Regulatory Capital

3 Months Ended

Mar. 31, 2020

Regulatory Capital Requirements [Abstract]

Regulatory Capital

NOTE 13 — REGULATORY CAPITAL

The Company and the Bank are each subject to various regulatory capital requirements administered by the FRB and the OCC. Quantitative measures established by regulation to ensure capital adequacy require that the Company and the Bank each maintain minimum amounts and ratios of Total, Tier 1 and Common Equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. We compute capital ratios in accordance with Federal Reserve capital guidelines and OCC capital rules for assessing adequacy of capital for the Company and CIT Bank, respectively. The regulatory capital rules applicable to the Company and the Bank were the Basel III Rule and the Simplification Final Rule for the period ended on March 31, 2020, and the Basel III Rule and the Transition Final Rule for the period ended December 31, 2019. CIT and CIT Bank are also subject to certain capitalization levels based on Regulation Y for Bank Holding Companies (“BHC”) and Change in Bank Control and the FDIC’s Prompt Corrective Action (“PCA”) framework. CIT Group and CIT Bank capital ratios were all in excess of minimum capital ratios to be considered well-capitalized under Regulation Y and the PCA framework, respectively, at March 31, 2020 and December 31, 2019.

In March 2020, the OCC, FRB and FDIC collectively issued an interim final rule on the Revised CECL Transition Rule for regulatory capital. The Revised CECL Transition Rule provides banking organizations that implement CECL during the 2020 calendar year with the option to delay for two years the impact of CECL’s effect on regulatory capital, followed by a three-year transition period. During the first two years of the transition period, CIT will delay the day one impact of CECL to retained earnings ($82.4 million), plus a scaling factor of 25 percent of the change in the Adjusted Allowance for Credit Losses (“AACL”) from initial CECL implementation to the end of the quarter, excluding the impact of the initial non-PCD charge related to MOB, or $424 million times 25 percent ($106 million). After the initial two-year delay period, there will be a three-year phase in period starting January 1, 2022. The day one impact of CECL and the 25% scaling factor of the change in non-PCD ACL from Day 1 to the end of the second year will be phased out: 75 percent of transitional benefits are recognized in regulatory capital in year three; 50 percent in year four; and 25 percent in year five. After that point the banking organization would have fully reversed out the temporary regulatory capital benefits of the two-year delay and adjustments. These changes are only applicable to regulatory capital, which resulted in an increase to CET1 capital of $188 million as of March 31, 2020. There was no impact to the balance sheet or the income statement.

The following table summarizes the actual and required capital ratios:

Capital Components and Ratios (dollars in millions)

	CIT				CIT Bank, N.A.
	March 31,		December 31,		March 31,		December 31,
	2020		2019		2020		2019
Common Equity Tier 1 Capital	$	5,158.1	$	5,444.4	$	4,677.7	$	4,879.6
Tier 1 Capital		5,682.9		5,969.3		4,677.7		4,879.6
Total Capital		6,842.3		6,983.3		5,545.7		5,644.3
Risk-Weighted Assets	$	52,973.0	$	45,262.0	$	45,160.2	$	37,150.5
Common Equity Tier 1 Capital Ratio:
Actual	9.7%		12.0%		10.4%		13.1%
Effective minimum ratios under Basel III guidelines(1)	7.0%		7.0%		7.0%		7.0%
BHC and PCA Well-Capitalized	(2)		(2)		6.5%		6.5%
Tier 1 Capital Ratio:
Actual	10.7%		13.2%		10.4%		13.1%
Effective minimum ratios under Basel III guidelines(1)	8.5%		8.5%		8.5%		8.5%
BHC and PCA Well-Capitalized	6.0%		6.0%		8.0%		8.0%
Total Capital Ratio:
Actual	12.9%		15.4%		12.3%		15.2%
Effective minimum ratios under Basel III guidelines(1)	10.5%		10.5%		10.5%		10.5%
BHC and PCA Well-Capitalized	10.0%		10.0%		10.0%		10.0%
Tier 1 Leverage Ratio:
Actual	9.8%		11.9%		8.9%		11.0%
Required minimum ratios under Basel III guidelines(1)	4.0%		4.0%		4.0%		4.0%
BHC and PCA Well-Capitalized	(2)		(2)		5.0%		5.0%

^{(1) Required minimum ratios include stated minimums of 4.5%, 6% and 8% for CET1 capital, Tier 1 capital and Total capital ratios, respectively, plus the fully phased-in capital conservation buffer of 2.5%.}

^{(2) Regulation Y for the bank holding company does not define well-capitalized ratios for CET1 ratio and Tier 1 leverage ratio.}