Edgar Filing: CIT GROUP INC

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


\|X\|	Quarterly Report Pursuant to Section 13 or 15(d)	or	\| \|	Transition Report Pursuant to Section 13 or 15(d)
	of the Securities Exchange Act of 1934			of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2009

Commission File Number: 001-31369

CIT GROUP INC.
(Exact name of Registrant as specified in its charter)


	Delaware	65-1051192
	(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

	505 Fifth Avenue, New York, New York	10017
	(Address of Registrant’s principal executive offices)	(Zip Code)

	(212) 771-0505
	(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes |X| No |_|

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer |X| Accelerated filer |_| Non-accelerated filer |_| Smaller reporting company |_|.

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 under the Securities Exchange Act of 1934. Yes |_| No |X|

As of July 31, 2009 there were 392,081,921 shares of the registrant’s common stock outstanding.

CONTENTS


Part One—Financial Information:

ITEM 1.	Consolidated Financial Statements	2
	Consolidated Balance Sheets (Unaudited)	2
	Consolidated Statements of Operation (Unaudited)	3
	Consolidated Statement of Stockholders’ Equity (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of
	Operations	42
	and
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	42
ITEM 4.	Controls and Procedures	83

Part Two—Other Information:

ITEM 1.	Legal Proceedings	83
ITEM 1A	Risk Factors	85
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
ITEM 3.	Defaults Upon Senior Securities	93
ITEM 4.	Submission of Matters to a Vote of Security Holders	94
ITEM 5.	Other Information	94
ITEM 6.	Exhibits	94
Signatures		97

Part One—Financial Information

ITEM 1. Consolidated Financial Statements

CIT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (dollars in millions – except per share data)


	June 30, 2009			December 31, 2008
	June 30, 2009			December 31, 2008

Assets
Cash and due from banks	$	255.2		$	592.5
Deposits with banks, including restricted balances of $1,104.3 and $2,102.5 at June 30, 2009 and December 31, 2008, respectively		4,212.5			7,773.3
Trading assets at fair value – derivatives		151.2			139.4
Investments – retained interests in securitizations		169.5			229.4
Assets held for sale		427.3			156.1
Loans including receivables pledged of $21,893.0 and $24,273.9 at June 30, 2009 and December 31, 2008, respectively		48,730.3			53,126.6
Allowance for loan losses		(1,538.4	)		(1,096.2	)

Total loans, net of allowance for loan losses		47,191.9			52,030.4
Operating lease equipment, net including assets pledged of $4,218.5 and $3,623.7 at June 30, 2009 and December 31, 2008, respectively		13,380.1			12,706.4
Derivative counterparty assets at fair value		966.3			1,489.5
Goodwill and intangible assets, net		–			698.6
Other assets, including advances of $1,393.6 and $1,492.6 at June 30, 2009 and December 31, 2008 respectively, associated with a lending facility structured as a TRS		4,265.2			4,589.1
Assets of discontinued operation		–			44.2

Total Assets	$	71,019.2		$	80,448.9

Liabilities
Deposits	$	5,378.7		$	2,626.8
Trading liabilities at fair value – derivatives		139.4			127.4
Credit balances of factoring clients		2,671.8			3,049.9
Derivative counterparty liabilities at fair value		182.7			433.7
Other liabilities		2,441.0			2,291.3
Long-term borrowings, including $13,849.4 due within twelve months		54,087.6			63,750.7

Total Liabilities		64,901.2			72,279.8

Stockholders’ Equity:
Preferred stock: $0.01 par value, 100,000,000 authorized
Issued and outstanding:
Series A 14,000,000 with a liquidation preference of $25 per share		350.0			350.0
Series B 1,500,000 with a liquidation preference of $100 per share		150.0			150.0
Series C 11,500,000 with a liquidation preference of $50 per share		575.0			575.0
Series D 2,330,000 with a liquidation preference of $1,000 per share		2,071.7			1,911.3
Common stock: $0.01 par value, 600,000,000 authorized
Issued: 398,289,150 and 395,068,272 at June 30, 2009 and December 31, 2008, respectively		4.0			3.9
Outstanding: 392,067,503 and 388,740,428 at June 30, 2009 and December 31, 2008, respectively
Paid-in capital, net of deferred compensation of $31.1 and $40.3 at June 30, 2009 and December 31, 2008, respectively		11,269.8			11,469.6
Accumulated deficit		(7,896.6	)		(5,814.0	)
Accumulated other comprehensive loss		(134.7	)		(205.6	)
Less: treasury stock, 6,221,647 and 6,327,844 shares, at cost at June 30, 2009 and December 31, 2008, respectively		(310.3	)		(315.9	)

Total Common Stockholders’ Equity		2,932.2			5,138.0

Total Stockholders’ Equity		6,078.9			8,124.3
Noncontrolling minority interests		39.1			44.8

Total Equity		6,118.0			8,169.1

Total Liabilities and Equity	$	71,019.2		$	80,448.9

See Notes to Consolidated Financial Statements.


2	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Operation (Unaudited) (dollars in millions – except per share data)

	Quarters Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

Interest Income
Interest and fees on loans	$	606.5		$	857.0		$	1,235.1		$	1,798.8
Interest and dividends on investments		8.0			59.9			19.0			107.6

Interest income		614.5			916.9			1,254.1			1,906.4

Interest Expense
Interest on deposits		(37.4	)		(24.8	)		(61.8	)		(54.9	)
Interest on short-term borrowings		–			(4.7	)		–			(31.6	)
Interest on long-term borrowings		(596.2	)		(717.6	)		(1,228.9	)		(1,492.7	)

Interest expense		(633.6	)		(747.1	)		(1,290.7	)		(1,579.2	)

Net interest revenue		(19.1	)		169.8			(36.6	)		327.2
Provision for credit losses		(588.5	)		(152.2	)		(1,123.9	)		(398.9	)

Net interest revenue, after credit
provision		(607.6	)		17.6			(1,160.5	)		(71.7	)

Other income
Rental income on operating leases		473.5			492.3			948.7			999.0
Other		(198.8	)		168.9			(10.8	)		229.9

Total other income		274.7			661.2			937.9			1,228.9

Total net revenue, net of interest expense
and credit provision		(332.9	)		678.8			(222.6	)		1,157.2

Other expenses
Depreciation on operating lease
equipment		(286.6	)		(280.1	)		(568.6	)		(574.7	)
Goodwill and intangible assets
impairment charges		(692.4	)		–			(692.4	)		–
Other		(293.9	)		(329.6	)		(456.5	)		(850.5	)

Total other expenses		(1,272.9	)		(609.7	)		(1,717.5	)		(1,425.2	)

(Loss) income from continuing operations
before income taxes		(1,605.8	)		69.1			(1,940.1	)		(268.0	)
(Provision) benefit for income taxes		(12.7	)		(21.2	)		(20.7	)		75.2

(Loss) income from continuing
operations		(1,618.5	)		47.9			(1,960.8	)		(192.8	)

Discontinued Operation
Loss from discontinued operation
before income taxes		–			(2,551.1	)		–			(2,746.9	)
Benefit for income taxes		–			435.3			–			633.1

Loss from discontinued operation		–			(2,115.8	)		–			(2,113.8	)

Loss before preferred stock dividends		(1,618.5	)		(2,067.9	)		(1,960.8	)		(2,306.6	)
Preferred stock dividends		(61.6	)		(16.7	)		(122.0	)		(24.2	)

Net loss before attribution of
noncontrolling interests		(1,680.1	)		(2,084.6	)		(2,082.8	)		(2,330.8	)

(Income) loss attributable to
noncontrolling interests, after tax		0.7			0.2			0.2			(10.8	)

Net loss attributable to common
stockholders	$	(1,679.4	)	$	(2,084.4	)	$	(2,082.6	)	$	(2,341.6	)

Basic and Diluted Earnings Per
Common Share data
Loss (gain) from continuing operations	$	(4.30	)	$	0.12		$	(5.34	)	$	(1.00	)
Loss from discontinued operation		–			(8.00	)		–			(9.28	)

Net Loss attributable to common stockholders	$	(4.30	)	$	(7.88	)	$	(5.34	)	$	(10.28	)

Average number of shares – basic and
diluted (thousands)		390,535			264,381			389,741			227,704
Cash dividends per common share	$	–		$	0.10		$	0.02		$	0.35

See Notes to Consolidated Financial Statements.


Item 1: Consolidated Financial Statements	3

CIT GROUP INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity (Unaudited) (dollars in millions)

	Preferred Stock	Common Stock	Paid-in Capital		Accumulated (Deficit) / Earnings		Accumulated Other Comprehensive Income / (Loss)		Treasury Stock		Noncontrolling Interest in Subsidiaries		Total Stockholders’ Equity

December 31, 2008	$2,986.3	$3.9	$11,469.6		$(5,814.0	)	$(205.6	)	$(315.9	)	$44.8		$8,169.1

Adoption of EITF 07-5 and
designation of TARP warrant as a
liability effective January 1, 2009	136.8		(418.7	)									(281.9	)
Reclassification of TARP warrant
from liability to equity			211.2										211.2

Net loss before preferred stock
dividends					(1,960.6	)					(0.2	)	(1,960.8	)
Foreign currency translation
adjustments							(34.0	)					(34.0	)
Change in fair values of derivatives
qualifying as cash flow hedges							102.0						102.0
Unrealized loss on available for sale
equity and securitization investments,
net							(2.3	)					(2.3	)
Minimum pension liability adjustment							5.2						5.2

Total comprehensive loss													(1,889.9	)

Cash dividends – common			(3.2	)									(3.2	)
Cash dividends – preferred					(98.4	)							(98.4	)
Distribution of earnings											(5.5	)	(5.5	)
Restricted stock expense			6.4										6.4
Stock option expense			6.2										6.2
Issuance of common stock		0.1	7.5										7.6
Accretion of discount on preferred
stock – series D	23.6				(23.6	)							–
Employee stock purchase plan
participation, other			(9.2	)					5.6				(3.6	)

June 30, 2009	$3,146.7	$4.0	$11,269.8		($7,896.6	)	($134.7	)	($310.3	)	$39.1		$6,118.0

See Notes to Consolidated Financial Statements.


4	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, (dollars in million)	2009			2008

Cash Flows From Operations
Net loss before preferred stock dividends	$	(1,960.6	)	$	(2,317.4	)
Adjustments to reconcile net loss to net cash flows from operations:
Provision for credit losses		1,123.9			398.9
Depreciation, amortization and accretion		695.7			635.3
Goodwill and intangible assets impairment charges		692.4			–
Loss (gains) on equipment, receivable and investment sales		171.9			(98.4	)
Valuation allowance for receivables held for sale		38.0			126.9
Warrant fair value adjustment		(70.6	)		–
(Gain) loss on debt and debt-related derivative extinguishments		(139.4	)		142.6
Provision (benefit) for deferred income taxes		33.4			(755.7	)
Decrease in finance receivables held for sale		11.3			147.9
Decrease in other assets		209.3			7.3
Increase in accrued liabilities and payables		69.8			476.9
Loss on disposal of discontinued operation, net of tax		–			1,863.6
Provision for credit losses – discontinued operation		–			608.5

Net cash flows provided by operations		875.1			1,236.4

Cash Flows From Investing Activities
Finance receivables extended and purchased		(13,534.3	)		(32,308.5	)
Principal collections of finance receivables and investments		15,724.0			29,103.9
Proceeds from asset and receivable sales		1,515.2			3,669.2
Purchases of assets to be leased and other equipment		(1,057.4	)		(1,372.7	)
Net (increase) decrease in short-term factoring receivables		549.4			(368.9	)
Net proceeds from sale of discontinued operation		44.2			340.6

Net cash flows provided by (used for) investing activities		3,241.1			(936.4	)

Cash Flows From Financing Activities
Net decrease in commercial paper		–			(2,760.3	)
Proceeds from the issuance of term debt		4,145.4			11,217.8
Repayments of term debt		(13,802.7	)		(7,664.6	)
Net increase in deposits		2,751.9			(743.7	)
Net repayments of non-recourse leveraged lease debt		(19.7	)		(15.9	)
Proceeds from sale of stock		7.6			1,535.4
Collection of security deposits and maintenance funds		516.1			1,257.5
Repayment of security deposits and maintenance funds		(459.3	)		(1,308.5	)
Treasury stock issuances		5.6			31.2
Cash dividends paid		(91.3	)		(100.6	)
Other		(69.7	)		(20.9	)

Net cash flows (used for) provided by financing activities		(7,016.1	)		1,427.4

Net (decrease) increase in cash and cash equivalents		(2,899.9	)		1,727.4
Unrestricted cash and cash equivalents, beginning of period		6,263.3			6,313.1

Unrestricted cash and cash equivalents, end of period	$	3,363.4		$	8,040.5

Supplementary Cash Flow Disclosures
Interest paid	$	1,287.7		$	1,646.4
Federal, foreign, state and local income taxes refunded, net	$	(67.9	)	$	(6.6	)
Supplementary Non Cash Flow Disclosures
Net transfer of finance receivables from held for investment to held for sale	$	412.4		$	1,334.3
Vendor receivables previously off-balance sheet and brought on-balance sheet	$	454.4		$	–
Vendor related debt previously off-balance sheet and brought on-balance sheet	$	454.4		$	–

See Notes to Consolidated Financial Statements.


Item 1: Consolidated Financial Statements	5

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation, Basis of Presentation

The accompanying consolidated financial statements include the accounts of CIT Group Inc. and its majority owned subsidiaries (“CIT” or the “Company”), and those variable interest entities (VIEs) where the Company is the primary beneficiary. All significant inter-company accounts and transactions have been eliminated. Results of operations of companies purchased are included from the dates of acquisition and for VIEs, from the dates that the Company became the primary beneficiary. Assets held in an agency or fiduciary capacity are not included in the consolidated financial statements. The Company accounts for investments in companies for which it owns a voting interest of 20 percent to 50 percent and for which it has the ability to exercise significant influence over operations and financial decisions using the equity method of accounting. These investments are included in other assets and the Company’s proportionate share of net income or loss is included in other income.

These financial statements, which have been prepared in accordance with the instructions to Form 10-Q, do not include all of the information and note disclosures required by accounting principles generally accepted in the United States (“GAAP”) and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The financial statements in this Form 10-Q have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of CIT’s financial position, results of operations and cash flows in accordance with GAAP.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates and assumptions.

As more fully described below, the global financial market crisis and negative economic conditions have materially and adversely affected CIT’s liquidity position and operating results. The Company has reported net losses since the second quarter of 2007 due primarily to deteriorating economic conditions that caused us to record provisions for credit losses, other than temporary impairment charges, restructuring charges, greater interest charges on debt and losses associated with asset sales at depressed prices. In addition to the adverse effects on our operations, our liquidity and funding strategy have been materially adversely affected by the on-going stress in the financial markets, our credit ratings downgrades, regulatory and cash restrictions and, since March 2007, reliance upon secured funding markets for liquidity. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming the Company is a going concern and do not reflect any adjustments that may arise from this uncertainty.

In July 2009, the Company determined that it would be unable to pay its obligations in the normal course of business in 2009 and service its debt in a timely fashion and, as a result, initiated restructuring efforts that include a new Credit Facility and an Offer for the August 17 Notes (both described below). Under the new Credit Facility, the Company agreed to work with and submit to a committee of lenders in the Credit Facility (the Steering Committee) a restructuring plan (the Plan) the intent of which would be to restructure CIT’s business and address the Company’s liquidity and capital positions over the near and longer terms. While formulation of the Plan is in the early stages, certain aspects of the Plan are described below under “Liquidity”.

Effective January 1, 2009 the Company prospectively adopted EITF 07-5 “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock.” Upon adoption of the standard, management determined the warrant issued to the U.S. Treasury in conjunction with the Trouble Asset Relief Program (TARP) no longer qualified as equity and should be accounted for as a derivative liability in accordance with provisions set forth in Statement of Financial Accounting Standards No. 133 “Accounting for Derivatives” (SFAS 133). As a result, the Company classified $281.9 million of amounts recorded in Paid-in Capital at January 1, 2009 to Other liabilities. On May 12, 2009, upon shareholder approval of the issuance of common stock related to the potential exercise of the warrant by the Treasury, the liability was reclassified to permanent equity in the amount of $211.2 million. The decline in the fair value of the warrant between January 1, 2009 and May 12, 2009 totaled $70.6 million, of which $95.8 million was added to other income in the first quarter (representing the first quarter reduction in the fair value of the warrant liability), and $25.2 million was charged to other income in the second quarter (representing the second quarter increase in the fair value of the warrant liability until the requirements were met to record it as equity).


6	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Liquidity

The Company’s business historically has been dependent upon access to both the secured and unsecured debt capital markets for liquidity and cost-efficient funding. The disruptions in the credit markets that began in 2007 limited the Company’s access to the unsecured debt markets. Downgrades in April and June 2009 in the Company’s short- and long-term credit and counterparty ratings, which are now well below investment grade, materially worsened the situation and had the effect of leaving the Company without access to any unsecured term debt markets.

As a result of these developments, and the Company’s inability to implement its funding strategies as a Bank Holding Company (“BHC”), the Company’s sources of funds are limited primarily to secured borrowings, where available, and cash from portfolio run-off and asset sales. The reliance on secured borrowings has resulted in significant additional costs to the Company due to higher interest rates and restrictions on the types of eligible assets and levels of advance rates in such secured facilities.

During the summer of 2008, the Company developed its BHC strategy, which was designed to give us a more stable and reliable funding source and a lower cost of capital. In connection with its BHC application, which was approved in December 2008 along with CIT’s participation in the TARP whereby the U.S. Department of the Treasury made an investment of $2.33 billion in CIT’s preferred stock, the Company presented a multi-step BHC strategy to the Federal Reserve and the Federal Deposit Insurance Corporation (“FDIC”). The BHC strategy contemplated an orderly transition from a capital markets funded business to a diversified funding model that had its recently converted state-chartered Utah bank as the primary operating subsidiary. The transition plan included (i) asset transfers from the Company’s non-bank subsidiaries to CIT Bank via exemptions under Section 23A of the Federal Reserve Act that would be funded by expanded deposit issuance through existing and new channels, (ii) transfers of bank-eligible personnel and systems into CIT Bank, and (iii) participation by the Company in the FDIC’s Temporary Liquidity Guarantee Program (“TLGP”). On November 12, 2008, simultaneous with filing its BHC applications, CIT applied for approval to transfer up to $30 billion of assets from its non-bank affiliates to CIT Bank pursuant to an exemption from Section 23A. Asset transfers under 23A would have provided liquidity to the Company and facilitated the transfer of businesses into the Bank. In April 2009, the Federal Reserve granted the Company a waiver under Section 23A to transfer $5.7 billion of government guaranteed student loans to CIT Bank. In connection with this transaction, CIT Bank assumed $3.5 billion in debt and paid $1.6 billion in cash to CIT.

On January 12, 2009, CIT applied for approval to participate in the FDIC’s TLGP. Participation in this program would have enabled CIT to issue government-guaranteed debt, which would have enhanced liquidity, reduced funding costs and supported business growth during the transition period.

On July 15, 2009, the Company was advised that there was no appreciable likelihood of additional government support being provided in the near term, through either participation in the TLGP or further approvals to transfer additional assets under our pending 23A exemption request. As a result, the Company is not able to shift its primary operating platforms to CIT Bank and will not issue government-guaranteed debt under TLGP, further reducing available liquidity options.

As a result of rating agency downgrades, negative media reports and lack of government approvals, during late June and into July, the Company experienced higher draws on financing commitments, including approximately $0.7 billion during the week of July 13 – 17, about twice the normal activity. However, during the latter half of July, the draws normalized and some repayments were received. Line draws, combined with an increased request by factoring customers to take advances against eligible receivables, degraded the Company’s liquidity position. As of July 31, 2009, financing commitments, excluding commitments not available for draw, were approximately $3.7 billion, including asset-based lending (ABL) facilities in which CIT is the lead agent (which in management’s judgment present the highest liquidity risk) of approximately $0.7 billion, $0.9 billion in ABL facilities in which CIT is a participant and $2.1 billion of primarily cash-flow based facilities, of which CIT was the lead in $0.7 billion and participant in $1.4 billion. See Note 12 – Commitments for further information.

The Company has significant maturities of unsecured debt in both the near term and future years. Estimated unsecured debt funding needs for the twelve months ending June 30, 2010 total approximately $8 billion. In the second half of 2009, the Company has unsecured debt maturities of approximately $3 billion. Estimated secured facilities maturities (which are generally repaid in tandem with underlying receivable maturities) are $6 billion for the twelve months ending June 30, 2010 and $4.5 billion for the second half of 2009. There are two facilities with approximately $1.6 billion of availability at June 30, 2009 that are subject to renewal over the next six months. If the facilities are not renewed, the assets already held will remain outstanding and the obligations will be repaid out of the cash flows from the assets. In order to satisfy the Company’s funding needs, the Company will need to extend debt maturities, or potentially sell assets to generate sufficient cash to retire the debt.

Term Loan Financing

On July 20, 2009, CIT entered into a senior secured term loan facility (the “Credit Facility”) for up to $3 billion with Barclays Bank PLC and other lenders. As of August 4, 2009, the Company had drawn the entire $3 billion in financing under the Credit Facility. The Company and certain of its subsidiaries are borrowers under the credit facility (collectively, the “Borrowers”). The Company and all current and future domestic wholly-owned subsidiaries of the Company, with the exception of CIT Bank and other regulated subsidiaries, special purpose entities, and immaterial subsidiaries, are guarantors of the Credit Facility (the “Guarantors”).


Item 1: Consolidated Financial Statements	7

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

advance, (ii) an unused line fee with respect to undrawn commitments at the rate of 1% per annum and (iii) a 2% exit fee on amounts prepaid or repaid and the unused portion of any commitment.

The Credit Facility is secured by a perfected first priority lien on substantially all unencumbered assets of the Borrowers and Guarantors, which includes 65% of the voting and 100% of the non-voting stock of other first-tier foreign subsidiaries (other than direct subsidiaries of the Company, in each case owned by a Guarantor), 100% of the stock of CIT Aerospace International and between 49% and 65% of certain other material non-U.S., non-regulated subsidiaries. Unencumbered assets at June 30, 2009 totaled approximately $36 billion.

Borrowings under the Credit Facility will be used for general corporate purposes and working capital needs and to purchase notes accepted for payment in the Offer (as defined below).

The Credit Facility includes a minimum collateral coverage covenant. The covenant requires the ratio of the book value of the collateral securing the Credit Facility to the loans outstanding thereunder to exceed 5 to 1 as of the end of each fiscal quarter commencing as of the fiscal quarter ending September 30, 2009, and the ratio of the fair value of the collateral securing the Credit Facility to the loans outstanding thereunder to exceed 3 to 1 as of the end of each fiscal year commencing with the fiscal year ending December 31, 2009. At July 31, 2009, the book value of the collateral securing the Credit Facility to the loans outstanding ratio was greater than 8 to 1.

The Credit Facility provides for the Company to continue to underwrite and conduct business activities in the ordinary course, but also contains affirmative and negative covenants, including, among other things and subject to certain exceptions, limitations on the ability of Borrowers and subsidiaries to incur additional indebtedness, grant liens, make material non-ordinary course asset sales, make certain restricted payments (including paying any dividends without the consent of a majority of the members of the Steering Committee comprised of six leading bondholders), make investments, engage in certain fundamental changes, engage in sale and leaseback transactions, engage in transactions with affiliates, and prepay certain indebtedness.

Borrowings under the Credit Facility may be prepaid, subject to a prepayment premium in the amount of 6.5% of the amounts prepaid or commitment reduced (the “Call Premium”), declining ratably to zero over the first 18 months following entry into the Credit Facility, provided that no Call Premium will apply if the borrowings are repaid as part of or following a restructuring plan for the Company and its Subsidiaries approved by a majority in number of the Steering Committee.

The Credit Facility contains provisions (i) requiring the Company and the Steering Committee to work together in good faith to promptly develop a mutually acceptable restructuring plan for the Company and its Subsidiaries and (ii) requiring the Company to adopt a restructuring plan acceptable to the majority in number of the Steering Committee by October 1, 2009. The Company currently expects to complete development of and begin executing on the restructuring plan prior to October 1.

Restructuring Plan

The Credit Facility requires management and the Steering Committee of the bondholder group to develop a comprehensive restructuring plan with the objectives of realizing maximum value by enhancing the Company’s capital and liquidity positions while positioning CIT for sustainable profitability. The Company also engaged third-party advisors to assist in the plan development and execution, which will address the following issues:

Business Model – Management will develop a business model that seeks to optimize our portfolio of businesses, organization structure and funding model. The business model could identify businesses or portfolios that may be liquidated or sold over time;
Business Size – The plan will address the optimal asset levels that can be supported by the funding model and right- size the corporate infrastructure to the new business scale;
Capital Structure – The plan will identify a target capital structure that is appropriate for the business model that would provide sufficient cushion against risk, meet and exceed all regulatory capital requirements and position the Company for a return to investment grade ratings;
Implementation Plan – The plan will identify a series of transactions, which will likely consist of debt for equity exchanges and maturity extension offers that, if successfully implemented, would enable the Company to achieve its targeted capitalization structure;
Bank Model – Management continues to believe that a bank model is a key element of a small-business focused commercial franchise. The plan will detail the core businesses that, subject to regulatory approvals, will operate in CIT Bank, and could possibly include a plan to reintroduce to regulators the transfer of business platforms into the bank; and
Deposit Strategy – Deposits, including retail deposits, are likely to be a key component to the funding model.


8	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

It is the Company’s intent to pursue its restructuring plan outside of bankruptcy court. However, the Company may need to seek relief under the U.S. Bankruptcy Code if the Company’s restructuring plan is unsuccessful, or if the Steering Committee is unwilling to agree to an out-of-court restructuring. This relief may include (i) seeking bankruptcy court approval for the sale of most or substantially all of our assets pursuant to section 363(b) of the U.S. Bankruptcy Code; (ii) pursuing a plan of reorganization; or (iii) seeking another form of bankruptcy relief, all of which involve uncertainties, potential delays and litigation risks.

Tender Offer for Floating Rate Senior Notes due August 17, 2009

On July 20, 2009 the Company commenced a cash tender offer for its outstanding Floating Rate Senior Notes due August 17, 2009 (the “August 17 Notes”) and the related letter of transmittal (the “Offer”). On August 3, the Company amended the terms of the offer to purchase any and all of its August 17 Notes for $875 for each $1,000 principal amount of outstanding August 17 Notes tendered and not validly withdrawn as total consideration in the Offer. The Offer was conditioned upon, among other things, holders of August 17 Notes tendering and not withdrawing an amount of such Notes equal to at least 58% of the aggregate principal amount of August 17 Notes outstanding (the “Minimum Condition”). The Minimum Condition was satisfied, therefore, the Company was able to use the proceeds of the Credit Facility to complete the Offer and repaid the August 17 Notes.

Asset Sales

The Company is currently developing a restructuring plan that includes various scenarios, some of which reflect possible asset or business sales. As these scenarios are still in development, the assets in these scenarios have not been classified in the balance sheet to assets held for sale or discontinued operations. As the restructuring plan is finalized, the Company will evaluate the appropriate accounting guidance for financial and non-financial assets and discontinued operations and present such, if any, in its financial statements as appropriate. The determination of the asset classification is highly judgemental and requires management to make good faith estimates based on information available at the time. Given market conditions, material mark-to-market impairment charges may result from such changes in classification.

Risks Associated With Liquidity Plans

Even assuming the successful implementation of all of the actions described above, including, among other things, the Offer, adoption of its restructuring plan, obtaining sufficient financing from third party sources to continue operations, and successfully operating its business, the Company may be required to execute asset sales (with 85% of the sale proceeds required to pay down the Credit Facility) or other capital generating actions over and above its planned activities to provide additional working capital and repay debt as it matures. In the event that we need to sell assets, cash proceeds could be at levels significantly below current carrying values, resulting in further capital reductions. The Company’s liquidity position could be further strained if the borrowers on lines of credit continue to access these lines or increase their rate of borrowing, resulting in a material adverse effect on its business.

As a result, the Company has initiated restructuring efforts, which include the previously discussed Credit Facility and Offer for the August 17 Notes and a broad restructuring plan, based on discussions with bondholders, which would result in improvements to the Company’s liquidity and capital positions.

Bank Holding Company and CIT Bank Status

The Company and CIT Bank are each subject to various regulatory capital requirements set by the Federal Reserve Board and the FDIC, respectively. Failure to meet minimum capital requirements can result in regulators taking certain mandatory, or in some circumstances discretionary actions that could have a direct material adverse effect on the Company. Losses during the first and second quarter of 2009 have reduced the Company’s level of Total Capital to slightly below the agreed-upon 13% level. Continued losses in future quarters may further reduce the Company’s Total Capital below the agreed-upon levels. The restructuring plan currently being developed by management and the Steering Committee is in part aimed at improving our capital levels.

If the Company does not maintain sufficient regulatory capital, the Company may become subject to enforcement actions (including being required to divest CIT Bank or CIT Bank becoming subject to FDIC conservatorship or receivership) or otherwise be unable to successfully execute its business plan. Such actions could have a material adverse effect on its business, results of operations, and financial position and could result in the Company seeking relief under the U.S. Bankruptcy Code.

Should the Company seek relief under the Bankruptcy Code, the Federal Reserve or the FDIC could take action to require the Company to divest its interest in CIT Bank or otherwise limit access to CIT Bank by the Company or its creditors.


Item 1: Consolidated Financial Statements	9

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 16, 2009, the FDIC and the Utah Department of Financial Institutions (the “UDFI”) each issued an order to cease and desist to CIT Bank in connection with the diminished liquidity of CIT. CIT Bank, without admitting or denying any allegations made by the FDIC and UDFI, consented and agreed to the issuances of the FDIC and the UDFI orders (together, the “Orders”). The Company does not believe that these cease and desist orders will have an immediate adverse impact on the Company based on the relatively small size of CIT Bank. However, in the long term, the Company will need to obtain some flexibility in developing CIT Bank or otherwise building a retail branch network in order to complete its transformation to a deposit funded institution.

Each of the Orders directs CIT Bank to take certain affirmative actions, including among other things, ensuring that it does not allow any “extension of credit” to CIT or any other affiliate of CIT Bank or engage in any “covered transaction,” declaring or paying any dividends or other reductions in capital and from increasing the amount of “Brokered Deposits” above the $5.527 billion held, without the prior written consent of the FDIC and the UDFI. As management assesses the Orders, we will originate new corporate finance business outside of the bank operations. Further, on August 14, 2009, CIT Bank provided to the FDIC and the UDFI a contingency plan that ensures the continuous, satisfactory servicing of CIT Bank’s loans. Both Orders prohibit making payments that represent a reduction in capital.

On August 12, 2009, the Company entered into a Written Agreement (the “Written Agreement”) between the Company and the Federal Reserve Bank of New York (the “Reserve Bank”). The Written Agreement requires regular reporting to the Reserve Bank, the submission of plans related to corporate governance, credit risk management, capital, liquidity and funds management, the Company’s business and the review and revision, as appropriate, of the Company’s consolidated allowances for loan and lease losses methodology. Prior written approval by the Reserve Bank is required for payment of dividends and distributions, incurrence of debt, other than in the ordinary course of business, and the purchase or redemption of stock. The Written Agreement requires notifying the Reserve Bank prior to the appointment of new directors or senior executive officers, and restrictions on indemnifications and severance payments.

Income Taxes

CIT’s tax provision for continuing operations for the quarter ended June 30, 2009 of $12.7 million equated to a (0.8)% effective tax rate, compared with an effective tax rate for continuing operations of 30.6% for the quarter ended June 30, 2008. The negative effective tax rate is the result of U.S. federal and state valuation allowances recorded against U.S. losses, taxes on international operations, and certain discrete tax items.

As of June 30, 2009, CIT had U.S. federal net operating losses of approximately $5.5 billion which will expire beginning in 2027. During 2008, a full valuation allowance was recorded against the federal and much of the state net deferred tax assets as CIT has not relied on future income from operations in recognizing the tax benefit for these losses. Tax benefit has been recorded to the extent that CIT has identified taxable income within the carryforward period related to reversing deferred taxes and FIN 48 liabilities.

Excluding discrete tax items (explained below), the 2009 annual effective tax rate was approximately 0.2%. CIT’s effective tax rate differs from the U.S. federal tax rate of 35% primarily due to federal and state tax valuation allowance, separate state and local income taxes, international results taxed at lower rates, and permanent differences between the book and tax treatment of certain items.

Included in the second quarter 2009 tax provision is $11.2 million in net tax expense comprised primarily of a $10.6 million increase in state tax valuation allowance. In addition, included is a $38.6 million net decrease in liabilities related to uncertain tax positions in accordance with Financial Accounting Standards Board Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes” and related interest, which is largely related to the settlement of the IRS audit and the lapse of applicable statutes of limitations. The decrease in FIN 48 liabilities was offset by an increase in U.S. tax valuation allowance. The Company believes that the total unrecognized tax benefits may decrease by $15 million to $40 million prior to June 30, 2010 in relation to the settlement of audits and the expiration of various statutes of limitations.

As of June 30, 2009, Federal income taxes have not been provided on approximately $1.5 billion of cumulative earnings of foreign subsidiaries that we have determined to be permanently reinvested. The restructuring plan may impact this assertion and, if so, the assertion that some or all of the unremitted foreign earnings are permanently reinvested may be reversed.

New Accounting Pronouncements

In June 2009, the FASB issued FASB Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles. SFAS 168 establishes the FASB Accounting Standards Codification (‘Codification’) as the exclusive source of authoritative reference for nongovernmental U.S. GAAP, except for SEC rules and interpretive releases, which are also authoritative U.S. GAAP for SEC registrants. The Codification will supersede all existing non-SEC accounting and reporting standards and references. The FASB’s intent is that the Codification retains existing GAAP without changing it, with the exception of certain guidance related to software revenue recognition. SFAS 168 and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009. Adoption of this statement will not have an impact on the Company’s consolidated financial statements.

In June 2009, the FASB issued FASB SFAS No. 167, Amendments to FASB Interpretation No. 46(R). SFAS 167 is a revision to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting, or similar rights, should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. SFAS 167 will require a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. SFAS 167 will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity. Early application is not permitted. The Company will adopt SFAS 167 effective January 1, 2010. The Company is currently evaluating the affect of this statement on its consolidated financial statements.

In June 2009, the FASB issued FASB SFAS No. 166, Accounting for Transfers of Financial Assets. SFAS 166 is a revision to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets and requires additional disclosures. SFAS 166 will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for a calendar year-end entity. Early application is not permitted. The Company will adopt SFAS 166 effective January 1, 2010. The Company is currently evaluating the affect of this statement on its consolidated financial statements.

In May 2009, the FASB issued FASB SFAS No. 165, Subsequent Events. This Statement establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued. This Statement affirms that an entity that has a current expectation of widely distributing its financial statements to shareholders and other financial statement users, including public entities, shall evaluate subsequent events through the date that the financial statements are issued, and disclose that date. It provides that an entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the


10	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimates inherent in the process of preparing financial statements. It also provides that an entity shall not recognize subsequent events that provide evidence about conditions that did not exist at the balance sheet date, although it does state that certain nonrecognized subsequent events are of such a nature that they must be disclosed to keep the financial statements from being misleading. As this Statement is modeled after the same principles as the subsequent event guidance already existing in the auditing literature, it is not expected that its adoption will result in significant changes in the subsequent events that the Company reports. This Statement is effective for interim or annual financial periods ending after June 15, 2009. Adoption of this statement did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position (FSP) FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and includes additional factors for determining whether there has been a significant decrease in market activity, and eliminates the proposed presumption that all transactions are distressed (not orderly) unless proven otherwise. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted this FSP effective April 1, 2009. Adoption of this statement did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FASB FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP changes existing guidance for determining whether an impairment is other than temporary to debt securities; and replaces the existing requirement that management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. This FSP is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted this FSP effective April 1, 2009. Adoption of this statement did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FASB FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP also requires those disclosures in summarized financial information at interim reporting periods. FSP 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted this FSP effective April 1, 2009. Adoption of this statement did not have an impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FASB FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. This FSP amends the guidance in FASB Statement No. 141 (Revised December 2007), Business Combinations, to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if it can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with FASB Statement No. 5 and FASB Interpretation (FIN) No. 14. The FASB also removed the subsequent accounting guidance for assets and liabilities arising from contingencies from Statement 141R, and carries forward the guidance in FASB Statement No. 141. This FSP is effective for business combinations on or after December 15, 2008. The Company did not have any business combinations during the six months ended June 30, 2009 and thus the adoption of this FSP did not have a significant effect on the Company’s financial statements. Additionally, there were no changes in the Company’s previously acquired deferred tax assets or uncertain tax positions.


Item 1: Consolidated Financial Statements	11

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – LOANS

The following tables present loans (includes loans and finance leases) for each segment based on obligor location.

Loans (dollars in millions)



	June 30, 2009						December 31, 2008
		Domestic		Foreign		Total		Domestic		Foreign		Total

Corporate Finance	$	14,918.9	$	3,134.7	$	18,053.6	$	17,201.3	$	3,567.5	$	20,768.8
Transportation Finance		1,960.4		463.7		2,424.1		2,146.1		501.5		2,647.6
Trade Finance		4,539.2		516.6		5,055.8		5,329.0		709.0		6,038.0
Vendor Finance		6,394.7		4,936.9		11,331.6		6,363.8		4,835.8		11,199.6
Consumer		11,830.2		35.0		11,865.2		12,438.7		33.9		12,472.6

Total	$	39,643.4	$	9,086.9	$	48,730.3	$	43,478.9	$	9,647.7	$	53,126.6

The following table contains information on loans evaluated for impairment and the related reserve for credit losses. Loans evaluated for impairment include receivables of $0.5 million or greater that are on non-accrual status. Excluded from impaired loans are: 1) certain individual commercial non-accrual loans for which the collateral value supports the outstanding balance and the continuation of earning status, 2) small ticket leasing and other homogeneous pools of loans, which are subject to automatic charge-off procedures, and 3) short-term factoring customer loans, generally having terms up to 30 days. Non-accruing consumer balances totaled $196.3 million and $194.1 million at June 30, 2009 and December 31, 2008, respectively.

Loans Evaluated for Impairment and Related Reserves (dollars in millions)

	June 30, 2009		December 31, 2008
Impaired loans	$	1,892.8	$	1,035.1
Impaired loans with specific allowance⁽¹⁾	$	1,393.5	$	803.3
Specific allowance⁽¹⁾	$	577.4	$	334.4
Impaired loans with no specific allowance⁽²⁾	$	499.3	$	231.8
Average investment in impaired loans	$	1,405.5	$	431.6

⁽¹⁾	Impaired loans are those loans whose estimated fair value is less than the current recorded value. The allowance is the difference between these two amounts.

⁽²⁾	In these cases, the expected proceeds from collateral liquidation and cash flow sources are currently expected to be sufficient to recover the receivable balances.

The increase in the impaired loans reflects the overall trend in non-accrual loans and is primarily attributed to Corporate Finance.


12	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – RESERVE FOR CREDIT LOSSES

The following table presents changes in the reserve for credit losses for continuing operations

At or for the Periods Ended June 30, (dollars in millions)



	Quarters Ended						Six Months Ended
	2009			2008			2009			2008

Balance, beginning of period	$	1,316.3		$	714.8		$	1,096.2		$	574.3

Provision for credit losses		588.5			152.2			1,123.9			398.9
Reserve changes relating to foreign currency translation, other(1)		(10.5	)		0.5			(12.7	)		(7.6	)

Net additions to the reserve for credit losses		578.0			152.7			1,111.2			391.3

Charged-off – finance receivables		(375.8	)		(101.2	)		(703.0	)		(213.9	)
Recoveries of amounts previously charged-off		19.9			14.5			34.0			29.1

Net credit losses		(355.9	)		(86.7	)		(669.0	)		(184.8	)

Balance, end of period	$	1,538.4		$	780.8		$	1,538.4		$	780.8

Reserve for credit losses as a percentage of finance receivables								3.16	%		1.47	%
Reserve for credit losses (excluding specific reserves) as a
percentage of finance receivables, excluding guaranteed student
loans⁽²⁾								2.28	%		1.34	%

⁽¹⁾	Amounts reflect reserve reductions for portfolio sales and reserves established for estimated losses inherent in portfolios acquired through purchases or business combinations, as well as foreign currency translation adjustments.

⁽²⁾	Loans guaranteed by the U.S. government are excluded from the calculation.

NOTE 4 – GOODWILL AND INTANGIBLE ASSETS

The following table summarizes goodwill and intangible assets, net balances by segment:

Goodwill and Intangible Assets (dollars in millions)



	Corporate Finance			Trade Finance			Vendor Finance			Total

Goodwill
Balance at December 31, 2008	$	297.4		$	270.7		$	–		$	568.1
Activity		(1.3	)		0.8			–			(0.5	)
Impairment charge		(296.1	)		(271.5	)		–			(567.6	)

Balance at June 30, 2009	$	–		$	–		$	–		$	–

Intangible Assets
Balance at December 31, 2008	$	22.5		$	95.7		$	12.3		$	130.5
Activity		0.2			0.1			0.3			0.6
Amortization		(2.0	)		(3.5	)		(0.8	)		(6.3	)
Impairment charge		(20.7	)		(92.3	)		(11.8	)		(124.8	)

Balance at June 30, 2009	$	–		$	–		$	–		$	–

The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. The Company has performed goodwill impairment testing on a quarterly basis since the beginning of 2008 and previously recorded impairment charges for its Consumer segment in the fourth quarter of 2007 and for its Vendor Finance segment during the third quarter of 2008. Goodwill impairment testing is performed at the segment (or “reporting unit”) level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to


Item 1: Consolidated Financial Statements	13

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.

Goodwill and intangible assets impairment testing involves management judgment, requiring an assessment of whether the carrying value of the reporting units can be supported by the fair value of the individual reporting unit using accepted valuation techniques. In applying these methodologies this quarter, the Company analyzed a number of variables, including actual operating results, future business plans, economic projections and market data.

The Company performed goodwill impairment testing at June 30, 2009, taking into account that the Company’s common stock has continued to trade below book value per share throughout 2009; coupled with the fact that the Company’s funding strategy and liquidity position since the first quarter of 2009 have been materially adversely affected by the ongoing stress in the credit markets, net losses, credit ratings downgrades, the decision by regulators not to provide access to TLGP or additional 23A asset transfers, and regulatory and cash restrictions.

Based on the results of our analysis as of June 30, 2009, CIT recorded a pretax goodwill impairment charge of $567.6 million and an intangible asset impairment pretax charge of $124.8 million. As of June 30, 2009, the Company has no goodwill or intangible assets remaining. The charges do not impact cash flows or negatively affect Tier 1 and Total Regulatory Capital Ratios, Tangible Capital or the Company’s liquidity position.

NOTE 5 – DEBT


Long-term Debt	June 30, 2009		December 31, 2008

Bank credit facilities	$	3,100.0	$	5,200.0
Secured borrowings		17,635.3		19,084.4
Senior unsecured notes – variable		7,451.7		12,754.4
Senior unsecured notes – fixed		23,801.7		24,613.0
Junior, subordinated notes and convertible equity units		2,098.9		2,098.9

Total debt	$	54,087.6	$	63,750.7

The following table includes information relating to the bank line facilities drawn in March 2008.

Bank Lines Drawn (dollars in millions)


Maturity Date	Original Term	# of Banks	Total Facility Amount

April 13, 2010	5 Year	27	$	2,100
December 6, 2011	5 Year	35		1,000

			$	3,100

Interest on each of these facilities is based on a credit ratings grid, with the interest rate measured as a spread in basis points over LIBOR, increasing if the Company’s credit ratings decrease. The decline of CIT’s credit ratings to below investment grade increased the total weighted average interest rate to the highest level under the facilities at approximately LIBOR plus 74 basis points. The current rates are LIBOR plus 45 bps for the 2011 tranche and LIBOR plus 88 bps for the 2010 tranche. The maturities of these facilities reflect the date upon which the Company must repay the outstanding balance, with no option to extend the term for repayment.

The following table summarizes all secured borrowings by type of collateral for continuing operations.


14	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Secured Borrowing and Pledged Asset Summary (dollars in millions)



	June 30, 2009				December 31, 2008
	Secured Borrowing		Assets Pledged		Secured Borrowing		Assets Pledged
Consumer (student lending)	$	7,900.0	$	10,358.2	$	9,326.2	$	10,410.0
Trade Finance (factoring receivable)^⁽¹⁾		926.0		3,137.2		1,043.7		4,642.9
Corporate Finance⁽²⁾		2,323.7		3,512.6		2,539.8		3,785.6
Corporate Finance⁽³⁾		–		–		603.8		694.1
Corporate Finance (small business lending)⁽²⁾		141.9		249.8		140.1		253.9
Corporate Finance (energy project finance)		270.2		270.6		244.9		244.9
Corporate Finance⁽⁴⁾		292.4		365.1		79.5		103.2
Vendor Finance (acquisition financing)		287.4		553.0		592.5		878.6
Vendor Finance⁽⁵⁾		776.8		1,007.1		2,107.1		2,946.7
Vendor Finance⁽⁶⁾		954.4		1,093.2		–		–
Vendor Finance⁽⁷⁾		486.3		648.6		–		–
Shared facility (Corporate Finance/Vendor Finance)		651.0		697.6		218.3		314.0

Subtotal – Finance Receivables		15,010.1		21,893.0		16,895.9		24,273.9
Transportation Finance – Aero⁽²⁾⁽⁹⁾		588.5		1,471.2		617.3		1,461.5
Transportation Finance – Rail⁽⁹⁾		973.3		1,464.5		1,026.1		1,514.0
Transportation Finance – ECA⁽⁸⁾⁽⁹⁾		1,063.4		1,282.8		545.1		648.2

Total	$	17,635.3	$	26,111.5	$	19,084.4	$	27,897.6

⁽¹⁾	Excludes credit balances of factoring clients.

⁽²⁾	Reflects advances associated with the Goldman Sachs facility.

⁽³⁾	Includes financing executed via total return swaps under which CIT retains control of and risk associated with the pledged assets.

⁽⁴⁾	Reflects advances associated with the Wells Fargo facility.

⁽⁵⁾	Reflects the repurchase of assets previously securitized off-balance sheet and the associated secured debt.

⁽⁶⁾	Equipment lease securitization qualified for the Federal Reserve Bank of New York’s Term Asset-Backed Securities Loan Facility (TALF).

⁽⁷⁾	Reflects the repurchase of assets previously sold and the associated secured debt.

⁽⁸⁾	Secured aircraft financing facility for the purchase of specified Airbus aircraft under operating leases.

⁽⁹⁾	Equipment under operating lease.

The assets related to the above secured borrowings are primarily owned by special purpose entities that are consolidated in the CIT financial statements, and the creditors of these special purpose entities have received ownership and/or security interests in the assets. These special purpose entities are intended to be bankruptcy remote so that such assets are not available to the creditors of CIT (or any affiliates of CIT) that sold assets to the respective special purpose entities. The transactions do not meet the accounting guidance requirements for sales treatment and are, therefore, recorded as secured borrowings in the Company’s financial statements.

In July 2009, the Company entered into a $3 billion Credit Facility, as discussed in NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Senior Unsecured Notes Summary (dollars in millions)


	June 30, 2009						December 31, 2008
	CIT Group Inc.		Subsidiaries		Total		Total

Variable – Rate	$	7,324.3	$	127.4	$	7,451.7	$	12,754.4
Fixed – Rate		20,602.8		3,198.9		23,801.7		24,613.0

Total senior unsecured notes	$	27,927.1	$	3,326.3	$	31,253.4	$	37,367.4

Included in our unsecured debt is $2.2 billion of unsecured debt issued by our wholly owned finance subsidiary, CIT Group Funding Company of Delaware (CITGF) and fully guaranteed by CIT Group Inc.. At the time that the debt was issued, CITGF was a Canadian legal entity. In December, 2007, as part of an internal tax reorganization, we redomesticated the legal entity in Delaware. CITGF is a finance company. Its sole business was to issue debt, the proceeds of which were lent to an affiliate to fund its business. CITGF’s assets consist of notes receivable from this affiliate.

NOTE 6 – DERIVATIVE FINANCIAL INSTRUMENTS

As part of managing economic risk and exposure to interest rate, foreign currency and, in limited instances, credit risk, CIT enters into various derivative transactions in over-the-counter markets with other financial institutions. To ensure both appropriate use as a hedge and to achieve hedge accounting treatment, whenever possible, derivatives entered into are designated according to a hedge objective against a specific liability, forecasted transaction or, in limited instances, assets. The critical terms of the derivatives, including notional amounts, rates, indices, and maturities, match the related terms of the underlying hedged items. CIT does not enter into derivative financial instruments for speculative purposes.


Item 1: Consolidated Financial Statements	15

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Upon executing a derivative contract, the Company designates the derivative as either a qualifying hedge (in accordance with accounting literature), an economic hedge not designated as a hedge, or held for trading. The designation may change based upon management’s reassessment or changing circumstances. Derivatives utilized by the Company principally include swaps and forward settlement contracts. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. Financial forward settlement contracts are agreements to buy or sell a quantity of a financial instrument, index, currency or commodity at a predetermined future date, and rate or price. CIT also executes interest rate swaps with customers (and offsetting swaps with financial institutions) in connection with certain lending arrangements.

Major portfolio hedge strategies include: (1) Interest rate risk management to match fund asset portfolio growth. Interest rate swaps, whereby CIT pays a fixed interest rate and receives a variable interest rate, are utilized to hedge cash flows relating to specific variable-rate debt instruments. These transactions are classified as cash flow hedges and effectively convert variable-rate debt to fixed-rate debt. Interest rate swaps, whereby CIT pays a variable interest rate and receives a fixed interest rate, are utilized to hedge specific fixed-rate debt. These transactions are classified as fair value hedges and effectively convert fixed-rate debt to a variable-rate debt. (2) Currency risk management to hedge foreign funding sources. Cross-currency swaps, whereby CIT pays U.S. dollars and receives various foreign currencies, are utilized to effectively convert foreign-denominated debt to U.S. dollar debt. These transactions are classified as either foreign currency cash flow or foreign currency fair value hedges. (3) Currency risk management to hedge investments in foreign operations. Cross-currency swaps and foreign currency forward contracts, whereby CIT pays various foreign currencies and receives U.S. dollars, are utilized to effectively convert foreign currency denominated Net Investments to U.S. dollar denominated Net Investment. These transactions are classified as foreign currency net investment hedges, or foreign currency cash flow hedges, with resulting gains and losses reflected in accumulated other comprehensive income as a separate component of equity.

Derivative instruments are recognized in the balance sheet at their fair values in derivative counterparty assets or liabilities in the case of derivatives qualifying for hedge accounting. Derivatives that do not qualify for hedge accounting are recognized in the balance sheet as trading assets or liabilities. Changes in fair values are recognized currently in earnings, unless the derivatives qualify as cash flow hedges. For derivatives qualifying as hedges of future cash flows, the effective portion of changes in fair value is recorded temporarily in accumulated other comprehensive income as a separate component of equity, and contractual cash flows, along with the related impact of the hedged items, continue to be recognized in earnings. Any ineffective portion of a hedge is reported in current earnings. Amounts accumulated in other comprehensive income are reclassified to earnings in the same period that the hedged transaction impacts earnings. Effective as of July 20, 2009, the date that the Company announced that it would be commencing a comprehensive restructuring of its liabilities, the Company’s cash flow hedges no longer met the criteria for hedge accounting. The changes in fair value of these derivatives subsequent to July 20, 2009 will be recorded in earnings. Upon finalization and approval of the restructuring plan by the Company and Steering Committee, the amount of unrealized losses on the cash flow hedges recorded in accumulated other comprehensive loss ($34.9 million as of June 30, 2009) may be charged to earnings.

The fair value of the Company’s derivative contracts is reflected net of cash paid or received pursuant to credit support agreements and is reported on a gross-by-counterparty basis in the Company’s consolidated statements of financial condition.

CIT uses both the “short-cut” method and the “long-haul” method to assess hedge effectiveness. The short-cut method is applied to certain interest rate swaps used for fair value and cash flow hedges of term debt if certain strict criteria are met. This method allows for the assumption of no hedge ineffectiveness if these strict criteria are met at the inception of the derivative, including matching of the critical terms of the debt instrument and the derivative. As permitted under the shortcut method, no further assessment of hedge effectiveness is performed for these transactions.

The long-haul method is applied to other interest rate swaps, non-compound cross-currency swaps and foreign currency forward exchange contracts. For hedges where we use the long-haul method to assess hedge effectiveness, we document, both at inception and over the life of the hedge, at least quarterly, our analysis of actual and expected hedge effectiveness. For hedges of foreign currency net investment positions we apply the “forward” method whereby effectiveness is assessed and measured based on the amounts and currencies of the individual hedged net investments and notional amounts and underlying currencies of the derivative contract. For those hedging relationships in which the critical terms of the entire debt instrument and the derivative are identical, and the credit-worthiness of the counterparty to the hedging instrument remains sound, there is an expectation of no hedge ineffectiveness so long as those conditions continue to be met.

The net interest differential, including premiums paid or received, if any, on interest rate swaps, is recognized on an accrual basis as an adjustment to finance revenue or as interest expense to correspond with the hedged position. In the event of early termination of derivative instruments, the gain or loss is reflected in earnings as the hedged transaction is recognized in earnings.

Derivative instruments are transacted with CIT customers using interest rate swaps and other derivatives with our customers as well as derivative transactions with other financial institutions with like terms. These derivative instruments do not qualify for hedge accounting. As a result, changes in fair value of these derivative instruments are reflected in current earnings. These


16	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

derivative instruments, in addition to others that do not qualify for hedge accounting, are recognized at fair value in the balance sheet as trading assets and liabilities.

CIT is exposed to credit risk to the extent that the counterparty fails to perform under the terms of a derivative instrument. This risk is measured as the market value of derivative transactions with a positive fair value, reduced by the effects of master netting agreements. We manage this credit risk by requiring that all derivative transactions be conducted initially with counterparties rated investment grade by nationally recognized rating agencies, with the majority of the counterparties rated “AA” or higher, and by setting limits on the exposure with any individual counterparty. Accordingly, counterparty credit risk is not significant.

CIT’s recent ratings downgrades have given its derivative counterparties the option to terminate all of the trades under an ISDA agreement by way of the Additional Termination Event provision. As of August 17, 2009, CIT received notice of terminations on 25 of our derivative instruments with a notional balance of $4.4 billion and a fair value of $40.9 million as of June 30, 2009. In addition, others (predominantly those who have a mark-to-market liability to CIT) have sent Reservation of Rights letters. These letters are intended to make it clear that the banks are not exercising their rights to terminate at the present time, but are reserving their rights to do so in the future.

The fair value of derivative financial instruments is set forth below:


	Assets			Liabilities
At June 30, 2009	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Cross currency swaps	Derivative counterparty assets	$	472.4	Derivative counterparty liabilities	$	(47.7	)
Interest rate swaps	Derivative counterparty assets		373.7	Derivative counterparty liabilities		(118.1	)
Foreign currency forward
exchange contracts	Derivative counterparty assets		120.2	Derivative counterparty liabilities		(16.9	)

Derivatives qualifying as
SFAS 133 hedges			966.3			(182.7	)

Cross currency swaps	Trading assets – derivatives		6.7	Trading liabilities – derivatives		(20.6	)
Interest rate swaps	Trading assets – derivatives		102.3	Trading liabilities – derivatives		(90.2	)
Foreign currency forward
exchange contracts	Trading assets – derivatives		42.2	Trading liabilities – derivatives		(28.6	)

Non-qualifying derivatives			151.2			(139.4	)

Total		$	1,117.5		$	(322.1	)

During the quarter and six months ended June 30, 2009 the Company recognized a gain of $3.9 million on the ineffective portion of derivatives qualifying as hedges of future cash flows.

During the quarter and six months ended June 30, 2009 the Company recognized losses of $14.3 million and $13.3 million, respectively, on the ineffective portion of derivatives qualifying as fair value hedges.

The following table presents the effect of derivative instruments not designated as hedging instruments under SFAS 133 on the statement of operations.


		Gain / (Loss)
Derivatives Not Designated as Hedging Instruments under SFAS 133	Line-item of Gain / (Loss) Recognized in Statement of Income	Quarter			Six Months
		Ended June 30, 2009

Cross currency swaps	Other income (expense)	$	(32.5	)	$	(41.2	)
Interest rate swaps	Other income (expense)		29.7			31.1
Foreign currency forward exchange contracts	Other income (expense)		(4.9	)		0.8
Warrant	Other income (expense)		(25.2	)		70.6

Derivatives not qualifying as SFAS 133 hedges		$	(32.9	)	$	61.3


Item 1: Consolidated Financial Statements	17

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents additional information regarding qualifying SFAS 133 hedges, specifically the notional principal value of interest rate swaps by class and the corresponding hedged positions.

Interest Rate Swaps (dollars in millions)


June 30, 2009		December 31, 2008		Hedged Item	Hedge Classification

Variable rate to fixed rate swaps^⁽¹⁾
$	2,891.4	$	4,975.1	Cash flow variability associated with specific variable-rate debt	Cash flow

Fixed rate to variable rate swaps ⁽²⁾
$	8,777.0	$	9,778.1	Specific fixed rate debt	Fair value

⁽¹⁾	CIT pays a fixed rate of interest and receives a variable rate of interest. These swaps hedge the cash flow variability associated with specific variable rate debt.

⁽²⁾	CIT pays a variable rate of interest and receives a fixed rate of interest. These swaps hedge specific fixed rate debt instruments.

The following table presents the notional principal amounts of cross-currency swaps by class and the corresponding hedged positions.

Cross-currency Swaps (dollars in millions)



June 30, 2009		December 31, 2008		Hedged Item	Hedge Classification

$	3,250.5	$	4,138.1	Foreign denominated debt	Foreign currency fair value
	1,749.6		164.4	Foreign currency equity investments in subsidiaries	Foreign currency net investment
	63.8		63.8	Foreign denominated fixed-rate debt	Foreign currency cash flow
	3.3		3.4	Foreign currency loans to subsidiaries	Foreign currency cash flow

$	5,067.2	$	4,369.7

CIT sells various foreign currencies forward. These contracts are designated as either cash flow hedges of specific foreign denominated intercompany receivables or as net investment hedges of foreign denominated investments in subsidiaries. During the first quarter of 2009, approximately $1 billion notional principal amount of foreign currency forward exchange contracts hedging ‘Foreign currency equity investments in subsidiaries’ matured. We replaced these forward contracts with cross-currency contracts.

The following table presents the notional principal amounts of foreign currency forward exchange contracts and the corresponding hedged positions.


18	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Forward Exchange Contracts (dollars in millions)


June 30, 2009		December 31, 2008		Hedged Item	Hedge Classification
$	224.3	$	521.0	Foreign currency loans to subsidiaries	Foreign currency cash flow
	2,270.6		3,584.3	Foreign currency equity investments in subsidiaries	Foreign currency net investment

$	2,494.9	$	4,105.3

The table that follows summarizes the nature and notional amount of economic hedges that do not qualify for hedge accounting under SFAS 133.

Non-hedge Accounting Derivatives (dollars in millions)


June 30, 2009		December 31, 2008		Type of Swaps/ Caps
$	8,025.4	$	9,731.1	US dollar interest rate swaps
	4,222.3		5,713.2	Interest rate caps
	234.6		408.7	Cross-currency swaps
	203.6		220.7	Foreign currency interest rate swaps
	–		39.0	Credit default swaps
	1,461.8		940.0	Foreign exchange forward contracts

$	14,147.7	$	17,052.7	Non-Hedge Accounting Derivatives

U.S. interest rate swap contracts in the table above relate to the following: (1) $1.6 billion at June 30, 2009 and $2.3 billion at December 31, 2008 in notional amount of interest rate swaps related to customer derivative programs, (2) $3.9 billion in basis swaps executed in December 2007 in conjunction with secured borrowings collateralized by student loans, (3) $1.2 billion in U.S. Dollar interest rate swaps (approximately $460.6 million each in offsetting float to fixed and fixed to float) related to an on-balance sheet Vendor Finance securitization transaction, (4) $0.9 billion in interest rate swaps relating to aerospace securitizations and (5) $0.4 billion of U.S. dollar interest rate swaps formerly hedging the commercial paper program and certain fixed rate debt, for which hedge accounting was discontinued in the first quarter of 2008. CIT has also extended $2.7 billion at June 30, 2009 and $4.0 billion at December 31, 2008 in interest rate caps in connection with its customer derivative program. The notional amounts of derivatives related to the customer program include both derivative transactions with CIT customers, as well as offsetting transactions with third parties with like notional amounts and terms.

CIT also has certain cross-currency swaps, certain U.S. and Canadian dollar interest rate swaps, and interest rate caps that are economic hedges of certain interest rate and foreign currency exposures. In addition, CIT has entered into credit default swaps, with original terms of 5 years, to economically hedge certain CIT credit exposures. Further, as discussed in Note 5 – Debt, the securities based borrowing facility with GSI is structured and documented as a total return swap (TRS). The amount available for advances under the TRS is accounted for as a derivative financial instrument; to the extent amounts have been advanced to the Company, the TRS notional is not accounted for as a derivative financial instrument because to do so would double count the risks and rewards of owning the underlying encumbered assets. At June 30, 2009, the estimated fair value of the contract in a hypothetical transfer is not significant.

In addition to the amounts in the preceding table, CIT had $533.1 million and $744.0 million in notional amount of interest rate swaps outstanding with securitization trusts at June 30, 2009 and December 31, 2008 to insulate the trusts against interest rate risk. CIT entered into offsetting swap transactions with third parties totaling $533.1 million and $744.0 million in notional amount at June 30, 2009 and December 31, 2008 to insulate the Company from the related interest rate risk.


Item 1: Consolidated Financial Statements	19

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The total comprehensive loss before preferred dividends for the quarter ended June 30, 2009 was $1.5 billion, versus $2.0 billion in the prior year quarter. For the six months ended June 30, 2009 and 2008, the balances were losses of $1.9 billion and $2.3 billion. The following table details the components of accumulated other comprehensive income, net of tax.

Accumulated Other Comprehensive Income (dollars in millions)


	June 30, 2009			December 31, 2008

Foreign currency translation adjustments	$	(2.7	)	$	31.3
Unrealized loss on equity and securitization investments		(3.6	)		(1.3	)
Benefit plan net (loss) and prior service (cost), net of tax		(93.5	)		(98.7	)
Changes in fair values of derivatives qualifying as cash flow hedges		(34.9	)		(136.9	)

Total accumulated other comprehensive loss	$	(134.7	)	$	(205.6	)

The change in the foreign currency translation adjustments as of June 30, 2009 reflects the strengthening of the U.S. dollar in relation to various foreign currencies, including the Euro and the Canadian Dollar, partially offset by corresponding hedging activity, on an after tax basis.

The change in the unrealized loss on equity and securitization investments primarily reflects the change in the fair value of these assets.

The change in fair values of derivatives qualifying as cash flow hedges related to variations in market interest rates, as these derivatives hedge the interest rate variability associated with an equivalent amount of variable-rate debt. See Note 6 – Derivative Financial Instruments for additional information.

The unrealized loss as of June 30, 2009 reflects lower market interest rates since the inception of the hedges. The Accumulated Other Comprehensive Loss (along with the corresponding swap asset or liability) will be adjusted as market interest rates change over the remaining lives of the swaps. Assuming no change in interest rates, approximately $19.9 million, net of tax, of the Accumulated Other Comprehensive Loss relating to derivatives qualifying as cash flow hedges as of June 30, 2009 is expected to be reclassified to earnings over the next twelve months as contractual cash payments are made.

NOTE 8 – FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

Assets and liabilities measured at estimated fair value on a recurring basis are summarized below. Such assets and liabilities are classified in their entirety based on the highest priority ranking of input that is significant to the fair value measurement. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and the determination of fair value requires significant judgment or estimation. Financial assets at estimated fair value classified within Level 3 totaled $169.8 million, or 0.2% of total assets as of June 30, 2009.


20	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis (dollars in millions)


June 30, 2009	Total		Level 1		Level 2		Level 3
Assets
Securities available for sale	$	26.8	$	18.9	$	7.9	$	–
Retained interests in securitizations and other investments		169.5		–		–		169.5
Trading assets at fair value – derivatives		151.2		–		151.2		–
Derivative counterparty assets at fair value		966.3		–		966.0		0.3

Total Assets	$	1,313.8	$	18.9	$	1,125.1	$	169.8

Liabilities
Trading liabilities at fair value – derivatives	$	139.4	$	–	$	139.4	$	–
Derivative counterparty liabilities at fair value		182.7		–		166.8		15.9

Total Liabilities	$	322.1	$	–	$	306.2	$	15.9

December 31, 2008
Assets
Equity Investments (in Other Assets)	$	88.5	$	88.5	$	–	$	–
Retained interests in securitizations		229.4		–		–		229.4
Trading assets at fair value – derivatives		139.4		–		139.4		–
Derivative counterparty assets at fair value		1,489.5		–		1,471.9		17.6

Total Assets	$	1,946.8	$	88.5	$	1,611.3	$	247.0

Liabilities
Trading liabilities at fair value – derivatives	$	127.4	$	–	$	127.4	$	–
Derivative counterparty liabilities at fair value		433.7		–		411.3		22.4

Total Liabilities	$	561.1	$	–	$	538.7	$	22.4

Securities available for sale

Securities available for sale category includes available-for-sale marketable equity securities, whose fair value is determined using quoted market prices. Such items are classified in Level 1. This category also includes debt securities that are not actively traded on an open market. The fair value of these securities were obtained through the broker and based on the actual trades. Such securities are classified in Level 2.

Retained Interests in Securitizations

Retained interests from securitization activities do not trade in an active, open market with readily observable prices. Accordingly, the retained interests fall within Level 3 of the fair value hierarchy and the fair value is estimated using discounted cash flow (“DCF”) models. Significant assumptions, including estimated loan pool credit losses, prepayment speeds and discount rates, are utilized to estimate the fair values of retained interests, both at the date of the securitization and in subsequent quarterly valuations. The assumptions reflect the Company’s recent historical experience and anticipated trends with respect to portfolio performances rather than observable inputs from similar transactions in the marketplace. Changes in assumptions may have a significant impact on the valuation of retained interests.

Derivatives

The Company’s derivative contracts are not generally listed on an exchange. Thus the derivative positions are valued using models in which the inputs are predominately determined using readily observable market data. The models utilized reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit quality of both the counterparty and CIT. Credit risk is factored into the fair value of derivative positions via a credit adjustment based upon observable market data such as the counterparty’s credit default swap (CDS) spreads, in the case of net asset positions, and CIT’s CDS spreads, in the case of net liabilities. In measuring the credit adjustment, the application of netting by counterparty is consistent with the ISDA master agreements that govern the terms and conditions of the Company’s derivative transactions.

The majority of the Company’s derivatives including interest rate swaps and option contracts fall within Level 2 of the fair value hierarchy because the significant inputs to the models are readily observable in actively quoted markets. Selected foreign currency interest rate swaps, two CPI index-based swaps, and a securities-based borrowing facility structured and documented as a total return swap (TRS), where inputs are not readily observable market parameters, fall within Level 3 of the fair value hierarchy. Receivables and payables are reported on a gross-by-counterparty basis.


Item 1: Consolidated Financial Statements	21

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Level 3 Gains and Losses

The tables below set forth a summary of changes in the estimated fair value of the Company’s Level 3 financial assets and liabilities as of the quarter and six months ended June 30, 2009 and 2008.


	Total			Retained Interests in securitizations			Derivatives
March 31, 2009	$	194.5		$	192.0		$	2.5
Gains or losses realized/unrealized
Included in other income	(22.8		)		1.0			(23.8	)
Included in other comprehensive income		7.0			1.3			5.7
Other net	(24.8		)		(24.8	)		–

June 30, 2009	$	153.9		$	169.5		$	(15.6	)

December 31, 2008	$	224.6		$	229.4		$	(4.8	)
Gains or losses realized/unrealized
Included in other income	(40.3		)		(12.9	)		(27.4	)
Included in other comprehensive income		14.9			(1.7	)		16.6
Other net	(45.3		)		(45.3	)		–

June 30, 2009	$	153.9		$	169.5		$	(15.6	)

March 31, 2008	$	1,121.5		$	1,129.9		$	(8.4	)
Gains or losses realized/unrealized
Included in other income		(19.8	)		(10.9	)		(8.9	)
Included in other comprehensive income		(8.8	)		(0.9	)		(7.9	)
Other net		98.2			98.2			–

June 30, 2008	$	1,191.1		$	1,216.3		$	(25.2	)

December 31, 2007	$	1,173.3		$	1,177.5		$	(4.2	)
Gains or losses realized/unrealized
Included in other income		(40.6	)		(29.4	)		(11.2	)
Included in other comprehensive income		(14.7	)		(4.9	)		(9.8	)
Other net		73.1			73.1			–

June 30, 2008	$	1,191.1		$	1,216.3		$	(25.2	)

The loss on Level 3 derivatives in the table above, related to certain cross-currency swaps that economically hedge currency exposures, but do not qualify for hedge accounting, was essentially offset by losses on corresponding currency transactional exposures.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Certain assets and liabilities are measured at estimated fair value on a non-recurring basis. These instruments are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). The following table presents the financial instruments on the Consolidated Balance Sheet by caption and by level within the valuation hierarchy (as described above) as of June 30, 2009, and December 31, 2008 for which a non-recurring change in fair value has been recorded.


			Fair Value Measurements at Reporting Date Using:
June 30, 2009	Total		Level 1	Level 2		Level 3			Total Gains and (Losses)
Assets
Assets Held for Sale	$	427.3	$ –	$	427.3		$	–	$	(37.9	)
Debt held to maturity		2.6	–		–			2.6		(1.0	)
Investments		9.7	–		–			9.7		(7.0	)
Impaired loans		1,216.1	–		–			1,216.1		(385.8	)

Total	$	1,655.7	$ –	$	427.3		$	1,228.4	$	(431.7	)


	Fair Value Measurements at Reporting Date Using:
December 31, 2008	Total		Level 1		Level 2		Level 3		Total Gains and (Losses)
Assets
Assets Held for Sale	$	–	$	–	$	–	$	–	$	–
Impaired loans		774.5		–		–		774.5		(289.8	)

Total	$	774.5	$	–	$	–	$	774.5	$	(289.8	)

Assets held for sale

Assets held for sale are comprised of loans and operating lease equipment. The estimated fair value of loans classified as held for sale is calculated using observable market information, including bids from prospective purchasers and pricing from similar


22	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

market transactions where available. Where bid information is not available for a specific loan, the valuation is principally based upon recent transaction prices for similar loans that have been sold. These comparable loans share characteristics that typically include industry, rating, capital structure, seniority, and consideration of counterparty credit risk. In addition, general market conditions, including prevailing market spreads for credit and liquidity risk, are also considered in the valuation process. Loans held for sale are generally classified within Level 2 of the valuation hierarchy.

Operating lease equipment held for sale consists of aircraft as of June 30, 2009 and is classified within Level 2. Similar to loans held for sale, the estimated fair values of these assets is calculated using observable market information, including bids from prospective purchasers, pricing from similar market transactions where available, and appraisal data.

Loans and lease receivables designated for sale, securitization or syndication are classified as finance receivables held for sale and are carried at lower of cost or fair value. The amount by which costs exceeds fair value is recorded as a valuation allowance. Subsequent changes in the valuation allowance are included in the determination of net income in the period in which the change occurs.

Debt securities held to maturity and Investments

The investments and debt securities held to maturity category include nonpublic investments in private equity and debt issued by such companies. Determining the fair value of nonpublic securities involves a significant degree of management resources and judgment as no quoted prices exist and such securities are generally very thinly traded. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of nonpublic securities, the Company also considers events such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions. Private equity securities are generally classified in Level 3 of the fair-value hierarchy.

Impaired Loans

Impairment of a loan within the scope of SFAS 114 is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent. Impaired loans for which the carrying amount is based on fair value of the underlying collateral are included in assets and reported at estimated fair value on a non-recurring basis, both at initial recognition of impairment and on an on-going basis until recovery or charge-off of the loan amount. The determination of impairment involves management’s judgment in the use of market data and third party estimates regarding collateral values. Valuations in the level of impaired loans and corresponding impairment as defined under SFAS 114 affect the level of the reserve for credit losses.

FAIR VALUES OF FINANCIAL INSTRUMENTS

FASB Staff Position (FSP) FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments amended FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require an entity to provide disclosures about fair value of financial instruments in interim financial information. Estimated fair values, recorded carrying values and various assumptions used in valuing CIT’s financial instruments are set forth below.


Item 1: Consolidated Financial Statements	23

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(dollars in millions)		June 30, 2009 Asset/(Liability)						December 31, 2008 Asset/(Liability)
		Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value

Finance receivables-loans⁽¹⁾	$	37,693.3		$	30,821.6		$	42,402.8		$	34,085.9
Finance receivables-held for sale⁽²⁾		427.3			427.3			156.1			156.1
Retained interest in securitizations⁽²⁾		169.5			169.5			229.4			229.4
Other assets⁽³⁾		2,451.9			2,451.9			2,862.0			2,862.0
Bank credit facilities (including accrued interest payable)		(3,100.9	)		(2,412.8	)		(5,200.0	)		(4,627.5	)
Deposits (including accrued interest payable)⁽⁴⁾		(5,070.2	)		(5,480.9	)		(2,651.9	)		(2,774.2	)
Variable-rate senior notes (including accrued interest payable)⁽⁵⁾		(7,455.7	)		(5,368.1	)		(12,824.0	)		(10,605.4	)
Fixed-rate senior notes (including accrued interest payable)⁽⁵⁾		(24,197.7	)		(15,907.5	)		(25,022.6	)		(17,703.5	)
Non-recourse, secured borrowings (including accrued interest payable)⁽⁶⁾		(17,662.6	)		(15,354.9	)		(19,119.0	)		(15,811.4	)
Junior, subordinated notes and convertible debt		(2,098.9	)		(872.5	)		(2,098.9	)		(1,263.5	)
Credit balances of factoring clients and other liabilities⁽⁷⁾		(4,718.0	)		(4,718.0	)		(4,945.3	)		(4,945.3	)
Derivative financial instruments⁽⁸⁾		795.4			795.4			1,067.8			1,067.8

⁽¹⁾	The fair value of performing fixed-rate loans was estimated based upon a present value discounted cash flow analysis, using interest rates that were being offered at the end of the period for loans with similar terms to borrowers of similar credit quality. Discount rate used in the present value calculation range from 8.2% to 23.4% for June 30, 2009 and 13.3% to 23.4% for December 31, 2008 based on individual business units. For floating-rate loans we used an average LIBOR spreads between 7.4% and 19.6% and between 11.6% and 16.7% to approximate carrying value as of June 30, 2009 and December 31, 2008, respectively. The net carrying value of lease finance receivables not subject to fair value disclosure totaled $10.8 billion at June 30, 2009 and $10.6 billion at December 31, 2008.

⁽²⁾	Finance receivables held for sale are recorded at lower of cost or market on the balance sheet. Given current market conditions, lower of cost or market is equal to fair value. Fair values of retained interests in securitizations are calculated utilizing current and anticipated credit losses, prepayment speeds and discount rates.

⁽³⁾	Other assets subject to fair value disclosure include accrued interest receivable, certain investment securities, servicing assets and miscellaneous other assets. The carrying amount of accrued interest receivable approximates fair value. The carrying value of other assets not subject to fair value disclosure totaled $1.8 billion at June 30, 2009 and $1.7 billion at December 31, 2008.

⁽⁴⁾	The fair value of deposits was estimated based upon a present value discounted cash flow analysis. Discount rates used in the present value calculation range from 0.65% to 4.25% at June 30, 2009 and 1.55% to 4.65% at December 31, 2008.

⁽⁵⁾	The difference between the carrying value of fixed-rate senior notes, variable rate senior notes and preferred capital securities and the corresponding balances reflected in the consolidated balance sheets is accrued interest payable. These amounts are excluded from the other liabilities balances in this table. Most fixed-rate notes were valued from quoted market estimates. In rare instances where market estimates were not available, values were computed using a present value discounted cash flow analysis with a discount rate approximating current market rates for issuances by CIT of similar term debt at the end of the year. Discount rates used in the present value calculation ranged from 8.37% to 34.70% at June 30, 2009 and 3.31% to 16.88% at December 31, 2008. The spread was substantially wider during the first six months of 2009 due to the widening of CIT credit spreads.

⁽⁶⁾	Non-recourse secured borrowing includes Trade Finance where the fair value is approximately par.

⁽⁷⁾	The estimated fair value of credit balances of factoring clients approximates carrying value due to their short settlement terms. Other liabilities include accrued liabilities and deferred federal income taxes. Accrued liabilities and payables with no stated maturities have an estimated fair value that approximates carrying value. The carrying value of other liabilities not subject to fair value disclosure totaled $0.4 billion at June 30, 2009 and $0.1 billion at December 31, 2008.

⁽⁸⁾	CIT enters into derivative financial instruments for hedging purposes (FAS 133 and economic hedges) only. The estimated fair values are calculated internally using market data and represent the net amount receivable or payable to terminate the agreement, taking into account current market rates. See Note 6 — “Derivative Financial Instruments” for notional principal amounts and fair values associated with the instruments.

NOTE 9 – CAPITAL

On December 22, 2008, The Board of Governors of the Federal Reserve (“FRB”) approved the Company’s application to become a bank holding company under the Bank Holding Company Act of 1956, as amended. On December 22, 2008, CIT Bank converted its charter as an industrial loan company to a non-member commercial bank, which continues to be supervised by the FDIC and the Utah Department of Financial Institutions.


24	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company and CIT Bank are each subject to various regulatory capital requirements administered by the FRB and the FDIC, respectively. Failure to meet minimum capital requirements can result in regulators taking certain mandatory, or in some circumstances, discretionary actions that could have a direct material effect on the Company. Under applicable Agency capital adequacy guidelines and, with respect to CIT Bank, the regulatory framework for prompt corrective action (“PCA”), the Company and CIT Bank must meet specific capital guidelines that involve quantitative measures of each institution’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Each institution’s regulatory capital amounts and CIT Bank’s PCA classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require that the Company and CIT Bank each maintain minimum amounts and ratios (set forth in the table below) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). In connection with becoming a bank holding company, the Company committed to a minimum level of total risk based capital of 13% of risk-weighted assets. In connection with CIT Bank’s conversion to a commercial bank, CIT Bank committed to maintaining for three years a Tier 1 leverage ratio of at least 15%. At June 30, 2009, the Company’s total risk based capital decreased to 12.8%, slightly below the level that the Company committed to maintain (13%). The Company is currently developing a plan to maintain sufficient capital which it will submit to the Federal Reserve for review.

The calculation of the Company’s regulatory capital ratios are subject to review and consultation with the FRB, which may result in refinements to the estimated amount reported as of June 30, 2009.

Although the Consolidated/Holding Company’s capital ratio is slightly below the ratio committed to regulators as described above, as of June 30, 2009, CIT Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios. There are no conditions or events since that notification that management believes have changed the Institution’s category.

Regulatory Capital Ratios (dollars in millions)


		Actual						To Be Well
								Capitalized
						Ratio For		Under Prompt
						Capital Adequacy		Corrective Action
		Amount		Ratio		Purposes		Provisions Ratio

Total Capital (to risk weighted assets):
Consolidated^⁽¹⁾	June 30, 2009	$	8,944.7	12.8	%	13.0	%	N/A
	December 31, 2008	$	10,369.7	13.1	%	13.0	%	N/A
CIT Bank	June 30, 2009	$	1,640.3	39.7	%	8.0	%	10.0	%
	December 31, 2008	$	563.7	23.5	%	8.0	%	10.0	%
Tier 1 Capital (to risk weighted assets):
Consolidated	June 30, 2009	$	6,157.9	8.8	%	4.0	%	N/A
	December 31, 2008	$	7,498.8	9.4	%	4.0	%	N/A
CIT Bank	June 30, 2009	$	1,588.5	38.4	%	4.0	%	6.0	%
	December 31, 2008	$	533.4	22.2	%	4.0	%	6.0	%
Tier 1 Capital (to average assets) (Leverage Ratio):
Consolidated	June 30, 2009	$	6,157.9	8.3	%	4.0	%	N/A
	December 31, 2008	$	7,498.8	9.6	%	4.0	%	N/A
CIT Bank⁽¹⁾	June 30, 2009	$	1,588.5	16.5	%	15.0	%	5.0	%
	December 31, 2008	$	533.4	15.8	%	15.0	%	5.0	%

⁽¹⁾ The Company and Bank have committed to maintaining capital ratios above regulatory minimum levels as explained in the paragraphs preceding this table.

The following table presents the components of Tier 1 capital and Total capital for the Company and CIT Bank at June 30, 2009 and December 31, 2008.


Item 1: Consolidated Financial Statements	25

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Regulatory Capital (dollars in millions)


	CIT Group Inc.						CIT Bank
Tier 1 Capital	June 30, 2009			December 31, 2008⁽¹⁾			June 30, 2009			December 31, 2008

Total stockholders’ equity	$	6,078.9		$	8,124.3		$	1,588.7		$	533.4
Effect of certain items in accumulated other comprehensive loss excluded from Tier 1 Capital		130.6			138.5			(0.2	)		–

Adjusted total equity		6,209.5			8,262.8			1,588.5			533.4
Qualifying noncontrolling interest		32.4			33.0			–			–
Less: Goodwill		–			(568.1	)		–			–
Disallowed intangible assets		–			(130.5	)		–			–
Investment in certain subsidiaries		(2.5	)		(22.0	)		–			–
Other Tier 1 components⁽²⁾		(81.5	)		(76.4	)		–			–

Tier 1 Capital		6,157.9			7,498.8			1,588.5			533.4
Tier 2 Capital
Long-term debt and other instruments qualifying as Tier 2 Capital		1,899.0			1,899.0			–			–
Qualifying reserve for credit losses		890.3			993.8			51.7			30.3
Other Tier 2 components		(2.5	)		(21.9	)		0.1			–

Total qualifying capital	$	8,944.7		$	10,369.7		$	1,640.3		$	563.7

Risk-weighted assets	$	69,998.1		$	79,403.2		$	4,133.3		$	2,400.8

Tier 1 Capital Ratio		8.8	%		9.4	%		38.4	%		22.2	%
Total Capital Ratio		12.8	%		13.1	%		39.7	%		23.5	%

⁽¹⁾	Reclassified to conform to current quarter’s presentation.

⁽²⁾	Includes the portion of net deferred tax assets that does not qualify for inclusion in Tier 1 capital based on the capital guidelines, the Tier 1 capital charge for nonfinancial equity investments, and the Tier 1 capital deduction for net unrealized losses on available-for-sale marketable equity securities (net of tax).

NOTE 10 – EARNINGS (LOSS) PER COMMON SHARE

The following table displays the computation of basic and diluted (loss) earnings per common share:

Earnings Per Share (dollars in millions, except per share amount; shares in thousands)


	Quarters Ended June 30,				Six Months Ended June 31,
	2009		2008		2009		2008
Earnings / (Loss)
Net (loss) income from continuing operations, before preferred stock dividends	$(1,618.5	)	$ 47.9		$ (1,960.8	)	$ (192.8	)
Loss from discontinued operation	–		(2,115.8	)	–		(2,113.8	)

Net loss before preferred stock dividends	(1,618.5	)	(2,067.9	)	(1,960.8	)	(2,306.6	)
Preferred stock dividends	(61.6	)	(16.7	)	(122.0	)	(24.2	)
(Income) loss attributable to noncontrolling interests, after tax	0.7		0.2		0.2		(10.8	)

Net loss attributable to common stockholders	$(1,679.4	)	$ (2,084.4	)	$ (2,082.6	)	$(2,341.6	)

Weighted Average Common Shares Outstanding
Basic and diluted shares outstanding⁽¹⁾	390,535		264,381		389,741		227,704
Basic and diluted earnings per common share data
(Loss) income from continuing operations⁽²⁾	$ (4.30	)	$ 0.12		$ (5.34	)	$ (1.00	)
Loss from discontinued operation	–		(8.00	)	–		(9.28	)

Net loss per share attributable to common shareholders	$ (4.30	)	$ (7.88	)	$ (5.34	)	$ (10.28	)

⁽¹⁾	Weighted average options and restricted shares that were excluded from diluted per share totaled 24.4 million and 14.8 million for the quarters ended June 30, 2009 and 2008 respectively, and 23.9 million and 14.6 million for the six months ended June 30, 2009 and 2008 respectively. Also excluded as the effect was anti-dilutive were the potential dilution of 88.7 million common shares issuable under a 10-year warrant at an exercise price of $3.94.

⁽²⁾	Amount is net of preferred stock dividends and non-controlling minority interests.


26	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

The following table discloses various components of pension and postretirement expense.


	Quarters Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Retirement Plans
Service cost	$	4.7		$	5.5		$	9.5		$	11.4
Interest cost		6.0			6.3			11.9			12.4
Expected return on plan assets		(4.6	)		(5.0	)		(9.4	)		(10.3	)
Amortization of net loss		3.7			0.5			7.4			0.7
Amortization of prior service cost		0.5			0.6			1.0			1.2
Loss due to settlements & curtailments		–			0.7			(0.4	)		5.1
Termination benefits		0.2			–			0.4			0.7

Net periodic benefit cost	$	10.5		$	8.6		$	20.4		$	21.2

Postretirement Plans
Service cost	$	0.3		$	0.3		$	0.6		$	0.6
Interest cost		0.8			0.9			1.5			1.6
Amortization of net (gain) loss		(0.1	)		(0.1	)		(0.1	)		(0.1	)
Amortization of prior service cost		–			(0.1	)		–			(0.1	)
Loss due to settlements & curtailments		–			–			(0.1	)		0.5
Remeasurement/plan establishment		–			0.9			–			0.9

Net periodic benefit cost	$	1.0		$	1.9		$	1.9		$	3.4

For the six months ended June 30, 2009, CIT contributed $52.0 million to the retirement plans, including a contribution of approximately $45.8 million to the U.S. Retirement Plan, and currently expects to contribute an additional $5.0 million in the second half of 2009, for a total of $57.0 million. CIT contributed $2.6 million to the postretirement plans, and currently expects to contribute an additional $2.1 million in 2009, for a total of $4.7 million.

NOTE 12 – COMMITMENTS

The accompanying table summarizes credit-related commitments, as well as purchase and funding commitments related to continuing operations. Descriptions of these items follow the table.

Commitments (dollars in millions)


	June 30, 2009						December 31, 2008 Total Outstanding
	Within One Year		After One Year		Total Outstanding		December 31, 2008 Total Outstanding
Financing Commitments
Financing and leasing assets	$	716.6	$	3,748.1	$	4,464.7	$	5,526.0
Vendor receivables		454.9		367.5		822.4		–
Letters of credit and acceptances:
Standby letters of credit		246.6		177.2		423.8		646.5
Other letters of credit		209.3		–		209.3		245.7
Guarantees, acceptances and other recourse obligations		547.4		–		547.4		748.4
Purchase and Funding Commitments
Aerospace and other manufacturer purchase commitments		476.9		4,522.9		4,999.8		5,559.9
Sale-leaseback payments		165.9		1,540.8		1,706.7		1,815.3
Other
Liabilities for unrecognized tax benefits		15.0		44.6		59.6		110.9

Financing Commitments

Financing commitments, referred to as loan commitments, or lines of credit, are agreements to lend to customers, subject to the customers’ compliance with contractual obligations. Given that these commitments are not typically fully drawn, may expire unused or be reduced or cancelled at the customer’s request, the total commitment amount does not necessarily reflect the actual future cash flow requirements.


Item 1: Consolidated Financial Statements	27

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The expiration and utilization of financing commitments resulted in a decline from $5.5 billion at year end 2008 to $4.5 billion at June 30, 2009, excluding the impact of an approximate $0.8 billion increase in additional funding commitments associated with vendor receivables previously off-balance sheet and brought on-balance sheet during the second quarter in connection with the renegotiation of a contract with a manufacturer. The manufacturer is obligated to provide CIT the funds necessary for CIT to disburse to the customer, therefore these do not present liquidity risk to the Company. Financing commitments shown above also exclude roughly $2.8 billion of commitments that were not available for draw due to requirements for asset / collateral availability or covenant conditions at June 30, 2009.

The Company does not include in the previous table unused cancelable lines of credit to customers in connection with select third-party vendor programs, which may be used solely to finance additional product purchases. These uncommitted lines of credit can be reduced or canceled by CIT at any time without notice. Management’s experience indicates that customers related to vendor programs typically do not seek to exercise their entire available line of credit at any point in time. These lines of credit include vendor finance programs for Dell customers. See Note 14 –Certain Relationships and Related Transactions for additional information regarding Dell.

Letters of Credit and Guarantees

In the normal course of meeting the needs of its customers, CIT also enters into commitments to provide financing, letters of credit and guarantees. Standby letters of credit obligate CIT to pay the beneficiary of the letter of credit in the event that a CIT client to whom the letter of credit was issued does not meet its related obligation to the beneficiary. These financial instruments generate fees and involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the consolidated balance sheets. To minimize potential credit risk, CIT generally requires collateral and other forms of credit support from the customer.

Guarantees are issued primarily in conjunction with CIT’s factoring product in Trade Finance, whereby CIT provides the client with credit protection for its trade receivables without actually purchasing the receivables. The trade terms are generally sixty days or less. If the client’s customer is unable to pay according to the contractual terms, then CIT purchases the receivables from the client. As of June 30, 2009 and December 31, 2008, CIT had no outstanding liabilities relating to these credit-related commitments or guarantees, as amounts are generally billed and collected on a monthly basis.

Purchase and Funding Commitments

CIT’s firm purchase commitments relate predominantly to purchases of commercial aircraft and rail equipment. The commitments to purchase commercial aircraft are with both Airbus Industrie and The Boeing Company. The aerospace equipment purchases are contracted for a specific model aircraft, using a baseline aircraft specification at fixed prices, which reflect discounts from fair market purchase prices prevailing at the time of commitment. The delivery price of an aircraft may also change depending on the final specifications of the aircraft, including engine thrust, aircraft weight and seating configuration. Equipment purchases are recorded at delivery date at the final purchase price paid, which includes purchase price discounts, price changes relating to specification changes and price increases relating to inflation and manufacturing components. Accordingly, the commitment amounts detailed in the preceding table are based on the contracted purchase price less payments to date for pre-delivery payments and exclude buyer furnished equipment to be selected by the initial lessee. Pursuant to existing contractual commitments, 103 aircraft remain to be purchased (13 within the next twelve months). Lease commitments are in place for all aircraft to be delivered over the next twelve months. The aircraft deliveries to CIT are scheduled periodically through 2018.

Outstanding commitments to purchase equipment to be leased to customers, other than aircraft, relate primarily to rail equipment. Rail equipment purchase commitments are at fixed prices subject to price increases for inflation and manufacturing components. The time period between commitment and purchase for rail equipment is generally less than 18 months.

CIT is party to sale-leaseback transactions involving railcars and two business aircraft, under which it is obligated to pay a remaining total of $1,706.7 million, with annual amounts ranging from $141 million to $166 million per year for 2010 through 2014, with remaining payments due through 2030. These lease payments are expected to be more than offset by rental income associated with re-leasing the assets, subject to actual utilization and rentals. In conjunction with sale-leaseback transactions, CIT has guaranteed all obligations of the related consolidated lessee entities.


28	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CIT has guaranteed the public and private debt securities of a number of its wholly-owned consolidated subsidiaries, including those disclosed in Note 17 – Summarized Financial Information of Subsidiaries. In the normal course of business, various consolidated CIT subsidiaries have entered into other credit agreements and certain derivative transactions with financial institutions that are guaranteed by CIT. These transactions are generally used by CIT’s subsidiaries outside of the U.S. to allow the local subsidiary to borrow funds in local currencies.

NOTE 13 – CONTINGENCIES

SECURITIES CLASS ACTION

On July 25, 2008 and August 22, 2008, putative class action lawsuits were filed in the United States District Court for the Southern District of New York against CIT, its Chief Executive Officer and its Chief Financial Officer. On August 15, 2008, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York by a holder of CIT-PrZ equity units against CIT, its Chief Executive Officer, its Chief Financial Officer, its former Controller and members of its Board of Directors. On May 26, 2009, the Court consolidated these three shareholder actions into a single action and appointed Pensioenfonds Horeca & Catering as Lead Plaintiff to represent the proposed class, which consists of all acquirers of CIT securities from December 12, 2006 through March 5, 2008, who allegedly were damaged, including acquirers of CIT-PrZ preferred stock pursuant to the October 17, 2007 offering.

On July 16, 2009, the Lead Plaintiff filed a consolidated amended complaint alleging violations of the Securities Exchange Act of 1934 (“1934 Act”) and the Securities Act of 1933 (“1933 Act”). Specifically, it is alleged that the Company, its CEO, its CFO, its former Vice Chairman, and its former Executive Vice President and Controller, violated Section 10(b) of the 1934 Act by allegedly making false and misleading statements and omissions regarding CIT’s subprime home lending and student lending businesses. The allegations relating to the Company’s student lending businesses are based upon the assertion that the Company failed to account in its financial statements or, in the case of the preferred stockholders, its registration statement and prospectus, for private student loans related to a helicopter pilot training school, which, it is alleged were highly unlikely to be repaid and should have been written off. The allegations relating to the Company’s home lending business are based on the assertion that the Company failed to fully disclose the risks in the Company’s portfolio of subprime loans. It also is alleged that its CEO, its CFO, its former Vice Chairman and its former Executive Vice President and Controller violated Section 20(a) of the 1934 Act as controlling persons of the Company. Lead Plaintiff also alleges that the Company, its CEO, its CFO and its former Executive Vice President and Controller and those Directors of the Company who signed the registration statement in connection with the October 2007 CIT-PrZ preferred offering violated Sections 11 and/or 12 of the 1933 Act by making false and misleading statements concerning the Company’s student lending business as described above. It also is alleged that its CEO and its CFO, as well as the Directors who signed the registration statement, violated Section 15 of the 1933 Act as controlling persons of the Company.

On September 5, 2008, a purported shareholder derivative lawsuit was filed in the United States District Court for the Southern District of New York on behalf of CIT against its Chief Executive Officer and members of its Board of Directors, alleging defendants breached their fiduciary duties to CIT and abused the trust placed in them by wasting, diverting and misappropriating CIT’s corporate assets. On September 10, 2008, a similar purported shareholder derivative action was filed in New York County Supreme Court against CIT’s Chief Executive Officer, its Chief Financial Officer and members of its Board of Directors. The allegations in these derivative law suits are based upon private student loans related to a pilot training school, however, plaintiffs’ counsel has indicated that they intend to file an amended complaint.

In these shareholder and derivative lawsuits, plaintiffs seek, among other relief, unspecified damages and interest. CIT believes the allegations in these complaints are without merit and intends to vigorously defend against the allegations.

PILOT TRAINING SCHOOL BANKRUPTCY

In February 2008, a helicopter pilot training school filed for bankruptcy and ceased operating. Student Loan Xpress, Inc. (“SLX”), a subsidiary of CIT engaged in the student lending business, had originated private (non-government guaranteed) loans to approximately 2,600 students of the school, which totaled approximately $196.8 million in principal and accrued interest as of December 31, 2007. SLX ceased originating new loans to students of this school in September 2007, but a majority of SLX’s student borrowers had not completed their training when the school ceased operations. Collectability of the outstanding principal and interest on the balance of the loans will depend on a number of factors, including the student’s current ability to repay the loan.


Item 1: Consolidated Financial Statements	29

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

After the school filed for bankruptcy, and ceased operations, SLX voluntarily placed those students who were in school at the time of the closure “in grace” such that no payments under their loans are required to be made and no interest on their loans is accruing, pending further notice. Lawsuits, including four putative class action lawsuits and one collective action, have been filed against SLX and other lenders alleging, among other things, violations of state consumer protection laws. In addition, several other attorneys who purport to represent student borrowers have threatened litigation if their clients do not receive relief with respect to their debts to SLX. SLX participated in a mediation with several class counsels and the parties have made substantial progress towards a resolution of the student claims against SLX, and has completed a settlement of a mass action commenced by students in Georgia, which is binding upon 37 SLX borrowers. The Attorneys General of several states are reviewing the impact of the helicopter pilot training school’s closure on the student borrowers and any possible role of SLX. SLX is cooperating in each of the Attorney General inquiries. Management believes the Company has good defenses in each of these pending and threatened matters and with respect to the Attorneys General inquiries. However, since the loans are unsecured and uncertainties exist regarding collection, management continues to attempt to resolve these matters as expeditiously as possible.

STUDENT LOAN INVESTIGATIONS

In connection with investigations into (i) the relationships between student lenders and the colleges and universities that recommend such lenders to their students, and (ii) the business practices of student lenders, CIT and/or SLX received requests for information from several state Attorneys General and several federal governmental agencies. In May, 2007, CIT entered into an Assurance of Discontinuance (“AOD”) with the New York Attorney General (“NYAG”), pursuant to which CIT contributed $3.0 million into a fund established to educate students and their parents concerning student loans and agreed to cooperate with the NYAG’s investigation, in exchange for which, the NYAG agreed to discontinue its investigation concerning certain alleged conduct by SLX. CIT is fully cooperating with the remaining investigations.

VENDOR FINANCE BILLING AND INVOICING INVESTIGATION

In the second quarter of 2007, the office of the United States Attorney for the Central District of California requested that CIT produce the billing and invoicing histories for a portfolio of customer accounts that CIT purchased from a third-party vendor. The request was made in connection with an ongoing investigation being conducted by federal authorities into billing practices involving that portfolio. Certain state authorities, including California, have been conducting a parallel investigation. It appears the investigations are being conducted under the Federal False Claims Act and its state equivalents. CIT is cooperating with these investigations, and substantial progress has been made towards a resolution of the investigations. Based on the facts known to date, CIT believes its exposure will not be material.

LEHMAN BROTHERS BANKRUPTCY

In conjunction with certain interest rate and foreign currency hedging activities, the Company had counterparty receivables from Lehman Special Financing Inc. (“LSF”), a subsidiary of Lehman Brothers Holding Inc. (“Lehman”) totaling $33 million related to derivative transactions. On September 15, 2008, Lehman filed a petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. In October 2008, LSF filed a Chapter 11 petition in the same court. The Company terminated the swaps prior to the bankruptcy, but has not received payment for the amounts owed, resulting in a bankruptcy claim against LSF and a claim against Lehman, as guarantor of LSF’s obligations. Based on management’s assessment of the collectibility of the outstanding balances and the corresponding potential impairment of this asset, the Company recorded a $15 million pretax valuation charge in the fourth quarter of 2008 and an additional $4.7 million pretax valuation charge in the second quarter of 2009.

RESERVE FUND INVESTMENT

At June 30, 2009, the Company had a remaining principal balance of $60 million (of an initial investment of $600 million) invested in the Reserve Primary Fund (the “Reserve Fund”), a money market fund. The Reserve Fund’s net asset value fell below its stated value of $1.00 and the Reserve Fund currently is in orderly liquidation under the supervision of the Securities and Exchange Commission (“SEC”). In September 2008, the Company requested redemption, and received confirmation with respect to a 97% payout on a portion of the investment. As a result, the Company accrued a pretax charge of $18 million in the third quarter of 2008 representing the Company’s estimate of loss based on the 97% partial payout confirmation.

On February 26, 2009, the Board of Trustees of the Reserve Fund (the “Board”) announced its decision to initially set aside $3.5 billion in a special reserve under the plan of liquidation, to cover potential liabilities for damages and associated expenses related


30	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to lawsuits and regulatory actions against the Reserve Fund. The special reserve may be increased or decreased as further information becomes available. As a result, pursuant to the liquidation plan, interim distributions will continue to be made up to 91.72%, unless the Board determines a need to increase the special reserve. Amounts in the special reserve will be distributed to shareholders once claims, if any, are successful, and the related expenses have been paid or set aside for payment. In May, 2009, the SEC sought an injunction prohibiting distributions from the special damages reserve. If the SEC prevails, the monies in the damages reserve should be made available for distribution in accordance with the Reserve Fund’s orderly liquidation. A hearing to consider the SEC’s request is scheduled to be held in September, 2009.

On May 5, 2009, the SEC filed fraud charges against several entities and individuals who operate the Reserve Fund, alleging a failure to provide key material facts to investors and trustees concerning the Reserve Fund’s vulnerability as a consequence of the LSF and Lehman bankruptcies. The SEC seeks various types of relief, including the return of ill-gotten gains, the payment of civil monetary penalties and the distribution of all Reserve Fund assets pro rata to shareholders who have not been fully paid for any redeemed shares.

The determination of the total distribution to CIT is subject to the distribution available to all investors of this fund and may take a long period of time. As a result, potential recovery may vary from the recorded investment. The Company will continue to monitor further developments with respect to the estimate of loss.

OTHER LITIGATION

In addition, there are various legal proceedings and government investigations against or including CIT, which have arisen in the ordinary course of business. While the outcomes of the ordinary course legal proceedings and the related activities are not certain, based on present assessments, management does not believe that they will have a material adverse effect on CIT.

NOTE 14 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Until December 31, 2007, CIT was a partner with Dell Inc. (“Dell”) in Dell Financial Services L.P. (“DFS”), a joint venture that offered financing to Dell’s customers. The joint venture provided Dell with financing and leasing capabilities that were complementary to its product offerings and provided CIT with a source of new financings. In December 2007, Dell exercised its right to buy CIT’s interest and the Company sold its 30% ownership interest in the DFS joint venture. We maintain the right to provide 25% (of sales volume) funding to DFS in 2009. We also retain the vendor finance programs for Dell’s customers in Canada and in more than 40 countries outside the United States that are not affected by Dell’s purchase of our DFS interest. CIT has certain recourse to DFS on defaulted contracts. Financing and leasing assets related to the DFS program included in the CIT Consolidated Balance Sheet (but excluding certain related international receivables originated directly by CIT) were approximately $1.9 billion at June 30, 2009 and $2.2 billion at December 31, 2008. Securitized assets included in owned and securitized assets were approximately $0.1 billion at June 30, 2009 and $0.2 billion at December 31, 2008.

CIT also has a joint venture arrangement with Snap-on Incorporated (“Snap-on”) that has a similar business purpose and model to the DFS arrangement described above, including limited credit recourse on defaulted receivables. In July 2009, Snap-on notified CIT that it was terminating the joint venture agreement, which had been scheduled to terminate January 2010. Under the terms of the agreement, Snap-On will acquire CIT’s interest in the joint venture for a payment of approximately $8 million and will continue to service the portfolio owned by CIT. The termination of the joint venture is not expected to have a material impact on CIT’s origination volume, asset levels or net income prior to the first or second quarter of 2010. CIT and Snap-on have 50% ownership interests, 50% board of directors’ representation, and share income and losses equally. The Snap-on joint venture is accounted for under the equity method and is not consolidated in CIT’s financial statements. Financing and leasing assets were approximately $1.0 billion at both June 30, 2009 and December 31, 2008.

Since December 2000, CIT has been a joint venture partner with Canadian Imperial Bank of Commerce (“CIBC”) in an entity that is engaged in asset-based lending in Canada. Both CIT and CIBC have a 50% ownership interest in the joint venture, and share income and losses equally. This entity is not consolidated in CIT’s financial statements and is accounted for under the equity method. CIT’s investment in and loans to the joint venture were approximately $341 million at June 30, 2009 and $385 million at December 31, 2008.

In the first quarter of 2007, the Company formed Care Investment Trust Inc. (Care), an externally managed real estate investment trust (RElT), formed principally to invest in healthcare-related commercial real estate. In conjunction with a June 2007 IPO, CIT contributed approximately $280 million of loans to Care in return for cash and a 36% equity investment in Care, currently carried


Item 1: Consolidated Financial Statements	31

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

at approximately $62 million. During the six months ended June 30, 2009, CIT recorded impairment charges of approximately $14 million. A subsidiary of CIT provides services to Care pursuant to a management agreement. The investment in Care is accounted for under the equity method, as CIT does not have a majority of the economics (expected losses and residual returns) in the entity.

CIT invests in various trusts, partnerships, and limited liability corporations established in conjunction with structured financing transactions of equipment, power and infrastructure projects. CIT’s interests in these were entered into in the ordinary course of business. Other assets included approximately $8.8 million at June 30, 2009 and $11.8 million at December 31, 2008 of investments in non-consolidated entities relating to such transactions that are accounted for under the equity or cost methods.

The combination of investments in and loans to non-consolidated entities represents the Company’s maximum exposure to loss, as the Company does not provide guarantees or other forms of indemnification to non-consolidated entities.

Certain shareholders of CIT provide investment management, banking and investment banking services to the Company in the normal course of business.


32	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – BUSINESS SEGMENT INFORMATION

The following table presents our business segment financial information for continuing operations:

Business Segments (dollars in millions)


	Corporate Finance			Transportation Finance			Trade Finance			Vendor Finance			Commercial Segments			Consumer			Total Segments			Corporate and Other			Continuing Operations
Quarter ended June 30, 2009
Interest income	$	243.7		$	39.9		$	31.0		$	224.8		$	539.4		$	68.5		$	607.9		$	6.6		$	614.5
Interest expense		(126.4	)		(139.2	)		(13.1	)		(140.5	)		(419.2	)		(83.4	)		(502.6	)		(131.0	)		(633.6	)
Provision for credit losses		(430.4	)		(0.2	)		(20.1	)		(77.4	)		(528.1	)		(32.5	)		(560.6	)		(27.9	)		(588.5	)
Rental income on operating leases		11.3			337.5			–			125.2			474.0			–			474.0			(0.5	)		473.5
Other income, excluding rental income on operating leases		(234.2	)		14.6			55.7			15.2			(148.7	)		(8.3	)		(157.0	)		(41.8	)		(198.8	)
Depreciation on operating lease equipment		(7.6	)		(165.0	)		–			(114.3	)		(286.9	)		–			(286.9	)		0.3			(286.6	)
Other expenses, excluding depreciation on operating lease equipment		(94.1	)		(34.2	)		(32.7	)		(84.1	)		(245.1	)		(14.4	)		(259.5	)		(34.4	)		(293.9	)
Goodwill and intangible assets impairment charges		(316.8	)		–			(363.8	)		(11.8	)		(692.4	)		–			(692.4	)		–			(692.4	)
(Provision) benefit for income taxes and noncontrolling interests, after tax		291.4			(4.1	)		126.7			27.0			441.0			27.7			468.7			(480.7	)		(12.0	)

Net (loss) income from continuing operations, before preferred stock dividends	$	(663.1	)	$	49.3		$	(216.3	)	$	(35.9	)	$	(866.0	)	$	(42.4	)	$	(908.4	)	$	(709.4	)	$	(1,617.8	)

Select Period End Balances
Loans including receivables pledged	$	18,053.6		$	2,424.1		$	5,055.8		$	11,331.6		$	36,865.1		$	11,865.2		$	48,730.3		$	-		$	48,730.3
Credit balances of factoring clients		–			–			2,671.8			–			2,671.8			–			2,671.8			–			2,671.8
Assets held for sale		361.7			10.8			–			0.7			373.2			54.1			427.3			–			427.3
Operating lease equipment, net		206.0			12,309.5			–			864.6			13,380.1			–			13,380.1			–			13,380.1
Securitized assets		645.8			–			–			470.1			1,115.9			–			1,115.9			–			1,115.9
Quarter ended June 30, 2008
Interest income	$	357.0		$	52.4		$	51.0		$	265.3		$	725.7		$	144.8		$	870.5		$	46.4		$	916.9
Interest expense		(213.1	)		(141.4	)		(20.2	)		(156.6	)		(531.3	)		(105.8	)		(637.1	)		(110.0	)		(747.1	)
Provision for credit losses		(51.8	)		0.1			(36.1	)		(22.6	)		(110.4	)		(33.1	)		(143.5	)		(8.7	)		(152.2	)
Rental income on operating leases		13.4			335.8			–			143.7			492.9			–			492.9			(0.6	)		492.3
Other income, excluding rental income on operating leases		63.9			34.4			54.1			16.0			168.4			0.9			169.3			(0.4	)		168.9
Depreciation on operating lease equipment		(8.2	)		(142.2	)		–			(129.8	)		(280.2	)		–			(280.2	)		0.1			(280.1	)
Other expenses, excluding depreciation on operating lease equipment		(96.7	)		(34.2	)		(33.3	)		(101.6	)		(265.8	)		(15.6	)		(281.4	)		(48.2	)		(329.6	)
(Provision) benefit for income taxes and noncontrolling interests, after tax		(21.5	)		(13.3	)		(3.8	)		(3.5	)		(42.1	)		9.0			(33.1	)		12.1			(21.0	)

Net (loss) income from continuing operations, before preferred stock dividends	$	43.0		$	91.6		$	11.7		$	10.9		$	157.2		$	0.2		$	157.4		$	(109.3	)	$	48.1

Select Period End Balances
Loans including receivables pledged	$	20,841.4		$	2,554.4		$	6,237.4		$	10,699.8		$	40,333.0		$	12,890.7		$	53,223.7		$	–		$	53,223.7
Credit balances of factoring clients		–			–			3,189.7			–			3,189.7			–			3,189.7			–			3,189.7
Assets held for sale		396.6			448.6			88.0			6.7			939.9			76.8			1,016.7			–			1,016.7
Operating lease equipment, net		323.0			10,931.8			–			1,087.6			12,342.4			–			12,342.4			–			12,342.4
Securitized assets		1,210.5			–			–			3,642.2			4,852.7			–			4,852.7			–			4,852.7


Item 1: Consolidated Financial Statements	33

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Corporate Finance			Transportation Finance			Trade Finance			Vendor Finance			Commercial Segments			Consumer			Total Segments			Corporate and Other			Continuing Operations
Six months ended June 30, 2009
Interest income	$	499.3		$	84.5		$	62.4		$	454.8		$	1,101.0		$	135.9		$	1,236.9		$	17.2		$	1,254.1
Interest expense		(276.4	)		(275.8	)		(29.2	)		(284.9	)		(866.3	)		(158.0	)		(1,024.3	)		(266.4	)		(1,290.7	)
Provision for credit losses		(823.8	)		1.4			(36.7	)		(158.1	)		(1,017.2	)		(72.6	)		(1,089.8	)		(34.1	)		(1,123.9	)
Rental income on operating leases		23.0			674.3			–			252.4			949.7			–			949.7			(1.0	)		948.7
Other income, excluding rental income on operating leases		(234.5	)		23.3			110.1			41.5			(59.6	)		(11.9	)		(71.5	)		60.7			(10.8	)
Depreciation on operating lease equipment		(15.3	)		(327.1	)		–			(226.8	)		(569.2	)		–			(569.2	)		0.6			(568.6	)
Other expenses, excluding depreciation on operating lease equipment		(200.9	)		(75.3	)		(69.1	)		(171.5	)		(516.8	)		(37.0	)		(553.8	)		97.3			(456.5	)
Goodwill and intangible assets impairment charges		(316.8	)		–			(363.8	)		(11.8	)		(692.4	)		–			(692.4	)		–			(692.4	)
(Provision) benefit for income taxes and noncontrolling interests, after tax		442.0			(10.0	)		119.1			43.2			594.3			54.7			649.0			(669.5	)		(20.5	)

Net (loss) income from continuing operations, before preferred stock dividends	$	(903.4	)	$	95.3		$	(207.2	)	$	(61.2	)	$	(1,076.5	)	$	(88.9	)	$	(1,165.4	)	$	(795.2	)	$	(1,960.6	)

Six months ended June 30, 2008
Interest income	$	779.6		$	102.1		$	110.2		$	538.8		$	1,530.7		$	306.1		$	1,836.8		$	69.6		$	1,906.4
Interest expense		(467.5	)		(290.4	)		(43.1	)		(312.0	)		(1,113.0	)		(239.9	)		(1,352.9	)		(226.3	)		(1,579.2	)
Provision for credit losses		(135.7	)		0.5			(46.1	)		(50.8	)		(232.1	)		(182.7	)		(414.8	)		15.9			(398.9	)
Rental income on operating leases		29.7			678.6			–			291.7			1,000.0			–			1,000.0			(1.0	)		999.0
Other income, excluding rental income on operating leases		10.2			74.1			120.0			27.8			232.1			(7.5	)		224.6			5.3			229.9
Depreciation on operating lease equipment		(17.4	)		(291.7	)		–			(265.9	)		(575.0	)		–			(575.0	)		0.3			(574.7	)
Other expenses, excluding depreciation on operating lease equipment		(210.9	)		(74.8	)		(72.5	)		(205.6	)		(563.8	)		(36.9	)		(600.7	)		(249.8	)		(850.5	)
(Provision) benefit for income taxes and noncontrolling interests, after tax		7.7			(22.3	)		(23.9	)		(6.5	)		(45.0	)		65.9			20.9			43.5			64.4

Net (loss) income from continuing operations, before preferred stock dividends	$	(4.3	)	$	176.1		$	44.6		$	17.5		$	233.9		$	(95.0	)	$	138.9		$	(342.5	)	$	(203.6	)


34	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – SEVERANCE AND FACILITIES EXITING RESERVES

The following table summarizes activities during 2009:

Severance and Facilities Exit Reserves (dollars in millions)


	Severance					Facilities					Total Reserves
	Number of Employees		Reserve			Number of Facilities		Reserve			Total Reserves
Balance at December 31, 2008	175		$	42.9		12		$	7.7		$	50.6
Additions and adjustments	264			29.6		3			9.7			39.3
Utilization	(237	)		(29.4	)	(4	)		(6.4	)		(35.8	)

Balance at June 30, 2009	202		$	43.1		11		$	11.0		$	54.1

The severance additions during 2009 primarily relate to employee termination benefits incurred in conjunction with various organization efficiency and cost reduction initiatives, primarily in Corporate Finance, Trade Finance and Vendor Finance. These additions, along with charges related to accelerated vesting of equity and other benefits, were recorded as part of the $42.9 million provision. Outstanding severance liabilities at June 30, 2009 will largely be paid to employees in the third quarter of 2009.

The ending facilities reserves relate primarily to shortfalls in sublease transactions and will be utilized over the remaining terms which range up to approximately 7 years.

NOTE 17 – SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES

The following presents condensed consolidating financial information for CIT Holdings LLC. CIT has guaranteed on a full and unconditional and a joint and several basis the existing debt securities that were registered under the Securities Act of 1933 and certain other indebtedness of this subsidiary. CIT has not presented related financial statements or other information for this subsidiary on a stand-alone basis. No subsidiaries within “Other Subsidiaries” in the following tables have unconditionally guaranteed debt securities for any other CIT subsidiary. Also presented are condensed financial statements for CIT Bank and CIT Group Funding Company of Delaware, LLC (Delaware Funding Co.), for which CIT has fully and unconditionally guaranteed the debt securities. During the second quarter of 2009, $5.7 billion of government guaranteed student loans were transferred to CIT Bank, which assumed $3.5 billion of debt and paid $1.6 billion of cash to “CIT Group Inc”.


Item 1: Consolidated Financial Statements	35

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEETS (dollars in millions)


CONSOLIDATING BALANCE SHEETS	CIT Group Inc.			CIT Holdings LLC		CIT Bank		Delaware Funding Co.			Other Subsidiaries		Eliminations			Total
June 30, 2009
ASSETS
Net finance receivables	$	–		$	2,892.3	$	7,739.3	$	–		$	36,560.3	$	–		$	47,191.9
Operating lease equipment, net		–			257.9		–		–			13,122.2		–			13,380.1
Assets held for sale		–			268.6		66.0		–			92.7		–			427.3
Cash and cash equivalents		1,130.4			89.4		1,660.1		1.4			1,586.4		–			4,467.7
Other assets		8,945.7			892.3		415.8		46.5			2,262.9		(7,011.0	)		5,552.2

Total Assets	$	10,076.1		$	4,400.5	$	9,881.2	$	47.9		$	53,624.5	$	(7,011.0	)	$	71,019.2

LIABILITIES AND STOCKHOLDERS’ EQUITY
Debt, including deposits	$	33,125.9		$	693.9	$	8,199.9	$	2,206.8		$	15,239.8	$	–		$	59,466.3
Credit balances of
factoring clients		–			–		–		–			2,671.8		–			2,671.8
Accrued liabilities and payables		(29,128.7	)		2,735.6		92.6		(2,267.2	)		31,330.8		–			2,763.1

Total Liabilities		3,997.2			3,429.5		8,292.5		(60.4	)		49,242.4		–			64,901.2

Total Stockholders’ Equity		6,078.9			971.0		1,588.7		108.3			4,343.0		(7,011.0	)		6,078.9
Minority Interests		–			–		–		–			39.1		–			39.1

Total Equity		6,078.9			971.0		1,588.7		108.3			4,382.1		(7,011.0	)		6,118.0

Total Liabilities and
Stockholders’ Equity	$	10,076.1		$	4,400.5	$	9,881.2	$	47.9		$	53,624.5	$	(7,011.0	)	$	71,019.2

December 31, 2008
ASSETS
Net finance receivables	$	–		$	3,152.0	$	1,904.3	$	–		$	46,974.1	$	–		$	52,030.4
Operating lease equipment, net		–			272.6		–		–			12,433.8		–			12,706.4
Assets held for sale		–			–		65.1		–			91.0		–			156.1
Cash and cash equivalents		4,351.9			183.2		1,284.1		13.8			2,532.8		–			8,365.8
Other assets		6,923.2			805.1		244.8		7.4			4,652.8		(5,487.3	)		7,146.0
Assets of discontinued operations		–			–		–		–			44.2		–			44.2

Total Assets	$	11,275.1		$	4,412.9	$	3,498.3	$	21.2		$	66,728.7	$	(5,487.3	)	$	80,448.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
Debt, including deposits	$	41,248.3		$	220.1	$	2,912.4	$	2,200.0		$	19,796.7	$	–		$	66,377.5
Credit balances of
factoring clients		–			–		–		–			3,049.9		–			3,049.9
Accrued liabilities and payables		(38,097.5	)		3,231.5		52.5		(2,336.1	)		40,002.0		–			2,852.4

Total Liabilities		3,150.8			3,451.6		2,964.9		(136.1	)		62,848.6		–			72,279.8

Total Stockholders’ Equity		8,124.3			961.3		533.4		157.3			3,835.3		(5,487.3	)		8,124.3
Minority Interests		–			–		–		–			44.8		–			44.8

Total Equity		8,124.3			961.3		533.4		157.3			3,880.1		(5,487.3	)		8,169.1

Total Liabilities and
Stockholders’ Equity	$	11,275.1		$	4,412.9	$	3,498.3	$	21.2		$	66,728.7	$	(5,487.3	)	$	80,448.9


36	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME (dollars in millions)


CONSOLIDATING STATEMENTS OF INCOME	CIT Group Inc.			CIT Holdings LLC			CIT Bank			Delaware Funding Co.			Other Subsidiaries			Eliminations		Total
Six Months Ended Ended June 30, 2009
Interest income	$	4.3		$	64.0		$	143.0		$	51.3		$	991.5		$	–	$	1,254.1
Interest expense		(239.8	)		111.9			(103.3	)		(45.6	)		(1,013.9	)		–		(1,290.7	)

Net interest revenue		(235.5	)		175.9			39.7			5.7			(22.4	)		–		(36.6	)
Provision for credit losses		–			(33.2	)		(42.7	)		–			(1,048.0	)		–		(1,123.9	)

Net interest revenue, after credit provision		(235.5	)		142.7			(3.0	)		5.7			(1,070.4	)		–		(1,160.5	)
Equity in net income of subsidiaries		(2,110.4	)		–			–			–			–			2,110.4		–
Other Income
Rental income on operating leases.		–			43.9			–			–			904.8			–		948.7
Other		146.3			(42.7	)		39.4			0.8			(154.6	)		–		(10.8	)

Total other income		146.3			1.2			39.4			0.8			750.2			–		937.9

Total net revenue, net of interest expense and credit provision		(2,199.6	)		143.9			36.4			6.5			(320.2	)		2,110.4		(222.6	)

Other expenses
Depreciation on operating lease equipment		–			(35.4	)		–			–			(533.2	)		–		(568.6	)
Goodwill and intangible assets impairment charges		–			–			–			–			(692.4	)		–		(692.4	)
Other		171.3			(34.0	)		(25.9	)		–			(567.9	)		–		(456.5	)

Total other expenses		171.3			(69.4	)		(25.9	)		–			(1,793.5	)		–		(1,717.5	)


(Loss) Income from continuing operations before provision for
income taxes and minority interests		(2,028.3	)		74.5			10.5			6.5			(2,113.7	)		2,110.4		(1,940.1	)
Benefit (provision) for income taxes		67.7			(28.3	)		(3.6	)		–			(56.5	)		–		(20.7	)

Net (loss) income from continuing operations, before preferred
stock dividends		(1,960.6	)		46.2			6.9			6.5			(2,170.2	)		2,110.4		(1,960.8	)
(Loss) Income from discontinued operations		–			–			–			–			–			–		–
Preferred stock dividends		(122.0	)		–			–			–			–			–		(122.0	)

Net (loss) income before attribution of non-controlling interests		(2,082.6	)		46.2			6.9			6.5			(2,170.2	)		2,110.4		(2,082.8	)
(Income) attributable to noncontrolling interests, after tax		–			–			–			–			0.2			–		0.2

Net (loss) income (attributable) available to common
stockholders	$	(2,082.6	)	$	46.2		$	6.9		$	6.5		$	(2,170.0	)	$	2,110.4	$	(2,082.6	)


Item 1: Consolidated Financial Statements	37

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATING STATEMENTS OF INCOME	CIT Group Inc.			CIT Holdings LLC			CIT Bank			Delaware Funding Co.			Other Subsidiaries			Eliminations			Total
Six Months Ended June 30, 2008
Interest income	$	64.1		$	93.8		$	85.2		$	56.0		$	1,607.3		$	–		$	1,906.4
Interest expense		(211.7	)		(12.4	)		(62.5	)		(53.3	)		(1,239.3	)		–			(1,579.2	)

Net interest revenue		(147.6	)		81.4			22.7			2.7			368.0			–			327.2
Provision for credit losses		20.7			(17.8	)		(12.9	)		–			(388.9	)		–			(398.9	)

Net interest revenue, after credit provision		(126.9	)		63.6			9.8			2.7			(20.9	)		–			(71.7	)

Equity in net income of subsidiaries		73.4			–			–			–			–			(73.4	)		–
Other Income
Rental income on operating leases.		1.0			50.2			–			–			947.8			–			999.0
Other		(32.8	)		9.4			6.5			(0.1	)		246.9			–			229.9

Total other income		(31.8	)		59.6			6.5			(0.1	)		1,194.7			–			1,228.9

Total net revenue, net of interest expense and credit provision		(85.3	)		123.2			16.3			2.6			1,173.8			(73.4	)		1,157.2
Other expenses
Depreciation on operating lease equipment		(0.4	)		(41.6	)		–			–			(532.7	)		–			(574.7	)
Other		(302.5	)		(43.5	)		(7.0	)		–			(497.5	)		–			(850.5	)

Total other expenses		(302.9	)		(85.1	)		(7.0	)		–			(1,030.2	)		–			(1,425.2	)

(Loss) Income from continuing operations before provision for
income taxes and minority
interests		(388.2	)		38.1			9.3			2.6			143.6			(73.4	)		(268.0	)
Benefit (provision) for income taxes		184.6			(14.5	)		(3.4	)		(1.0	)		(90.5	)		–			75.2

Net (loss) income from continuing operations, before preferred
stock dividends		(203.6	)		23.6			5.9			1.6			53.1			(73.4	)		(192.8	)
Loss from discontinued operations		(2,113.8	)		–			–			–			–			–			(2,113.8	)
Preferred stock dividends		(24.2	)		–			–			–			–			–			(24.2	)

Net (loss) income before attribution of noncontrolling interests		(2,341.6	)		23.6			5.9			1.6			53.1			(73.4	)		(2,330.8	)
(Income) attributable to noncontrolling interests, after tax		–			–			–			–			(10.8	)		–			(10.8	)

Net (loss) income (attributable) available to common
stockholders	$	(2,341.6	)	$	23.6		$	5.9		$	1.6		$	42.3		$	(73.4	)	$	(2,341.6	)


38	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (dollars in millions)


	CIT Group Inc.			CIT Holdings LLC			CIT Bank			Delaware Funding Co.			Other Subsidiaries			Eliminations			Total
Six Months Ended June 30, 2009
Cash Flows From Operating Activities:
Net cash flows provided
by (used for) operations	$	(330.8	)	$	89.4		$	(82.0	)	$	(33.5	)	$	1,232.0		$	–		$	875.1

Cash Flows From Investing Activities:
Net increase (decrease) in financing and
leasing assets		–			(59.9	)		(5,879.9	)		–			9,180.9			–			3,241.1
Decrease in inter-company loans
and investments		5,323.0			–			–			–			–			(5,323.0	)		–

Net cash flows (used for) provided by
investing activities		5,323.0			(59.9	)		(5,879.9	)		–			9,180.9			(5,323.0	)		3,241.1

Cash Flows From Financing Activities:
Net increase (decrease) in debt		(8,122.4	)		473.8			5,287.5			6.8			(4,570.5	)		–			(6,924.8	)
Inter-company financing		–			(597.1	)		1,050.4			14.3			(5,790.6	)		5,323.0			–
Proceeds from the issuance of equity		–			–			–			–			–			–			–
Cash dividends paid		(91.3	)		–			–			–			–			–			(91.3	)

Net cash flows provided by (used for)
financing activities		(8,213.7	)		(123.3	)		6,337.9			21.1			(10,361.1	)		5,323.0			(7,016.1	)

Net (decrease) increase in cash and
cash equivalents		(3,221.5	)		(93.8	)		376.0			(12.4	)		51.8			–			(2,899.9	)
Cash and cash equivalents, beginning of period		4,351.9			183.2			1,284.1			13.8			430.3			–			6,263.3

Cash and cash equivalents, end of period	$	1,130.4		$	89.4		$	1,660.1		$	1.4		$	482.1		$	–		$	3,363.4


Six Months Ended June 30, 2008
Cash Flows From Operating Activities:
Net cash flows provided
by (used for) operations	$	31.6		$	(8.8	)	$	94.2		$	20.3		$	1,099.1		$	–		$	1,236.4

Cash Flows From Investing Activities:
Net increase (decrease) in financing and
leasing assets		1,365.6			(95.4	)		(379.4	)		–			(1,827.2	)		–			(936.4	)
Decrease in inter-company loans
and investments		1,786.4			–			–			–			–			(1,786.4	)		–

Net cash flows (used for) provided by
investing activities		3,152.0			(95.4	)		(379.4	)		–			(1,827.2	)		(1,786.4	)		(936.4	)

Cash Flows From Financing Activities:
Net increase (decrease) in debt		(170.2	)		292.2			(680.6	)		4.0			2,082.6			–			1,528.0
Inter-company financing		–			(65.7	)		(.1	)		(24.3	)		(1,696.3	)		1,786.4			–
Cash dividends paid		(100.6	)		–			–			–			–			–			(100.6	)

Net cash flows provided by (used for)
financing activities		(270.8	)		226.5			(680.7	)		(20.3	)		386.3			1,786.4			1,427.4

Net (decrease) increase in cash and
cash equivalents		2,912.8			122.3			(965.9	)		–			(341.8	)		–			1,727.4
Cash and cash equivalents, beginning of period		3,171.0			30.5			1,931.6			–			1,180.0			–			6,313.1

Cash and cash equivalents, end of period	$	6,083.8	$		152.8		$	965.7		$	–		$	838.2		$	-		$	8,040.5


Item 1: Consolidated Financial Statements	39

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18 – SUBSEQUENT EVENTS

In accordance with current accounting literature, this subsequent events note is updated through August 17, 2009.

Credit Facility

On July 20, 2009, CIT entered into a Credit Facility for up to $3 billion with Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto. See NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further details.

Application for Temporary Liquidity Guarantee Program and Section 23A Waivers

On July 15, 2009, the Company announced that it had been advised that there is no appreciable likelihood of additional government support being provided in the near term. As a result of the Company’s failure to obtain additional government support, including TLGP approval and additional Section 23A waivers, the Company has not been able to shift its primary operating platform to CIT Bank and will not be able to issue government-guaranteed debt under TLGP, further reducing the liquidity options available to the Company.

Financing Commitments

The Company experienced higher draws on committed loan facilities, most notably during the week of July 13 – 17, which included draws of approximately $0.7 billion, about twice the normal activity. During the following week, the draws normalized and some repayments were received. During the same period, there was higher than normal requests for advances on factoring credit balances by customers in the Company’s Trade Finance segment. See NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further details.

Debt Tender Offer

On July 20, 2009, as part of the restructuring plan, the Company commenced a cash tender offer for its outstanding Floating Rate Senior Notes due August 17, 2009, upon the terms and subject to the conditions set forth in its Offer dated July 20, 2009. The transaction was completed on August 17, 2009 in accordance with the terms and conditions. See NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further details.

FDIC and UDFI Orders

On July 16, 2009, in connection with the diminished liquidity of CIT, CIT Bank, a wholly-owned subsidiary of CIT, entered into a Stipulation and Consent to the Issuance of an Order to Cease and Desist (“FDIC Consent Agreement”) with the FDIC in respect of its Order to Cease and Desist (the “FDIC Order”), and a Stipulation and Consent to the Issuance of an Order to Cease and Desist (“UDFI Consent Agreement”) with the Utah Department of Financial Institutions (the “UDFI”) in respect of its Order to Cease and Desist (the “UDFI Order”). See NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further details.


40	CIT GROUP INC

CIT GROUP INC. AND SUBSIDIARIES – NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Termination of Agreements

On July 16, 2009, Snap-On Incorporated notified CIT that Snap-On is terminating the operating agreement between CIT and Snap-On relating to the parties’ Snap-On Credit LLC joint venture. See NOTE 14 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS for further details.

On July 13, 2009, Microsoft Corporation notified CIT that they were terminating its vendor finance program agreement with the Company. Existing finance leases as of June 30, 2009 totaled approximately $649 million. The termination of the vendor finance program is not expected to have a material impact on the Company’s net income for 2009.

Suspension of Preferred Dividend Payments

CIT announced on August 3, 2009 it was suspending dividend payments on its four series of preferred stock in order to improve liquidity and preserve capital while restructuring efforts are ongoing.

Written Agreement with Federal Reserve

On August 12, 2009, the Company entered into a Written Agreement (the “Written Agreement”) between the Company and the Reserve Bank. See NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further details.

Adoption of Tax Benefits Preservation Plan

On August 12, 2009, the Company adopted a Tax Benefits Preservation Plan (the “Preservation Plan”) in order to protect the Company’s ability to utilize its net operating losses and other tax assets from an “ownership change” under U.S. federal income tax rules.


Item 1: Consolidated Financial Statements	41


ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations and

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

OVERVIEW

CIT Group Inc., (“we,” “CIT” or the “Company”), is a bank holding company that provides financing and leasing capital for commercial companies throughout the world. Covering a wide variety of industries, we offer vendor, equipment, commercial, and structured financing products, as well as factoring and management advisory services. CIT is the parent of CIT Bank, a Utah state bank. CIT operates primarily in North America, with locations in Europe, Latin America, Australia and the Asia-Pacific region. CIT has been providing capital solutions since its formation in 1908. The Company became a bank holding company in late 2008.

In the following discussion we use financial terms that are relevant to our business. You can find a glossary of key terms used in our business in “Item 1. Business” in our Form 10-K for the year ended December 31, 2008.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures about Market Risk” contain certain non-GAAP financial measures. See “Non-GAAP Financial Measurements” for reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures.

FUNDING AND LIQUIDITY UPDATES

Liquidity Risk Management

Bank Holding Company Strategy and Background

During the summer of 2008, the Company developed its BHC strategy, which was designed to give us a more stable and reliable funding source and lower cost of capital. In connection with its BHC application, which was approved in December 2008, along with CIT’s participation in the Troubled Asset Relief Program (TARP) whereby the U.S. Department of the Treasury made an investment of $2.3 billion in CIT’s preferred stock, the Company presented a multi-step BHC strategy to the Federal Reserve and the Federal Deposit Insurance Corporation (“FDIC”). The BHC strategy contemplated an orderly transition from a capital markets funded business to a diversified funding model that had its recently converted state-chartered Utah bank as the primary operating subsidiary. The transition plan included (i) asset transfers from the Company’s non-bank subsidiaries to CIT Bank via exemptions under Section 23A of the Federal Reserve Act that would be funded by expanded deposit issuance through existing and new channels, (ii) transfers of bank-eligible personnel and systems into CIT Bank, and (iii) participation by the Company in the FDIC’s Temporary Liquidity Guarantee Program (“TLGP”). On November 12, 2008, simultaneous with filing its BHC applications, CIT applied for approval to transfer up to $30 billion of assets from its non-bank affiliates to CIT Bank pursuant


42	CIT GROUP INC

to an exemption from Section 23A. Asset transfers under 23A would have provided liquidity to the Company and facilitated the transfer of businesses into the Bank. In April 2009, the Federal Reserve granted the Company a waiver under Section 23A to transfer $5.7 billion of government guaranteed student loans to CIT Bank. In connection with this transaction, CIT Bank assumed $3.5 billion in debt and paid $1.6 billion in cash to CIT.

Recent Liquidity Actions

Bank Holding Company Strategy Update

Credit Line Draws

Term Loan Financing

The Credit Facility has a two and a half year maturity and bears interest at LIBOR plus 10%, with a 3% LIBOR floor, payable monthly. It provides for (i) a commitment fee of 5% of the total advances made thereunder, payable upon the funding of each advance, (ii) an unused line fee with respect to undrawn commitments at the rate of 1% per annum and (iii) a 2% exit fee on amounts prepaid or repaid and the unused portion of any commitment.

The Credit Facility is secured by a perfected first priority lien on substantially all unencumbered assets of the Borrowers and Guarantors, which includes 65% of the voting and 100% of the non-voting stock of other first-tier foreign subsidiaries (other than direct subsidiaries of the Company, in each case owned by a Guarantor), 100% of the stock of CIT Aerospace International and between 49% and 65% of certain other material non-U.S., non-regulated subsidiaries. Unencumbered assets of June 30, 2009 totaled approximately $36 billion.

Borrowings under the Credit Facility were used for general corporate purposes and working capital needs and to purchase notes accepted for payment in the Offer (as defined below).


Item 2: Management’s Discussion and Analysis and Item 3: Quantitative and Qualitative Disclosures about Market Risk	43

The Credit Facility contains provisions (i) requiring the Company and the Steering Committee to work together in good faith to promptly develop a mutually acceptable restructuring plan for the Company and its Subsidiaries and (ii) requiring the Company to adopt a restructuring plan acceptable to the majority in number of the Steering Committee by October 1, 2009. The Company currently expects to complete development of the restructuring plan prior to October 1 and to begin implementing the plan following approval by the Steering Committee.

Restructuring Plan Initiated

Business Model – Management will develop a business model that seeks to optimize our portfolio of businesses, organization structure and funding model. The business model could identify businesses or portfolios that may be liquidated or sold over time;
Business Size – The plan will address the optimal asset levels that can be supported by the funding model and right-size the corporate infrastructure to the new business scale;
Capital Structure – The plan will identify a target capital structure that is appropriate for the business model that would provide sufficient cushion against risk, meet and exceed all regulatory capital requirements and position the Company for a return to investment grade ratings;
Implementation Plan – The plan will identify a series of transactions, which will likely consist of debt for equity exchanges and maturity extension offers that if successfully implemented, would enable the Company to achieve its targeted capitalization structure;
Bank Model – Management continues to believe that a bank model is a key element of a small-business focused commercial franchise. The plan will detail the core businesses that, subject to regulatory approvals, will operate in CIT Bank, and could possibly include a plan to reintroduce to regulators the transfer of business platforms into the bank; and
Deposit Strategy – Deposits, including retail deposits, are likely to be a key component to the funding model.

Tender Offer for Floating Rate Senior Notes due August 17, 2009

Asset Sales

Risks Associated With Liquidity Plans


44	CIT GROUP INC

need to sell assets, cash proceeds could be at levels significantly below current carrying values, resulting in further capital reductions. The Company’s liquidity position could be further strained if the borrowers on lines of credit continue to access these lines or increase their rate of borrowing, resulting in a material adverse effect on its business.

Second Quarter Liquidity Position

The variances for the second quarter from our liquidity plan as contemplated at the time of our March 31, 2009 Form 10-Q filing are predominantly due to increased line draws by our customers on loan commitments, higher levels of advances on credit balances of factoring clients, and the Company’s inability to utilize secured lending facilities in the timeframe planned for as additional liquidity. As a result, corporate cash declined to $1.2 billion at June 30, 2009, from $2.6 billion at the end of last quarter. In total, we had $4.5 billion of cash and cash equivalents at June 30, down from $6.0 billion at March 31, 2009, as portfolio collections and asset sales proceeds were more than offset by the paydowns of $2.1 billion of bank line debt and approximately $2.8 billion of unsecured debt during the quarter. Our quarter end cash position is comprised of $1.2 billion of corporate cash available to CIT, $1.7 billion of cash and short-term investments at CIT Bank and $1.6 billion of restricted and other cash balances, which largely relates to securitizations and cash at the business units.

At June 30, 2009, unencumbered financing and leasing assets totaled $36 billion. However, on July 20, 2009, the Company entered into the Credit Facility for up to $3 billion with Barclays Bank PLC and other lenders that is secured by virtually all remaining unencumbered assets, which limits any future secured borrowings to certain permitted transactions including those incurred in the ordinary course, such as securitization conduit sales, and exchange transactions in connection with an approved restructuring plan.

The Company has significant maturities of unsecured debt in both the near term and future years. Estimated unsecured debt funding needs for the twelve months ending June 30, 2010 total approximately $8 billion. In the second half of 2009, the Company has unsecured debt maturities of approximately $3 billion. Estimated secured facilities maturities (which are generally repaid in tandem with underlying receivable maturities) are $6 billion for the twelve months ending June 30, 2010 and $4.5 billion for the second half of 2009. There are two facilities with approximately $1.6 billion of availability at June 30, 2009 that are subject to renewal in the next six months. If the facilities are not renewed, the assets already held will remain outstanding and the obligations will be repaid out of the cash flows from the assets. In order to satisfy the Company’s funding needs, the Company will need to extend debt maturities, or potentially sell assets to generate sufficient cash to retire the debt.

Supplemental Funding and Liquidity Related Information

The following tables summarize significant contractual payments and projected cash collections, and contractual commitments at June 30, 2009:

Payments and Collections by Year, for the twelve months ended June 30,⁽¹⁾(dollars in millions)


	Total			2010		2011			2012			2013			2014+
Deposits	$	5,378.7		$	1,545.0	$	1,367.9		$	1,242.0		$	447.8		$	776.0
Bank Lines		3,100.0			2,100.0		1,000.0			–			–			–
Unsecured notes		31,253.4			5,734.7		4,972.2			5,260.0			4,201.7			11,084.8
Secured borrowings⁽²⁾		17,635.3			6,014.7		1,782.1			1,405.5			1,426.1			7,006.9
Junior, subsordinated notes and convertible		2,098.9			–		199.9			–			–			1,899.0
Credit balances of factoring clients		2,671.8			2,671.8		–			–			–			–
Lease rental expense		351.0			38.7		34.6			32.9			30.9			213.9

Total contractual payments		62,489.1			18,104.9		9,356.7			7,940.4			6,106.5			20,980.6

Finance receivables⁽²⁾		48,730.3			11,544.2		5,861.7			5,843.8			4,908.5			20,572.1
Operating lease rental income⁽³⁾		6,523.9			1,729.4		1,339.8			970.8			692.5			1,791.4
Finance and leasing assets held for sale⁽⁴⁾		427.3			427.3		–			–			–			–
Cash and due from banks and deposits with banks⁽⁵⁾		4,467.7			4,467.7		–			–			–			–
Retained interest in securitizations		169.5			66.6		35.8			28.0			6.1			33.0

Total projected cash collections		60,318.7			18,235.2		7,237.3			6,842.6			5,607.1			22,396.5

Net projected cash collections (payments)	$	(2,170.4	)	$	130.3	$	(2,119.4	)	$	(1,097.8	)	$	(499.4	)	$	1,415.9

⁽¹⁾	Excludes projected proceeds from the sale of operating lease equipment, interest revenue from finance receivables, debt interest expense and other items. Also excludes obligations relating to postretirement programs.

⁽²⁾	Includes non-recourse secured borrowings, which is generally repaid in conjunction with the pledged receivable maturities. For student lending receivables, due to certain reporting limitations, the repayment of both the receivable and borrowing includes a prepayment component. The 2011 unsecured borrowings contractual payments includes $428 million for a bond with a 2017 maturity for which the bondholders have an option to put the bond back to CIT in June 2010.

⁽³⁾	Based upon carrying value, including unearned discount; amount could differ due to prepayments, extensions of credit, charge-offs and other factors.

⁽⁴⁾	Rental income balances include payments from lessees on sale-leaseback equipment. See related CIT payment in schedule below.

⁽⁵⁾	Based upon management’s intent to sell rather than hold to contractual maturities of underlying assets.

⁽⁶⁾	Includes approximately $1.7 billion of cash held at our Utah bank that can be used solely by the bank to originate loans or repay deposits.

Debt Principal Payments for the quarters ended (dollars in millions)


	Total		September 30, 2009		December 31, 2009		March 31, 2010		June 30, 2010
Bank Lines	$	2,100.0	$	–	$	–	$	–	$	2,100.0
Unsecured notes		5,734.7		1,435.2		1,415.4		2,307.5		576.6
Secured borrowings⁽¹⁾		6,014.7		3,201.9		1,455.0		696.0		661.8

Total debt principal
payments	$	13,849.4	$	4,637.1	$	2,870.4	$	3,003.5	$	3,338.4

⁽¹⁾	The secured borrowings include conduit maturities of $4.1 billion and assumed amortization of other facilities of $1.7 billion. Conduit balances typically are liquidated as the underlying receivables mature and are collected. If a facility is not renewed, generally the assets already held will remain outstanding and the obligation will be repaid out of the cash flows from the assets.


Item 2: Management’s Discussion and Analysis and Item 3: Quantitative and Qualitative Disclosures about Market Risk	45

Commitment Expiration by twelve month periods ended June 30 (dollars in millions)


	Total		2010		2011		2012		2013		2014+
Financing commitments⁽¹⁾	$	4,464.7	$	716.6	$	882.0	$	1,161.3	$	981.3	$	723.5
Financing commitments – vendor receivables⁽²⁾		822.4		454.9		283.0		50.4		18.1		16.0
Aerospace and other manufacturer purchase
commitments		4,999.8		476.9		755.5		967.7		646.7		2,153.0
Letters of credit		633.1		455.9		51.4		79.3		34.8		11.7
Sale-leaseback payments		1,706.7		165.9		161.6		145.8		144.0		1,089.4
Guarantees, acceptances and other recourse obligations		547.4		547.4		–		–		–		–
Liabilities for unrecognized tax obligations⁽³⁾		59.6		15.0		44.6		–		–		–

Total contractual commitments	$	13,233.7	$	2,832.6	$	2,178.1	$	2,404.5	$	1,824.9	$	3,993.6

⁽¹⁾	Financing commitments do not include certain unused, cancelable lines of credit to customers in connection with third-party vendor programs, which can be reduced or cancelled by CIT at any time without notice.

⁽²⁾	Commitments related to vendor receivables for which the manufacturer has financing commitment as explained below.

⁽³⁾	The balance can not be estimated past 2010; therefore the remaining balance is reflected in 2011. See Income Taxes section for discussion of unrecognized tax obligations.

As of June 30, substantially all of our commercial commitments are senior facilities, with approximately 58% secured by equipment or other assets and the remainder supported by cash-flow or enterprise value. The vast majority of CIT’s commitments are syndicated transactions. CIT is the lead agent in roughly 50% of the facilities. The vast majority of our undrawn and available financing commitments are in our Corporate Finance segment where the average unfunded and available commitment balance is approximately $6.5 million and the top ten undrawn and available commitments aggregate to less than $500 million.

We expect some increase in utilization throughout 2009, which has been contemplated in our 12 month liquidity plan. The Company monitors line utilization on a daily basis and updates its liquidity forecast and funding plans accordingly.

During and subsequent to the June 2009 quarter end, each of the major rating agencies downgraded our credit ratings. Further downgrades by the rating agencies could cause further liquidity constraints on us. In July, CIT made a decision to reduce the number of rating agencies it has under contract to rate its debt and decided to end its relationship with Fitch Ratings, therefore we removed their ratings from the table. Any rating of CIT or its subsidiaries published by Fitch is based solely on publicly available information. The following table reflects our credit ratings at July 24, 2009.

Credit Ratings⁽¹⁾(as of July 24, 2009)


		Short-Term	Long-Term	Outlook / Watch
Moody’s		NP	Ca	Stable
Standard & Poor’s		C	CC-	Negative Watch
DBRS	R-5		CCC	Negative Watch

⁽¹⁾

The credit ratings stated above are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal by the assigning rating organization. Each rating should be evaluated independently of any other rating organization.

BANK HOLDING COMPANY AND CIT BANK UPDATES

The Company and CIT Bank are each subject to various regulatory capital requirements set by the Federal Reserve Board and the FDIC, respectively. Failure to meet minimum capital requirements can result in regulators taking certain mandatory, or in some circumstances discretionary actions that could have a direct material adverse effect on the Company. Losses during the first and second quarter of 2009 have reduced the Company’s level of regulatory capital to slightly below the agreed-upon 13% level. See Note 9 — Capital for additional information regarding regulatory capital requirements. Continued losses in future quarters may further reduce the Company’s regulatory capital below satisfactory levels. The restructuring plan currently being developed by management and the Steering Committee is in part aimed at improving our capital levels

On August 12, 2009, the Company entered into a Written Agreement (the “Written Agreement”) between the Company and the Reserve Bank. The Written Agreement requires regular reporting to the Reserve Bank, the submission of plans related to corporate governance, credit risk management, capital, liquidity and funds management, the Company’s business and the review and revision, as appropriate, of the Company’s consolidated allowance for loan and lease losses methodology. Prior written approval by the Reserve Bank is required for payment of dividends and distributions, incurrence of debt, other than in the ordinary course of business, and the purchase or redemption of stock. The Written Agreement requires notifying the Reserve Bank prior to the appointment of new directors or senior executive officers, and restrictions on indemnifications and severance payments.


46	CIT GROUP INC

Our consolidated Tier 1 and Total Capital Ratios were 8.8% and 12.8% at June 30, 2009, down from 9.2% and 13.1% at March 31, 2009. During the quarter we reduced risk-weighted assets to $70 billion from $73 billion at March 31, 2009.

At June 30, 2009, assets at CIT Bank totaled $9.9 billion, up from $3.9 billion at March 31, 2009 reflecting the 23A transfer of $5.7 billion of student loans and over $300 million of commercial loan originations. Deposits totaled $5.4 billion, up from $3.0 billion at March 31, 2009. For the six months ended June 30, 2009, the bank recorded net income of $6.9 million, and total capital ended at $1.6 billion. CIT Bank’s Tier 1 and Total Capital Ratios were 38.4% and 39.7% at June 30, 2009, up from 23.1% and 24.4% at March 31, 2009, respectively.

FINANCIAL PERFORMANCE REVIEW

Liquidity constraints that we have been working under and the recent events previously discussed, coupled with the weak economic environment weighed heavily on our second quarter and six months 2009 results. We recorded a loss of $1.7 billion, $4.30 per share, for the June 2009 quarter, and a loss of $2.1 billion, $5.34 per share, year to date. The reported loss exceeded the results anticipated, as disclosed in our 8-K filed on July 21, 2009, primarily due to additional credit loss provisioning, in part reflecting a refinement of our reporting of non-accrual loans to more closely align with Federal Reserve classifications. The current quarter included several noteworthy items, which provided little or no tax benefit:

Recorded goodwill and intangible asset impairment charges ($692 million pretax) primarily related to the Corporate Finance and Trade Finance segments triggered by liquidity constraints that have diminished earnings expectations for the segments and the failure to obtain additional government support, including TLGP approval and additional Section 23A waivers, coupled with the prolonged period that our stock has traded below book value. The charges represented the entire goodwill and intangible assets balances of CIT.
Sold $884 million of receivables to raise liquidity resulting in a pretax loss of approximately $184 million.
Reclassified the TARP warrant, recorded last quarter as a liability, to equity and recorded a $25 million pretax charge for the increase in fair value of the warrant for the period from the beginning of the quarter until the requirements were met to record the warrant as equity.
Terminated certain borrowing facilities and recorded termination fees of approximately $20 million, pretax, as a result of our credit rating downgrades.
Recorded pretax severance charges of $23 million primarily relating to the termination of approximately 120 employees.

The weak economic environment is directly impacting our credit costs. The provision for credit losses, non-accrual accounts and charge-offs increased from the prior quarter. In light of these trends, year to date, we have increased our reserve for credit losses by $442 million. We expect non-accrual loans and charge-off levels to remain elevated through at least the remainder of 2009.

The decline in interest margin slowed during the second quarter after compressing 25 basis points during the first quarter. The second quarter reflected lower interest expense on lower debt balances and somewhat better funding costs and yield-related fees, which were offset by termination fees on certain borrowing facilities and higher nonaccruals. We expect margins to remain under pressure from high non-accrual loan balances and other factors, including operating lease rental declines, increased cost of borrowings due to credit rating downgrades and recent funding arrangements.

Salaries and general operating expenses decreased from last quarter and are well below prior year levels. The improvement primarily reflected lower compensation costs, consistent with lower headcount, and reduced discretionary spending, partially offset by increased professional fees.

From a segment perspective, Transportation Finance, particularly the aerospace portfolio, performed well, as our commercial aircraft portfolio remained fully utilized. The railcar leasing industry, however, has been hit harder during this economic downturn, reflected by the decline in rail car utilization and lease rates. Trade Finance has performed well despite its reliance on the weak retail and manufacturing industries, as rising commission rates were overshadowed by the previously mentioned impairment charges for goodwill and intangible assets. Both Vendor Finance and Corporate Finance were significantly impacted by the economic and credit downturns and liquidity constraints.

Given the accelerated economic downturn and its deepening impact on our customers and credit exposures, combined with our inability to make significant progress on lowering funding costs, we do not expect to return to profitability during 2009.


Item 2: Management’s Discussion and Analysis and Item 3: Quantitative and Qualitative Disclosures about Market Risk	47

Selected Financial Data (dollars in millions, except share data)


	Quarters Ended									Six Months Ended
	June 30 2009			March 31, 2009			June 30 2008			June 30 2009			June 30 2008
*Selected Income Statement Data*
Net interest revenue	$	(19.1	)	$	(17.5	)	$	169.8		$	(36.6	)	$	327.2
Provision for credit losses		(588.5	)		(535.4	)		(152.2	)		(1,123.9	)		(398.9	)
Total other income		274.7			663.2			661.2			937.9			1,228.9
Total other expenses		(1,272.9	)		(444.6	)		(609.7	)		(1,717.5	)		(1,425.2	)
Loss from continuing operations		(1,618.5	)		(342.3	)		47.9			(1,960.8	)		(192.8	)
Loss attributable to common stockholders		(1,679.4	)		(403.2	)		(2,084.4	)		(2,082.6	)		(2,341.6	)
Average number of common
shares – diluted (in thousands)		390,535			388,940			264,381			389,741			227,704
*Performance Ratios*
Net finance revenue⁽¹⁾ as a percentage of
AEA		1.10	%		1.13	%		2.34	%		1.11	%		2.31	%
Net finance revenue⁽¹⁾ after provision as a
percentage of AEA		(2.75	)%		(2.31	)%		1.41	%		(2.52	)%		1.08	%
Return on average common stockholders’
equity		(161.3	)%		(31.8	)%		2.0	%		(90.0	)%		(7.3	)%
Return on AEA		(10.97	)%		(2.59	)%		0.19	%		(6.74	)%		(0.70	)%
*Per Common Share Data*
Diluted net loss per share	$	(4.30	)	$	(1.04	)	$	(7.88	)	$	(5.34	)	$	(10.28	)
Tangible book value per common share⁽²⁾	$	7.48		$	9.57		$	13.85
Outstanding common shares (in thousands)		392,068			388,893			285,303
*Financial Ratios*
Tier I capital		8.8	%		9.2	%		N/A
Total capital		12.8	%		13.1	%		N/A
Tangible common equity (TCE) ratio⁽³⁾		4.1	%		4.8	%		4.5	%
*Selected Balance Sheet Data*
Finance Receivables	$	48,730.3		$	50,859.1		$	53,223.7
Allowance for loan losses		(1,538.4	)		(1,316.3	)		(780.8	)
Operating lease equipment, net		13,380.1			13,175.2			12,342.4
Total Assets		71,019.2			75,657.0			87,819.4
Deposits		5,378.7			3,024.9			2,002.1
Total Long-term borrowings		54,087.6			59,481.9			67,911.4
Total Common Stockholders’ Equity		2,932.2			4,289.3			5,079.7
Total Equity		6,118.0			7,468.4			6,208.4

⁽¹⁾	Net finance revenue is the sum of net interest revenue plus rentals on operating leases less depreciation on operating lease equipment.

⁽²⁾	Excludes the potential dilution related to a warrant to purchase approximately 88.7 million common shares at an initial price of $3.94.

⁽³⁾	TCE equals total common stockholders’ equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets.


48	CIT GROUP INC

Quarterly Average Balances⁽¹⁾and Associated Income (dollars in millions)


	June 30, 2009							March 31, 2009							June 30, 2008
	Average Balance			Interest		Average Rate (%)		Average Balance			Interest		Average Rate (%)		Average Balance			Interest		Average Rate (%)
Deposits with banks	$	4,826.4		$	6.3	0.52	%	$	6,686.7		$	9.7	0.58	%	$	8,991.2		$	58.6	2.61	%
Investments⁽²⁾		475.0			1.7	1.43	%		480.0			1.3	1.08	%		438.0			1.3	1.19	%
Loans and leases (including held for sale)⁽³⁾⁽⁴⁾
U.S.		41,946.2			438.4	4.46	%		43,698.3			461.7	4.50	%		44,717.5			622.3	6.01	%
Non-U.S.		8,519.6			168.1	7.92	%		8,365.2			166.9	8.02	%		11,315.8			234.7	8.33	%

Total loans and leases⁽³⁾		50,465.8			606.5	5.08	%		52,063.5			628.6	5.10	%		56,033.3			857.0	6.50	%

Total interest earning assets / interest income⁽⁵⁾		55,767.2			614.5	4.63	%		59,230.2			639.6	4.53	%		65,462.5			916.9	5.90	%

Operating lease equipment, net⁽⁵⁾
U.S. Operating lease equipment, net⁽⁵⁾		6,327.0			67.6	4.27	%		6,264.3			83.8	5.35	%		6,262.4			92.8	5.93	%
Non-U.S. operating lease equipment, net⁽⁵⁾		6,913.3			119.3	6.90	%		6,620.0			109.4	6.61	%		6,348.2			119.4	7.52	%

Total operating lease equipment, net⁽²⁾		13,240.3			186.9	5.64	%		12,884.3			193.2	6.00	%		12,610.6			212.2	6.73	%

Total earning assets⁽³⁾		69,007.5		$	801.4	4.83	%		72,114.5		$	832.8	4.80	%		78,073.1		$	1,129.1	6.04	%

Non interest earning assets
Cash due from banks		331.0							430.3							576.4
Allowance for loan losses		(1,366.5	)						(1,159.4	)						(731.4	)
All other non-interest earning assets⁽⁶⁾		6,006.2							6,527.4							14,601.7

Total Average Assets	$	73,978.2						$	77,912.8						$	92,519.8

Average Liabilities
Borrowings
Deposits	$	4,276.9		$	37.4	3.50	%	$	2,346.4		$	24.4	4.16	%	$	1,928.2		$	24.8	5.14	%
Short-term borrowings		–			–				–			–	–			504.0			4.7	3.73	%
Long-term borrowings		56,588.3			596.2	4.21	%		61,426.5			632.7	4.12	%		70,578.0			717.6	4.07	%

Total interest-bearing liabilities		60,865.2		$	633.6	4.16	%		63,772.9		$	657.1	4.12	%		73,010.2		$	747.1	4.09	%

U.S. credit balances of factoring clients		2,657.0							2,691.5							3,286.6
Non-U.S. credit balances of factoring clients		32.2							37.6							39.9
Non-interest bearing liabilities,
noncontrolling interests and stockholders’
equity
Other liabilities		3,257.6							3,703.6							8,883.9
Noncontrolling interests		43.0							44.8							53.9
Stockholders’ equity		7,123.2							7,662.4							7,245.3

Total Average Liabilities and
Stockholders’ Equity	$	73,978.2						$	77,912.8						$	92,519.8

Net revenue spread						0.67	%						0.68	%						1.95	%
Impact of non-interest bearing sources⁽⁶⁾						0.34	%						0.33	%						0.09	%

Net revenue/yield on earning assets⁽³⁾				$	167.8	1.01	%				$	175.7	1.01	%				$	382.0	2.04	%


Item 2: Management’s Discussion and Analysis and Item 3: Quantitative and Qualitative Disclosures about Market Risk	49

Six Month Average Balances⁽¹⁾and Associated Income (dollars in millions)


	June 30, 2009						June 30, 2008
	Average Balance		Interest		Average Rate (%)		Average Balance		Interest		Average Rate (%)
Deposits with banks	$	5,748.2	$	16.0	0.56	%	$	7,220.9	$	102.8	2.85	%
Investments⁽²⁾		474.3		3.0	1.27	%		415.9		4.8	2.31	%
Loans and leases (including held for sale)⁽³⁾⁽⁴⁾
U.S.		42,804.2		900.1	4.49	%		44,839.1		1,331.8	6.46	%
Non-U.S.		8,491.4		335.0	7.92	%		11,176.6		467.0	8.39	%