think we continue to grow the franchise. I don't see a lot of kind of impact from them at this time, at least on the aircraft side. Bill Carcache - Nomura: Okay. I had a question – follow-up question on separate topic relating to the adjusted net finance margin. So we see it at the upper end of your range stable from last quarter. But as we look forward, I guess when you've seen a competitive pricing pressure that you have and your competition is intensifying and kind of think about the point where we're in the cycle, where kind of everyone is backup, post – although the significant credit losses that many lenders faced, and then people are lending again. I guess is it fair to say that kind of environment pricing usually doesn't get better again, unless something happens and if that's the case then when we think about kind of where you guys are at the top of the range, should we think about there being I guess gradually compressing towards the lower end of your range or I mean certainly would move higher. Maybe any commentary around trajectory and kind of in the light of the competitive environment and kind of where we are in the cycle would be great.

Yes. When we put out the near-term outlook, we did put the margin given the economic situation. And the competitive market, we did put 3.75% to 4.25%. My sense would be is that, we've seen some stabilization in different parts of the market and the utilization continues to be very strong. And so it's actually increased from when we kind of gave out the targets. So I'd say that the rail and aircraft utilization is helping, keep it at the levels that it is. That will – it's not much more that can go up to your point. But we see that as we've talked about that it could drift down to kind of the mid-point over the next year, if you're trying to do that forecast. But that would be partly the roll off of higher yielding assets and the new business being put on as lower yielding assets. So that dynamic is happening, but we do see stabilization in several of our markets. Bill Carcache - Nomura: Thank you.

The next question comes from Cheryl Pate of Morgan Stanley. Please go ahead. Cheryl Pate - Morgan Stanley: Hi. Good morning. I just wanted to follow-up on the net finance margin question a little bit. Just wondering if you can give some color maybe as to what type of economic and rate backdrop we should think about for the high-end and the low-end of the range and sort of the sensitivities there, should we move into a higher rate environment, particularly on the short-end?

Well, as we - as you know, Cheryl, we're asset sensitive. So if short-term rates go up, then you will get the pick up on the asset size quicker than we will have on the funding side. But, as I just mentioned to Bill, some of the pieces keeping us near the high is just the utilization of the air and rail business, which won't be as correlated to the interest rates, but that is a dynamic that is there. But, I think it's a combination of what the rate environment is and what's the competitive marketplace around pricing that I said kind of stabilize that asset change depending on what the rate outlook kind of ends up being in the near future. Cheryl Pate - Morgan Stanley: So I guess, what would we need to see specifically to really be at sort of low-end of the range, which is fairly significant compression from where we are today?

Well, I don't know if I want to give that forecast, Cheryl, but I would just say, when we gave out the range, it was kind of looking at what could happen and if pricing would continue to deteriorate and things of that sort that would be the main drivers really on the U.S. business.

Or I would say the other thing would be, if the U.S. economy were to deteriorate, which by the way we don't see, so as I said in my comments, we see the U.S. economy doing better. But, if you saw a significant slowdown in the U.S. economy that would impact the rail utilization and probably the yields, as well as the Corporate Finance book. Cheryl Pate - Morgan Stanley: Okay. That's helpful.

As I said though, we don't see that happening, but that would be a negative. Cheryl Pate - Morgan Stanley: Right, right. Okay. And just one last one for me. Does this near-term outlook embed the OneWest acquisition and the expected cost of funds improvement?

It did not. Remember, we put these out before we announced that transaction. So depending on the closing Cheryl, I think we would come back out with updated guidance based on the transaction. Cheryl Pate - Morgan Stanley: Right. Okay. That would be really helpful. Thanks.

Yes.

The next question comes from Sameer Gokhale of Janney Capital Markets. Please go ahead. Sameer Gokhale - Janney Capital Markets: Hi. Thank you. Just a couple of questions. I mean, the – when you look at Fed Governor Daniel Tarullo, he has been talking about this concept of raising the CCAR threshold to above $50 billion. And I think this Friday, he is meeting with several executives from regional banks. I know your sub-$50 billion currently. But first, I was just curious John or Scott, about whether you are headed to D.C. to meet with him related to this issue, because with the acquisition of OneWest you will be a CCAR bank. And then secondly, just wanted to get a sense related to that if that $50 billion threshold is raised, how much could you potentially save from an expense standpoint, in terms of stress testing related expenses that you wouldn't have to incur?

Well, I think, I'll start with the first part. So I believe that the people invited to that meeting were all already SIFI. So they were already over $50 billion. Obviously to the extent that there is talk about raising that SIFI level, we are very supportive of that. The number that Governor Tarullo has mentioned before was $100 million, so which we would obviously be under. So we would be very supportive of that type of change.

So Sameer on regards to the cost, I mean, we still have investments given the increased size of the institution and depending on what is part of raising the limit and what activities are kind of – are pulled out of that process, then we would – if there was less activity and less work, then, yes, there is some opportunities on the expense side. But we still believe that we want to continue to enhance several aspects of our business consistent with the size of the institution.

And the other thing, which we have had said before, we were anticipating that we would go over $50 billion anyways, just from organic growth. And so we have over the last couple of years been investing in the infrastructure to do that in any case. Sameer Gokhale - Janney Capital Markets: Yes. I mean I was trying to get a sense for some stress testing, which could be just good business practice in terms of trying to figure out how the portfolio perform. And the other part of stress testing, which is more regulatory mandated kind of specific things you need to do in terms of stress testing. So I was trying to get a sense for how much your savings might be, if that threshold is raised, but doesn't sound like you're willing to quantify that at this point?

Correct.

Correct. Sameer Gokhale - Janney Capital Markets: Okay. All right. Fair enough. The other thing I wanted to ask was, I was seeing some news articles related to your OneWest transaction and some objections raised because of loss sharing benefits that OneWest is getting, and these were agreements that OneWest entered into a few years ago. Now it's unclear to me, whether these are objections that are raised regularly by groups similar to whenever an M&A transaction is announced there is a slew of lawsuits announced or is this something investors should be concerned about that all of a sudden, either the loss sharing will be changed or somehow this derails their transaction. How should investors think about that?

Sure, Sameer. So the first thing is these objections and the press you've seen are coming from these CRA groups. And so these are groups that it is a normal process for them to protest transactions. It's also a process that we anticipated. So these are kind of expected types of protests. We have a good CRA track record, OneWest has a good CRA track record and both of us on a combined basis are committed to doing more in our local communities. And so we very much are invested in the local communities. So this process, that you're seeing is a normal and expected process. The loss share agreements, as we talked about when we announced the transaction the most significant loss share agreement, we spent a lot of time making sure was in fact transferable and that continues to be the case. And the protests are really about CRA investment not about the loss share. Sameer Gokhale - Janney Capital Markets: Okay. That's helpful clarity. And the last question I had and I am sorry I just got on the call a bit later, but the timing of the valuation adjustment reversal, the partial reversal, I was under the impression that reversal is usually something that happens after the end of the calendar year and you filed your tax returns or have a better sense for how your taxes are going to be trued-up relative to your GAAP balance sheet and your book taxable income for purposes of the test, but it seems like you've done it a bit ahead of year-end. So clearly, I was mistaken on that assumption or was it something unusual that than happened, that allowed you to reverse that valuation allowance more quickly than you otherwise might have been able to do?

No. Sameer, I think there are definitely taxes tend to be more of a year-end process, but as we called up before, it's a three-year cumulative profitability – cumulative profitability look. And, I mentioned that at the Barclays conference in September that based on some of our outlook we could hit that either in the third quarter or the fourth quarter. So you have older years falling off and you have the profitability at the current quarters. And once you trip that critical criteria then we had to assess other evidence related to the ability to reverse the valuation allowance. Our assessment of those criteria were that we could do that and so the process, it was able to be done based on when you meet the criteria not based on kind of a year-end closing process. So it could happen anytime during the year, it's just a matter of when you feel you've been to able to meet multiple criteria that suggest that the valuation allowance is no longer required. Sameer Gokhale - Janney Capital Markets: And what is the other criteria that need to be matched to reverse the rest of the valuation allowance, for the Federal deferred DTA?

You're going to look at the suitability, that profitability, your ability to forecast out to the time to those NOLs get utilized, you got to take into consideration economic environment trends and things of that sort. And other… Sameer Gokhale - Janney Capital Markets: I'm sorry, just to clarify, this quarter you did a partial reversal of your valuation allowance related to your U.S. Federal DTA, it seems like there's an another piece of it. So were those related to this quarter, some particular business lines and the other one's are related to other business lines, as you evaluate your three-year profitability? I was just trying to get some sense for the difference between what's included with this reversal versus the remaining reversal?

Yes. So there's three components of our valuation allowance. The largest that we mentioned in the deck is about $900 million that's related to our U.S. federal taxes. There's about another $350 million related to U.S. state taxes that we have valuation allowances up. And then, there's about $200 million that's related to international operations. So those are three components of the piece that was reversed this quarter relates to the U.S Federal DTA.

So Sameer, what will happen is, we only reverse part of it, because we can only justify that based up on our own projected earnings. Once we complete the OneWest transactions, their income is almost all U.S. taxable income. So we'll then be able to project out a higher expected future earnings and the expectation is, we'll reverse the rest of it at that point. Sameer Gokhale - Janney Capital Markets: Okay. Okay. That's very helpful. Thank you very much.

Thanks, Sameer.

The next question comes from Matt Schultheis of Boenning. Please go ahead. Matt Schultheis - Boenning: Good morning.

Good morning, Matt. Matt Schultheis - Boenning: Quick question on the $22.8 million FX and derivatives loss in the quarter, is that related to the exit of the non-strategic portfolios?

There's multiple pieces on that, but the main one is our TRS, total return swap structure, because we sold student loans out of that structure. The unused piece is viewed as a derivative for accounting purposes and so we had a negative hit on the fact that we had the unused capacity in there at the end of the quarter. So we think that's temporary. We are working on refilling up the facility with assets in the fourth quarter, which will then kind of readjust that derivative mark that we took in the quarter. That was the main piece we have normal, a little bit of FX is going through the line. And then we've got a small bit of CTA related to a small country that we exited. Matt Schultheis - Boenning: Okay. And so looking forward, the change in the Irish tax structure that's going to get phased-in, is that going to change your approach to the air lease business, does it give you guys a competitive advantage or competitive disadvantage, and how do you think it impacts the industry?

Yes. The change in the Irish rules don't relate to the structure that the aircraft leasing businesses have that was kind of look through double. Our aircraft are actually domiciled in Ireland, our infrastructures in Ireland, and all the income that we earn on the business is taxed in Ireland. Matt Schultheis - Boenning: Okay.

And the structures you're hearing about is not consistent with kind of the approach we have for our business. Matt Schultheis - Boenning: Okay. Thank you.

The next question comes from Chris Brendler of Stifel, Nicolaus. Please go ahead. Chris Brendler - Stifel, Nicolaus: Hi. Thanks, good morning. Scott, just on the margin outlook. Again, can you just talk it all about how much of that would be on the gross yield side? And the competitive environment, not necessarily – I think we talked about transportation. But I'm focused on Corporate Finance and Equipment, it looks like Equipment came down quite a bit on the gross yield this quarter, I'm assuming that Direct Capital. And Corporate seems to be bouncing around like a quarter – last quarter, and came back down this quarter. What contributes to the volatility, and if you just comment on how much of the yield or the NIM compression you're looking from near term comes from the gross yield side. Thanks.

Hey, Chris, I'd say on the Corporate Finance, when you look at the quarterly trend, second quarter as I mentioned we did have an accelerated recovery, interest recovery on a loan, so that kind of distorts the kind of the trend line, I would say that excluding that the trend over the last four, five quarters has been fairly stable, right, which is really just the mix issue. On the Equipment Finance side, actually Direct Capital has higher yields than the core Equipment Finance business that was existing here. So some of that is just the competitive pressures in the U.S. in regards to our small ticket Equipment Finance business. We also mentioned that we see some of that kind of stabilizing also. So it has come down, but we see a kind of stabilizing there. So that's kind of the – the view is that we're going to have a little bit of – it doesn't take much to have the quarterly variability based on some of the actions that we've talked about. But we think there is stability in the yield line. And then, the pressure is really that's going to be normal, how much new business we put on versus how of the old book runs off, and that mix is very hard to forecast. It's really dependent on kind of the market environment. Chris Brendler - Stifel, Nicolaus: Okay. That leads to actually very well into my follow-up question, which was on prepayment activity, and how much of that old stuff is running off naturally or it's worse getting prepaid. I think we talked about the Investor Day, that the prepayments had slowed a little bit. I'm calculating a little bit of a pickup in runoff this quarter, but nothing huge. If you can just talk about the prepayment, it sounded like we were seeing some stabilization some improvement how to look at this quarter?

Yes. I think we've seen stabilization on the Corporate Finance book, but as I called out in my prepared remarks, the real-estate business given the lot of money kind of back into the real estate market, we did have some loans prepay in the real estate business in the quarter that was, something – the first signs we've seen that as we built the business. So that's the area, not that Corporate Finance area. Chris Brendler - Stifel, Nicolaus: Okay. And then last sort of housekeeping type question, do you expect to still disclose and talk about economic earnings, or give us a sense of the cash taxes number, so we can continue to focus on a better true measure of your profitability once we have the full tax impact in 2015?

We disclosed – it's in the Q right today in regards to the cash flow statements. So it does talk about what the cash taxes we paid, but I think Chris we will kind of make sure that information is available, because I think as you said from an economic point of view that's kind of how we are trying to run the business to ensure that we utilize the NOL and get the benefit –both the capital benefits and the cash benefits of using the NOL. Chris Brendler - Stifel, Nicolaus: Great. Thanks so much.

The next question is a follow-up from Ken Bruce of Bank of America Merrill Lynch. Please go ahead. Ken Bruce - Bank of America Merrill Lynch: Thank you again. My follow-up relates to the JV, specifically if you could help us understand the rationale behind that, is that leveraging CTLs origination platform or is it more of a lower cost of funds that ultimately you're able to leverage through this joint venture, if you could just give us a little bit better understanding around that?

I think you mentioned both of them, so I think both of those, but I think it's the local relationships that CTL has in Asia plus, we do have lower level – they have lower cost of funds than we do. So both those were very valuable inputs in for the joint venture and then we partnered that with our – kind of our origination and asset management capabilities. So we think it's a good partnership. Ken Bruce - Bank of America Merrill Lynch: And essentially that you're accomplishing which you can accomplish in the U.S. aerospace business with the bank effectively providing that cheaper cost funds to – you point out that there was some pressure on leasing rates in aerospace. And I'm wondering if this is trying to kind of get around some of that pressure that you see, that maybe appearing globally?

No. I think it's an ability to continue to grow the franchise from an optimizing both our on-book and off, kind of using – getting some additional capacities to grow the business, leveraging this partnership. I don't think – it's not a matter that the yield and kind of pressures on different aircraft is going to be something that that goes through this – the cycle, which is more of a supply and demand. But the overall macro for the aircraft leasing market is very positive. And this just helps us get a increased exposure in our Asian platform. Ken Bruce - Bank of America Merrill Lynch: Okay. And then there has been a lot of discussion around these maritime portfolios in the European banks. And John you've spoken in the past that they didn't see a lot of activity there for various reasons. Has the AQR, you're saying changed the calculus around any of those portfolios possibly making their way out into the marketplace and separately if it was a large portfolio that became available. Could you structure something similar to what you're doing on the JV side in aerospace, in the maritime area?

So in terms of – the part of your question, we have not seen any willingness on the part of the European banks to sell any significant pieces of their portfolio. So at least so far, it doesn't seem to have that effect. If there was a big portfolio, either – we would buy the parts of it that we like, which is the more likely one, or could we structure joint venture like the aircraft one? Sure. That would certainly be an option if it was a particularly big portfolio. Ken Bruce - Bank of America Merrill Lynch: Okay, great. Thank you. That was it.

The next question comes from Vincent Caintic of Macquarie. Please go ahead. Vincent Caintic - Macquarie: Hi. Thanks and good morning. On the Century Tokyo JV, I was wondering if you could give us a sense for how much CIT's fee income could grow as the JV grows to its target, I believe it was a $2 billion in assets by 2016, if you could give us a sense for the economics that'd be great?

Yes. I mean, we talked – I'm not going to give you specifics around kind of what that would be. But we do see a good fee income stream from the JV and as it grows, our fees will increase as the JV grows. So we can get into more details, but I think it's fair to say that the economics for both parties are attractive and we see this as a good enhancement of the returns in the transportation business. Vincent Caintic - Macquarie: Okay. Got it. Switching to the tank cars, do you know what the average remaining lease duration is of those 10,000 tank cars you mentioned?

John mentioned, we have a fairly new portfolio on the tank cars between what we've ordered and even some of the ones that were pre-order. I don't have the exact number of top of my head, but I would say it's probably less than 10 years. But as we mentioned before is that the analysis really on the economics is what's the retro fit cost, how long can you amortize that cost relative to the lease rates that you'll get on that versus buying. And so, based on the age of our tank cars, we believe right now based on our interpretation that would be better economically to make the CapEx investment versus the cost of what new railcars might be.

And also, even on cars that are already under lease, the leases typically have provisions in them. If we're required to make capital investments in the car, we can adjust the lease rates. Vincent Caintic - Macquarie: Okay. Got it. And just the last one for me and this is a broader one on North American Commercial Finance. So if you could give us a forward look say two years from now after the OneWest deal closes, how North American Commercial Finance is going to look like? So what sort of products on the consumer and commercial side you'll be having? And then also, what's helping the earnings mix could be relative to the Transportation segment? And that's all for me. Thank you.

Well, I would say that the North American Commercial Finance will be much bigger, much bigger, right? So, if you kind of look at that – the current commercial portfolio is around $5 billion and so that continues to grow as the legacy portfolio amortizes off. And then, there was a comment they do some jumbo mortgages out of their branch banking networks. So our expectation is that's complementary to the branch strategy and so we see that as a go forward product. I would say the size of that is not going to be anywhere near the size of the commercial franchise, so that would just be something to support our branch network. So, I would say that, I can't give you the exact math of that but the North American Commercial Finance will be at least kind of 50-50 or we'll see based on the growth opportunities. Vincent Caintic - Macquarie: Great. Thanks so much, guys.

Final and last question comes from Bill Carcache. Please go ahead. Bill Carcache - Nomura: Thank you. As a follow-up, I was hoping that you could discuss the timeframe over which you guys would expect to enjoy the regulatory capital benefit of the DTA recapture?

The timeframe, well, I think the – on the regulatory capital point of view, as I mentioned, you don't get the regulatory benefit for that, when you have exposed DTA. So I think, the way we kind of talked about it as part of the OneWest transaction is the faster you use the NOL, actually get taxable income that builds regulatory capital to get closer to your book capital. So the whole focus is on utilizing the NOL so that you have the – you get the regulatory capital benefit from that. And so that's one of the bigger if we talked about with the profitability profile – the U.S. profitability profile of the OneWest transaction. Bill Carcache - Nomura: Got it. Thank you.

I would like to turn the conference back over to Barbara Callahan, Head of Investor Relations for any closing remarks.

Great. Thank you, Drew. And thank you, everyone, for joining 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 Web site at www.cit.com. Thanks again, for your time, and have a great day.

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