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 September 30, 2010    

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, a non-accelerated filer or a smaller reporting company. 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 of the Exchange Act). Yes |_| No |X|

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes |X| No |_|

As of October 31, 2010 there were 200,250,036 shares of the registrant’s common stock outstanding.




CONTENTS

Part One—Financial Information:
ITEM 1. Consolidated Financial Statements   
     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  
     and  
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 37
ITEM 4. Controls and Procedures 87
  

Part Two—Other Information:
ITEM 1. Legal Proceedings 88
ITEM 1A Risk Factors 90
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 90
ITEM 6. Exhibits 90
  Signatures 95

1



Part One—Financial Information
  
ITEM 1. Consolidated Financial Statements
  

CIT GROUP INC. AND SUBSIDIARIES




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

  September 30,   December 31,
  2010   2009
 
 
          Revised
         
Assets            
Cash and due from banks $ 714.2       $ 1,289.5
Interest bearing deposits, including restricted balances of $1,588.1 at
September 30, 2010 and $1,420.7 at December 31, 2009(1)
  10,463.8       8,536.4
Trading assets at fair value - derivatives   45.2       44.1
Assets held for sale(1)   887.7       343.8
Loans (see Note 4 for amounts pledged)   26,753.4       34,879.1
Allowance for loan losses (397.1 )  
 
   
Total loans, net of allowance for loan losses(1)   26,356.3       34,879.1
Operating lease equipment, net (see Note 4 for amounts pledged)(1)   10,964.5       10,910.0
Unsecured counterparty receivable   682.5       1,094.5
Goodwill   255.1       255.1
Intangible assets, net   136.3       225.1
Other assets   2,476.4       2,451.5
 
   
Total Assets $ 52,982.0     $ 60,029.1
 
   
Liabilities            
Deposits $ 4,788.6     $ 5,218.6
Trading liabilities at fair value - derivatives   123.0       41.9
Credit balances of factoring clients   959.2       892.9
Other liabilities   2,339.7       2,211.3
Long-term borrowings, including $3,942.9 and $4,629.5 contractually due within
           
twelve months at September 30, 2010 and December 31, 2009, respectively   35,940.7       43,263.0
 
   
Total Liabilities   44,151.2       51,627.7
 
   
Stockholders’ Equity            
Common stock: $0.01 par value, 600,000,000 authorized            
   Issued: 200,374,631 at September 30, 2010 and 200,035,561 December 31,   2.0       2.0
   2009 Outstanding: 200,250,036 at September 30, 2010 and 200,035,561 at            
   December 31, 2009            
Paid-in capital   8,426.6       8,398.0
Retained earnings   403.9      
Accumulated other comprehensive income   1.1      
Treasury stock: 124,595 shares at September 30, 2010 at cost   (4.0 )    
 
   
Total Common Stockholders’ Equity   8,829.6       8,400.0
Noncontrolling minority interests   1.2       1.4
 
   
Total Equity   8,830.8       8,401.4
 
   
Total Liabilities and Equity $ 52,982.0     $ 60,029.1
 
   
 
(1) The following table presents information on assets and liabilities related to Variable Interest Entities (VIEs) that are consolidated by the Company. The difference between total VIE assets and liabilities represents the Company’s interests in those entities, which were eliminated in consolidation. The assets of the consolidated VIEs will be used to settle the liabilities of those entities and, except for the Company’s interest in the VIEs, are not available to the creditors of CIT or any affiliates of CIT.
           
Assets            
Interest bearing deposits, restricted $ 772.4     $ 655.3
Assets held for sale   321.3       6.6
Total loans, net of allowance for loan losses (see Note 4 for amounts pledged)   12,661.1       13,501.9
Operating lease equipment, net   2,754.4       3,689.8
 
   
 
Total Assets $ 16,509.2     $ 17,853.6
 
   
Liabilities            
Beneficial interests issued by consolidated VIEs – (long-term borrowings) $ 11,350.3     $ 13,662.7
 
   
 
Total Liabilities $ 11,350.3     $ 13,662.7
 
   

See Notes to Consolidated Financial Statements.

2




CIT GROUP INC. AND SUBSIDIARIES




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

  Quarters Ended
September 30,
  Nine Months Ended
September 30,
 
 
  CIT 2010      Predecessor
CIT 2009
  CIT 2010      Predecessor
CIT 2009
 

 

Interest income                          
   Interest and fees on loans $ 809.5   $ 549.6      $ 2,884.7   $ 1,784.7  
   Interest and dividends on investments   6.2     7.0       18.0     26.0  
 
 
   
 
 
      Interest income   815.7     556.6       2,902.7     1,810.7  
 
 
   
 
 
Interest expense                          
   Interest on long-term borrowings   (706.9 )   (648.0 )     (2,300.2 ) (1,876.9 )
   Interest on deposits   (25.3 )   (45.8 )     (77.5 )   (107.6 )
 
 
   
 
 
      Interest expense   (732.2 )   (693.8 )     (2,377.7 ) (1,984.5 )
 
 
   
 
 
Net interest revenue   83.5     (137.2 )     525.0     (173.8 )
Provision for credit losses   (165.2 )   (701.8 )     (636.0 ) (1,825.7 )
 
 
   
 
 
Net interest revenue, after credit provision   (81.7 )   (839.0 )     (111.0 ) (1,999.5 )
 
 
   
 
 
Other income                          
   Rental income on operating leases   398.4     471.7       1,236.3     1,420.4  
   Other   269.4     (166.8 )     760.3     (177.6 )
 
 
   
 
 
      Total other income   667.8     304.9       1,996.6     1,242.8  
 
 
   
 
 
Total revenue, net of interest expense and                          
credit provision   586.1     (534.1 )     1,885.6     (756.7 )
 
 
   
 
 
Other expenses                          
   Depreciation on operating lease equipment   (161.7 )   (282.6 )     (512.9 )   (851.2 )
   Operating expenses   (228.8 )   (249.7 )     (767.2 )   (706.2 )
   Goodwill and intangible assets impairment                          
   charges                 (692.4 )
 
 
   
 
 
      Total other expenses   (390.5 )   (532.3 )     (1,280.1 ) (2,249.8 )
 
 
   
 
 
Income before provision for income taxes   195.6   (1,066.4 )     605.5   (3,006.5 )
Provision for income taxes   (64.2 )   33.1       (187.2 )   12.4  
 
 
   
 
 
Net income (loss) before preferred stock dividends   131.4   (1,033.3 )     418.3   (2,994.1 )
Preferred stock dividends and amortization of                          
discount       (41.2 )         (163.2 )
 
 
   
 
 
Net income before attribution of noncontrolling                          
interests   131.4   (1,074.5 )     418.3   (3,157.3 )
Net (income) loss attributable to noncontrolling                          
interests, after tax   0.1               0.2  
 
 
   
 
 
Net income (loss) available (attributable) to                          
common shareholders $ 131.5   $ (1,074.5 )   $ 418.3   $ (3,157.1 )
 
 
   
 
 
                            
Basic earnings per common share $ 0.66   $ (2.74 )   $ 2.09   $ (8.08 )
Diluted earnings per common share $ 0.66   $ (2.74 )   $ 2.09   $ (8.08 )
Average number of common shares - basic                          
(thousands)   200,323   392,195       200,147     390,614  
Average number of common shares - diluted                          
(thousands)   200,668   392,195       200,464     390,614  
Cash dividends per common share                 0.02  

See Notes to Consolidated Financial Statements.

3




CIT GROUP INC. AND SUBSIDIARIES


 

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

    Common
Stock
      Paid-in
Capital
      Retained
Earnings
        Accumulated
Other
Comprehensive
Income / (Loss)
      Treasury
Stock
      Noncontrolling
Interest in
Subsidiaries
      Total
Stockholders’
Equity
 
   
   
     
 
 
   
 
December 31, 2009 $ 2.0       $ 8,398.0       $         $      $      $ 1.4      $ 8,401.4  
Adoption of new accounting                                                        
pronouncement               (14.4 )                         (14.4 )
Net income               418.3                           418.3  
Foreign currency translation                                                        
adjustments                       0.6                   0.6  
Unrealized gain on available for sale                                                        
equity investments, net                       0.8                   0.8  
 
Minimum pension liability adjustment                       (0.3 )                 (0.3 )
                     
Total comprehensive income                                                     419.4  
   
 
Restricted stock and                                                        
stock option expenses         28.6                     (4.0 )           24.6  
Distribution of earnings and capital                                   (0.2 )     (0.2 )
 
   
   
     
   
   
   
 
September 30, 2010 $ 2.0     $ 8,426.6     $ 403.9       $ 1.1     $ (4.0 )   $ 1.2     $ 8,830.8  
 
   
   
     
   
   
   
 

See Notes to Consolidated Financial Statements.

4




CIT GROUP INC. AND SUBSIDIARIES


 

Consolidated Statements of Cash Flows (Unaudited) (dollars in millions)

  Nine Months Ended September 30,
 
  CIT
2010
       Predecessor CIT
2009
 
   
Cash Flows From Operations              
Net income (loss) before preferred stock dividends

$

418.3     $ (2,993.9 )
Adjustments to reconcile net income (loss) to net cash flows from operations:              
   Provision for credit losses   636.0       1,825.7  
   Net depreciation, amortization and (accretion)   (366.8 )     1,055.5  
   Goodwill and intangible assets impairment charges         692.4  
   (Gains) loss on equipment, receivable and investment sales   (331.0 )     514.3  
   Provision (benefit) for deferred income taxes   109.2       (2.9 )
   Decrease in finance receivables held for sale   13.1       19.4  
   Warrant fair value adjustment         (70.6 )
   Gain on debt and debt-related derivative extinguishments         (207.2 )
   Increase in other assets   (355.2 )     (1.2 )
   Increase in accrued liabilities and payables   157.6       560.4  
 
   
 
Net cash flows provided by operations   281.2       1,391.9  
 
   
 
Cash Flows From Investing Activities              
Finance receivables extended and purchased (13,791.5 )     (21,457.7 )
Principal collections of finance receivables and investments 19,439.7       23,633.0  
Proceeds from asset and receivable sales   3,912.5       1,850.0  
Purchases of assets to be leased and other equipment   (867.6 )     (1,177.3 )
Net decrease (increase) in short-term factoring receivables   346.4       (120.5 )
Change in restricted cash   (167.4 )     1,198.4  
Net proceeds from sale of discontinued operation         44.2  
 
   
 
Net cash flows provided by investing activities   8,872.1       3,970.1  
 
   
 
Cash Flows From Financing Activities              
Proceeds from the issuance of term debt   2,662.9       7,966.7  
Repayments of term debt (10,266.3 )     (17,181.9 )
Net (decrease) increase in deposits   (401.9 )     2,606.9  
Net repayments of non-recourse leveraged lease debt   (17.7 )     (28.6 )
Collection of security deposits and maintenance funds   542.2       700.1  
Repayment of security deposits and maintenance funds   (487.8 )     (637.3 )
Cash dividends paid         (91.3 )
Other         (53.3 )
 
   
 
Net cash flows used in financing activities (7,968.6 )     (6,718.7 )
 
   
 
Increase (decrease) in unrestricted cash and cash equivalents   1,184.7       (1,356.7 )
Unrestricted cash and cash equivalents, beginning of period   8,405.2       6,263.3  
 
   
 
Unrestricted cash and cash equivalents, end of period $ 9,589.9     $ 4,906.6  
 
   
 
Supplementary Cash Flow Disclosure              
Interest paid $ 2,092.4     $ 1,820.0  
Federal, foreign, state and local income taxes collected, net $ 3.1     $ (75.9 )
Supplementary Non Cash Flow Disclosure              
Net transfer of finance receivables from held for investment to held for sale $ 2,082.7     $ 458.3  

The accompanying notes are an integral part of these 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 and Basis of Presentation

The accompanying consolidated financial statements include financial information related to CIT Group Inc. and its majority owned subsidiaries, including CIT Bank (collectively, “CIT” or the “Company”), and those variable interest entities (“VIEs”) where the Company is primary beneficiary. CIT is a bank holding company and provides commercial financing and leasing products and other services to small and middle market companies in a wide variety of industries.

On November 1, 2009, CIT Group Inc. (“Predecessor CIT”) and CIT Group Funding Company of Delaware LLC (“Delaware Funding” and together with Predecessor CIT, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”). As a result of the Debtors’ emergence from bankruptcy and implementation of the Modified Second Amended Prepackaged Reorganization Plan of Debtors (the “Plan”) on December 10, 2009 (the “Emergence Date”), CIT Group Inc. (“Successor CIT”) became a new reporting entity for financial reporting purposes, effective December 31, 2009 (the “Convenience Date”), with a new basis in identifiable assets and liabilities assumed, a new capital structure and no retained earnings or accumulated losses. Predecessor CIT’s Consolidated Statements of Operation for the quarter and nine months ended September 30, 2009 and Cash Flows for the nine months ended September 30, 2009 are not comparable to the consolidated financial statements for the respective 2010 periods and are presented separately from Successor CIT. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (Form 10-K), Note 1 and Note 2 for additional Fresh Start Accounting (“FSA”) and reorganization information.

The terms “CIT” and “Company”, when used with respect to periods commencing after emergence from bankruptcy, are references to Successor CIT and when used with respect to periods prior to emergence, are references to Predecessor CIT. These references include subsidiaries of Successor CIT or Predecessor CIT, unless otherwise indicated or the context requires otherwise.

The consolidated financial statements include effects of adopting FSA upon emergence from bankruptcy, as required by generally accepted accounting principles in the United States of America (“GAAP”). In applying FSA, the Company designated December 31, 2009 as a convenience date (the (“Convenience Date”) for recording fair value adjustments to assets, liabilities and equity. Accretion and amortization of certain FSA adjustments are included in the Statement of Operations for the quarter and nine months ended September 30, 2010.

These consolidated financial statements, which have been prepared in accordance with the instructions to Form 10-Q, do not include all information and note disclosures required by GAAP. The financial statements in this Form 10-Q have not been audited by an independent registered public accounting firm in accordance with 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. These consolidated financial statements should be read in conjunction with our Form 10-K.

On January 1, 2010, the Company implemented new consolidation accounting guidance related to VIEs. The new guidance eliminated the concept of qualified special purpose entities (“QSPEs”) that were previously exempt from consolidation, and introduced a new framework for determining the primary beneficiary of a VIE. The primary beneficiary of a VIE is required to consolidate the assets and liabilities of the VIE. Under the new guidance, the primary beneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Consolidation eliminated the retained interest and increased Cash ($105 million), Loans ($821 million), Allowance for loan losses ($40 million), Long-term borrowings ($738 million), and Other liabilities ($17 million) as of January 1, 2010. Equity decreased by approximately $14 million as of January 1, 2010.

6




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


All significant inter-company accounts and transactions have been eliminated. 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 an 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.

The preparation of 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. Some of the more significant estimates include: fresh start accounting fair values; valuation of deferred tax assets; lease residual values and depreciation of operating lease equipment; and allowance for loan losses. Additionally, where applicable, policies conform to accounting and reporting guidelines prescribed by bank regulatory authorities.

On July 16, 2009, the FDIC and the Utah Department of Financial Institutions (the “UDFI”) each issued cease and desist orders to CIT Bank (together, the “Orders”). The Orders were in connection with the diminished liquidity of Predecessor CIT. CIT Bank, without admitting or denying any allegations made by the FDIC and UDFI, consented and agreed to the issuances of the Orders.

On August 12, 2009, CIT entered into a Written Agreement with the Federal Reserve Bank of New York. The Company continues to provide required periodic reports relating to: corporate governance, credit risk management, capital, liquidity and funds management, business trends, as appropriate, and the allowance for loan losses methodology.

Accounting Pronouncements

In January 2010, FASB issued Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820). This update enhances disclosures about (1) different classes of assets and liabilities measured at fair value, (2) valuation techniques and inputs used, (3) transfers between Levels 1, 2, and 3, and (4) activity in Level 3 fair value measurements. Except for the detailed Level 3 rollforward disclosures, this guidance was adopted and did not have a material impact on the Company’s financial statement disclosures. Disclosure of activity in Level 3 fair value measurements is effective for fiscal years and interim periods beginning after December 15, 2010.

In July 2010, the Company adopted Accounting Standards Update 2010-18, Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset (Topic 310) which provides guidance concerning whether an individual loan that is part of a pool of loans accounted for as a single asset should be removed from the pool upon modifications that would otherwise qualify as a troubled debt restructuring. The adoption of this update did not materially impact the Company’s financial condition and results of operations.

In July 2010, the FASB issued Accounting Standards Update 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which provides guidance that will require enhanced disclosures surrounding the credit characteristics of the Company’s loan portfolio. Under the new guidance, the Company will be required to disclose its accounting policies, the methods it uses to determine the components of the allowance for credit losses, and qualitative and quantitative information about the credit risk inherent in the loan portfolio, including additional information on certain types of loan modifications. For the Company, the new disclosures are effective for the 2010 Annual Report on Form 10-K. The new disclosures on the rollforward of the allowance for credit losses and the new disclosures about troubled debt modifications are effective for the first quarter 2011 Form 10-Q. The adoption of this guidance will affect CIT’s disclosures of loans and not its financial condition or results of operations.

7




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


NOTE 2 – PRIOR PERIOD REVISIONS

In preparing the consolidated financial statements for the quarter ended September 30, 2010, the Company discovered and corrected immaterial errors that impacted the 2010 first and second quarter results and had a de minimis impact on the post-emergence December 31, 2009 balance sheet. The net effect of these errors was an understatement of pre-tax income totaling $34.3 million and $22.5 million for the quarters ended June 30 and March 31, 2010, respectively, and goodwill totaling $15.7 million at December 31, 2009. While the adjustments were primarily related to the complexities of FSA and the accounting for the related activity, some other errors were identified as well. While these errors did not, individually or in the aggregate, result in a material misstatement of the Company’s previously issued consolidated financial statements, correcting these items in the third quarter would have been material to the third quarter results. Accordingly, management has revised in this filing and will revise in its 2010 Form 10-K and its subsequent quarterly filings on Form 10-Q, its previously reported December 31, 2009 balance sheet and March 31, 2010 and June 30, 2010 Consolidated Statements of Operations. All comparison to those periods and year to date 2010 reflect the revised amounts.

8



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


The Consolidated Statement of Operations for the noted quarter and six month periods are revised as follows:

  Quarter Ended June 30, 2010    Quarter Ended March 31, 2010   Six Months Ended June 30, 2010
 
 
 
    As
Reported
    Adjustments       As
Revised
      As
Reported
    Adjustments       As
Revised
      As
Reported
      Adjustments       As
Revised
 
Interest income                                                                      
  Interest and fees on                                                                      
  loans(1) $ 987.2      $ 6.4      $ 993.6      $ 1,043.5      $ 38.1      $ 1,081.6      $ 2,030.7      $ 44.5     $ 2,075.2  
  Interest and dividends on                                                                      
  investments   6.3             6.3       5.5             5.5       11.8             11.8  
 
   
   
   
   
   
   
   
   
 
 
    Total interest income   993.5       6.4       999.9       1,049.0       38.1       1,087.1       2,042.5       44.5       2,087.0  
 
   
   
   
   
   
   
   
   
 
 
Interest expense                                                                      
  Interest on long-term                                                                      
  borrowings(2)   (784.7 )     (1.3 )     (786.0 )     (807.7 )     0.4       (807.3 )     (1,592.4 )     (0.9 )     (1,593.3 )
 
  Interest on deposits(3)   (28.9 )     3.6       (25.3 )     (30.1 )     3.2       (26.9 )     (59.0 )     6.8       (52.2 )
 
   
   
   
   
   
   
   
   
 
 
    Total interest expense   (813.6 )     2.3       (811.3 )     (837.8 )     3.6       (834.2 )     (1,651.4 )     5.9       (1,645.5 )
 
   
   
   
   
   
   
   
   
 
 
Net interest revenue   179.9       8.7       188.6       211.2       41.7       252.9       391.1       50.4       441.5  
 
Provision for credit losses(4)   (260.7 )     16.4       (244.3 )     (186.6 )   (39.9 )     (226.5 )     (447.3 )     (23.5 )     (470.8 )
 
   
   
   
   
   
   
   
   
 
Net interest revenue, after                                                                      
credit provision   (80.8 )     25.1       (55.7 )     24.6       1.8       26.4       (56.2 )     26.9       (29.3 )
 
   
   
   
   
   
   
   
   
 
 
Other income                                                                      
  Rental income on                                                                      
  operating leases   419.7             419.7       418.2             418.2       837.9             837.9  
 
  Other(5),(6)   330.6       8.9       339.5       132.2       19.2       151.4       462.8       28.1       490.9  
 
   
   
   
   
   
   
   
   
 
 
  Total other income   750.3       8.9       759.2       550.4       19.2       569.6       1,300.7       28.1       1,328.8  
 
   
   
   
   
   
   
   
   
 
Other expenses                                                                      
  Depreciation on operating                                                                      
  lease equipment   (179.0 )     0.5       (178.5 )     (173.5 )     0.8       (172.7 )     (352.5 )     1.3       (351.2 )
  Operating expenses   (277.0 )     (0.2 )     (277.2 )     (261.9 )     0.7       (261.2 )     (538.9 )     0.5       (538.4 )
 
   
   
   
   
   
   
   
   
 
 
    Total other expenses   (456.0 )     0.3       (455.7 )     (435.4 )     1.5       (433.9 )     (891.4 )     1.8       (889.6 )
 
   
   
   
   
   
   
   
   
 
Income before provision for                                                                      
income taxes   213.5       34.3       247.8       139.6       22.5       162.1       353.1       56.8       409.9  
 
Provision for income taxes(7)   (71.1 )     (5.0 )     (76.1 )     (42.5 )     (4.4 )     (46.9 )     (113.6 )     (9.4 )     (123.0 )
 
   
   
   
   
   
   
   
   
 
Net income before attribution of                                                                      
noncontrolling interests   142.4       29.3       171.7       97.1       18.1       115.2       239.5       47.4       286.9  
Net (income) loss attributable to                                                                      
noncontrolling interests, after                                                                      
tax   (0.3 )           (0.3 )     0.2             0.2       (0.1 )           (0.1 )
 
   
   
   
   
   
   
   
   
 
 
Net income $ 142.1     $ 29.3     $ 171.4     $ 97.3     $ 18.1     $ 115.4     $ 239.4     $ 47.4     $ 286.8  
 
   
   
   
   
   
   
   
   
 
Basic earnings per common                                                                      
share $ 0.71     $ 0.15     $ 0.86     $ 0.49     $ 0.09     $ 0.58     $ 1.20     $ 0.23     $ 1.43  
Average number of common                                                                      
shares - basic (thousands)   200,075               200,075       200,040               200,040       200,057               200,057  
Diluted earnings per common                                                                      
share $ 0.71     $ 0.14     $ 0.85     $ 0.49     $ 0.09     $ 0.58     $ 1.19     $ 0.24     $ 1.43  
Average number of common                                                                      
shares - diluted (thousands)   200,644               200,644       200,076               200,076       200,359               200,359  

(1) As noted in the Company’s June 30, 2010 Form 10-Q, in the 2010 second quarter the Company corrected certain 2010 first quarter accretion-related errors associated with performing loans in the Corporate Finance and Transportation Finance segments. In connection with these revisions, $10.9 million of accretion income that had been incorrectly reported in the second quarter is now correctly reported in the first quarter. In addition, these revisions include corrections of certain other accretion-related errors identified in the quarter ended September 30, 2010, associated with an additional group of Corporate Finance segment loans for which accretion income had not been correctly recorded in the quarters ended March 31 and June 30, 2010.

(2) Interest expense on long-term borrowings has been revised to correct the duplicative recognition of certain interest charges in the quarters ended March 31 and June 30, 2010.

(3) Interest on deposits has been revised to remove amortization of capitalized broker deposit fees that should have been written off at December 31, 2009 in conjunction with the application of FSA.

(4) The Provision for credit losses has been revised principally to correct the inappropriate utilization of approximately $35 million of non-accretable discount in the first quarter of 2010 to offset loan impairments that should have been charged to provision for credit losses in that quarter, as well as reverse approximately $10 million of impairment charges taken in the second quarter of 2010 that should not have been recognized after re-establishing the aforementioned non-accretable discount.

(5) Other income has been revised upward in the first and second quarters of 2010 to record fees earned on a Vendor Finance liquidating portfolio that had been incorrectly deferred.

(6) Other income has been increased in the first quarter of 2010, and decreased in the second quarter, to correct errors in the recording of gains on certain asset sales as well as gains associated with certain derivative financial instruments.

(7) Provision for income taxes was increased as a result of recording these adjustments.

9



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



The impact of revising the Consolidated Balance Sheets is as follows:

  At June 30, 2010   At March 31, 2010   At December 31, 2009
 
 
 
    As
Reported
      Adjustments       As
Revised
      As
Reported
      Adjustments       As
Revised
      As
Reported
    Adjustments       As
Revised
Assets                                                                  
 
Total cash and deposits $ 10,666.4      $      $ 10,666.4      $ 10,015.6      $      $ 10,015.6      $ 9,825.9    $      $ 9,825.9
Trading assets at fair                                                                  
value - derivatives   216.1             216.1       93.5             93.5       44.1           44.1
Assets held for sale   572.5             572.5       1,368.8             1,368.8       343.8           343.8
Loans(1)   28,883.2       46.3       28,929.5       32,025.7       31.1       32,056.8       34,865.8     13.3       34,879.1
Allowance for loan                                                                  
losses(2)   (337.8 )     10.0       (327.8 )     (180.8 )     (6.3 )     (187.1 )              
 
   
   
   
   
   
   
 
   
Total loans, net of                                                                  
allowance for loan                                                                  
losses   28,545.4       56.3       28,601.7       31,844.9       24.8       31,869.7       34,865.8     13.3       34,879.1
Operating lease                                                                  
equipment, net   10,950.7       1.4       10,952.1       10,931.0       0.8       10,931.8       10,910.0           10,910.0
Goodwill and                                                                  
intangible assets, net(3)   407.9       15.7       423.6       440.9       15.7       456.6       464.5     15.7       480.2
Unsecured counterparty                                                                  
receivable   818.7             818.7       914.6             914.6       1,094.5           1,094.5
Other assets(4)   2,739.1       (25.1 )     2,714.0       2,451.2       (28.9 )     2,422.3       2,480.5     (29.0 )     2,451.5
 
   
   
   
   
   
   
 
   
 
Total assets $ 54,916.8     $ 48.3     $ 54,965.1     $ 58,060.5     $ 12.4     $ 58,072.9     $ 60,029.1   $     $ 60,029.1
 
   
   
   
   
 
   
 
Liabilities                                                                  
Deposits $ 4,708.9     $     $ 4,708.9     $ 4,853.6     $     $ 4,853.6     $ 5,218.6   $     $ 5,218.6
Trading liabilities at                                                                  
fair value - derivatives   46.9             46.9       55.7             55.7       41.9           41.9
Credit balances of                                                                  
factoring clients   877.3             877.3       881.1             881.1       892.9           892.9
Other liabilities   2,373.3       0.9       2,374.2       2,372.0       (1.7 )     2,370.3       2,211.3           2,211.3
Total long-term                                                                  
borrowings   38,276.5             38,276.5       41,369.1             41,369.1       43,263.0           43,263.0
 
   
   
   
   
   
   
 
   
 
Total liabilities   46,282.9       0.9       46,283.8       49,531.5       (1.7 )     49,529.8       51,627.7           51,627.7
 
   
   
   
   
   
   
 
   
Equity                                                                  
Stockholders’ equity                                                                  
Common stock   2.0             2.0       2.0             2.0       2.0           2.0
Paid-in capital   8,419.1             8,419.1       8,403.8             8,403.8       8,398.0           8,398.0
Accumulated                                                                  
earnings(5)   225.0       47.4       272.4       82.9       18.1       101.0                
Accumulated other                                                                  
comprehensive (loss)                                                                  
income   (9.7 )           (9.7 )     39.2       (4.0 )     35.2                
 
Treasury stock, at cost   (4.0 )           (4.0 )     (0.1 )           (0.1 )              
 
   
   
   
   
   
   
 
   
Total common                                                                  
stockholders’ equity   8,632.4       47.4       8,679.8       8,527.8       14.1       8,541.9       8,400.0           8,400.0
Noncontrolling interests   1.5             1.5       1.2             1.2       1.4           1.4
 
     
     
     
     
 
     
   
 
 
Total equity   8,633.9       47.4       8,681.3       8,529.0       14.1       8,543.1       8,401.4           8,401.4
 
   
   
   
   
   
   
 
   
Total liabilities and                                                                  
equity $ 54,916.8     $ 48.3     $ 54,965.1     $ 58,060.5     $ 12.4     $ 58,072.9     $ 60,029.1   $     $ 60,029.1
 
   
   
   
   
   
   
 
   
 
Book Value Per Common Share                                                              
Book value per                                                                  
common share $ 43.11     $ 0.23     $ 43.34     $ 42.63     $ 0.07     $ 42.70     $ 41.99   $     $ 41.99
Tangible book value                                                                  
per common share $ 41.07     $ 0.16     $ 41.23     $ 40.43     $ (0.01 )   $ 40.42     $ 39.67   $ (0.08 )   $ 39.59

(1) The outstanding loan balance has been revised principally to correct the understatement of accretion in the first and second quarters of 2010.

(2) The allowance for loan losses has been revised to correct the inappropriate utilization of non-accretable discount in the first quarter of 2010, as discussed in footnote 4 to the previous table, revised Consolidated Statement of Operations.

(3) Revisions to Goodwill correspond to a correction of an understatement of loans at fair value in FSA as well as a correction of erroneously capitalized broker deposit fees that should have been charged off at December 31, 2009. As stockholders' equity was stated at fair value at December 31, 2009, as required by FSA, the net effect of the aforementioned corrections was an adjustment to Goodwill.

These revisions to Goodwill include an additional $12 million correction as compared to the correction described in the Company’s October 26, 2010 Earnings Release included in the Current Report on Form 8-K filed that same date.

(4) Other assets decreased due to the write-off of fees.

(5) Accumulated earnings increased due to the adjustment to net income in the first and second quarters.

There was no impact to the Company’s actual cash balances as a result of these adjustments, and the adjustments do not change the net cash flows from operating, investing, or financing activities.

10



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


NOTE 3 – LOANS AND RESERVE FOR CREDIT LOSSES

The following table presents segment loans and leases held for investment, based on obligor location:


Loans (dollars in millions)
  September 30, 2010   December 31, 2009(1)
 
 
  Domestic   Foreign   Total   Domestic   Foreign   Total
 
 
 
 
 
 
Corporate Finance $ 7,186.3    $ 2,065.9     $ 9,252.2    $ 9,611.2    $ 2,563.7     $ 12,174.9
Transportation Finance   1,306.4     300.6     1,607.0     1,528.7     325.0     1,853.7
Trade Finance   2,398.3     207.2     2,605.5     2,602.6     388.4     2,991.0
Vendor Finance   2,737.3     2,345.0     5,082.3     4,351.8     3,824.0     8,175.8
Consumer   8,188.4     18.0     8,206.4     9,664.3     19.4     9,683.7
 
 
 
 
 
 
Total $ 21,816.7   $ 4,936.7   $ 26,753.4   $ 27,758.6   $ 7,120.5   $ 34,879.1
 
 
 
 
 
 

(1)      Certain balances have been revised from previously reported amounts. See Note 2 – Prior Period Revisions for details.

11



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


The following table contains information about impaired finance receivables and the related reserve for credit losses. The Company excludes consumer loans and small-ticket loan and lease receivables that have not been modified in a troubled debt restructuring, as well as short-term factoring receivables, from its impaired finance receivables disclosures as charge-offs are typically determined and recorded for such loans when they are more than 150-180 days past due. For purposes of this presentation, finance receivables that were identified as impaired at the Convenience Date and impaired loans identified in 2010 are presented separately below. The Company is applying the income recognition and disclosure guidance in ASC 310-30 (Loans and Debt Securities Acquired with Deteriorated Credit Quality) to loans considered impaired in FSA. The net investment of loans under the guidance of ASC 310-30 was $1,040.3 million at September 30, 2010.


Impaired Finance Receivables / Reserve for Credit Losses, at or for the Nine Months Ended September 30, 2010 (dollars in millions)

  Total   2010
Impaired Loans
    Loans
Impaired at
December 31, 2009
and prior
 
 
 
Impaired finance receivables $ 1,978.2    $ 1,051.0     $ 927.2
Impaired finance receivables with specific allowance   269.0     171.6     97.4
Specific allowance for impaired receivables   58.4     31.6     26.8
Impaired finance receivables with no specific allowance   1,709.2     879.4     829.8
Average investment in impaired finance receivables   1,769.5     564.5     1,205.0

The Company’s policy is to review finance receivables greater than $500,000 that are placed on non-accrual status for impairment. Consumer loans and small-ticket loan and lease receivables that have not been modified in a troubled debt restructuring, as well as short-term factoring receivables, are excluded from impaired finance receivables in the table above, but are included in reported non-accrual balances. The following table sets forth non-performing assets, which includes non-accrual loans and assets received in satisfaction of loans (repossessed assets). Non-accrual loans include loans greater than $500,000 that are individually evaluated and determined to be impaired, and loans less than $500,000 that are delinquent (generally for more than 90 days). The table excludes approximately $24 million of non-accrual loans that are classified as held for sale.


Non-performing assets (dollars in millions)

  September 30, 2010     December 31, 2009
 
 
Non-accrual loans $ 2,025.3    $ 1,574.4
Assets received in satisfaction of loans   34.4     36.3
 
 
Total non-performing assets $ 2,059.7   $ 1,610.7
 
 
Government-guaranteed accruing loans past due 90 days or more $ 420.5   $ 480.7
Other accruing loans past due 90 days or more   2.7     89.4
 
 
Total accruing loans past due 90 days or more $ 423.2   $ 570.1
 
 

At September 30, 2010 and December 31, 2009, there were $19.9 million and $14.8 million, respectively, of commitments to lend additional funds to borrowers whose loan terms have been modified in troubled debt restructurings.

12



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


At September 30, 2010, the remaining principal balance of finance receivables that were considered impaired in FSA was $1,638.9 million. Approximately $1,373 million of these loans are non-accrual at September 30, 2010.

The following table presents the changes to the accretable discount related to loans accounted for under ASC 310-30-5 (loans acquired with deteriorated credit quality) since December 31, 2009.


Accretable discount activity for loans accounted for under ASC 310-30-5 at Emergence Date (dollars in millions):

  Quarter ended
September 30, 2010
  Nine months ended
September 30, 2010
 
 
Accretable discount, beginning of the period $ 223.0      $ 454.8  
Accretion   (2.5 )     (37.6 )
Disposals/transfers   (31.6 )     (228.3 )
 
   
 
Accretable discount, end of period $ 188.9     $ 188.9  
 
   
 


Changes in Allowance for Loan Losses (dollars in millions)


Quarters Ended Nine Months Ended


CIT
   Predecessor CIT
CIT
   Predecessor CIT
September 30,
2010
June 30,
2010(1)
March 31,
2010(1)
September 30,
2009
September 30,
2010
September 30,
2009






Balance, beginning of period $ 327.8     $ 187.1    $    $ 1,538.4    $    $ 1,096.2






Provision for credit losses 165.2 244.3 226.5 701.8 636.0 1,825.7
Change relating to new
accounting pronouncement 39.7 39.7
Changes relating to sales,
foreign currency translation, other 4.7 2.7 (3.3 ) (0.9 ) 4.1 (13.6 )






Net additions 169.9 247.0 262.9 700.9 679.8 1,812.1






Gross charge-offs (111.4 ) (113.3 ) (77.9 ) (898.7 ) (302.6 ) (1,601.7 )
Recoveries (2) 10.8 7.0 2.1 22.6 19.9 56.6






Net charge-offs (100.6 ) (106.3 ) (75.8 ) (876.1 ) (282.7 ) (1,545.1 )






Balance, end of period $ 397.1 $ 327.8 $ 187.1 $ 1,363.2 $ 397.1 $ 1,363.2







(1)      Certain balances have been revised from previously reported amounts. See Note 2 – Prior Period Revisions for details.
   
(2)      Recoveries for the three months ended September 30, June 30, and March 31, 2010, respectively do not include $51.8 million, $113.1 million and $44.0 million and for the nine months ended September 30, 2010 do not include$208.9 million of recoveries on accounts that were charged-off pre-FSA, which are included in Other Income.

13



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


NOTE 4 – LONG-TERM BORROWINGS


Outstanding Long-term Borrowings (dollars in millions)

  September 30, 2010   December 31, 2009
 
 
  CIT Group Inc.   Subsidiaries   Total   Total
 
 
 
 
Secured borrowings $    $ 11,535.1    $ 11,535.1    $ 14,346.5
Secured credit facility and expansion credit facility   198.3     2,845.9     3,044.2     7,716.6
Senior unsecured notes   85.9     123.5     209.4     268.1
Series A Notes   18,959.1         18,959.1     18,733.6
Series B Notes       2,192.9     2,192.9     2,198.2
 
 
 
 
Total debt $ 19,243.3   $ 16,697.4   $ 35,940.7   $ 43,263.0
 
 
 
 

Secured Borrowings

Set forth below are borrowings and pledged assets primarily owned by consolidated special purpose entities. Creditors of these special purpose entities 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 creditors of CIT or any affiliates of CIT. These transactions do not meet accounting requirements for sales treatment and are recorded as secured borrowings. Except as otherwise noted, pledged assets listed below are not included in the collateral available to lenders under the Amended First Lien Facility, Series A Notes or Series B Notes described below.

14



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




Secured Borrowings and Pledged Assets (dollars in millions)
    September 30, 2010   December 31, 2009
    Secured
Borrowing
    Assets
Pledged
    Secured
Borrowing
    Assets
Pledged
 
 
 
 
Education trusts and conduits (student loans) $ 4,435.9    $ 5,648.4    $ 5,864.3    $ 6,864.7
Goldman Sachs TRS(1)   1,850.4     2,769.2     2,552.7     3,429.6
Vendor finance(2)   699.1     934.7     1,120.7     1,589.4
Equipment lease securitizations (Vendor)   915.3     1,015.6     706.0     762.2
Trade Finance   550.0     1,682.6        
Canadian equipment receivables financing   435.3     509.9     543.0     557.6
Corporate finance (energy project finance)(6)           288.9     305.0
Corporate finance (SBL)(2)   247.8     282.7        
 
 
 
 
Subtotal – Finance Receivables   9,133.8     12,843.1     11,075.6     13,508.5
 
 
 
 
ECA financing (Aero)(3)   1,243.8     1,370.9     1,097.4     1,212.2
Transportation Finance – Rail   150.1     146.6     907.4     1,276.7
Goldman Sachs TRS (Aero)   537.1     1,128.7     582.2     1,154.3
Other structures   108.0     131.0     61.2     69.8
 
 
 
 
Subtotal – Equipment under operating leases   2,039.0     2,777.2     2,648.2     3,713.0
 
 
 
 
Corporate finance (energy project finance)(6)   286.5     319.1        
Vendor finance(4)           469.8     903.3
FHLB borrowings (Consumer)(5)   75.8     133.0     152.9     150.8
 
 
 
 
Total $ 11,535.1   $ 16,072.4   $ 14,346.5   $ 18,275.6
 
 
 
 

(1) September 30, 2010 Financing is secured by $2.0 billion corporate finance receivables, $0.6 billion student loans, and $0.2 billion small business lending loans.

(2) Includes repurchase of assets previously sold or securitized and the associated secured debt.

(3) Secured aircraft financing facility for the purchase of specified Airbus aircraft.

(4) International facilities collateralized by local assets.

(5) Collateralized with Government Debentures and Certificates of Deposit.

(6) Finance receivables were transferred to Assets Held for Sale.

Secured Credit Facility and Expansion Credit Facility

In 2009, CIT entered into the Secured Credit Facility and Expansion Credit Facility (the “First Lien Facilities”). During 2010 CIT repaid $4.5 billion of the First Lien Facilities. In August 2010, CIT refinanced the remaining $3 billion by amending the First Lien Facilities. The refinanced $3 billion of first lien debt (the “Amended First Lien Facility”), which was accounted for as a modification, matures in August 2015 and carries an interest rate of LIBOR + 4.50% with a 1.75% LIBOR floor. Interest expense will include amortization of the FSA discount and costs that were capitalized such as the prepayment fees and underwriting expenses that were associated with the debt refinanced, as computed on a level yield method.

The Amended First Lien Facility is generally secured by a first lien on substantially all U.S. assets that are not otherwise pledged to secure the borrowings of special purpose entities as described above under “Secured Borrowings”, 65% of the voting and 100% of the non-voting stock of first-tier foreign subsidiaries, 100% of the stock of CIT Aerospace International (except one nominee share) and between 44% and 65% of certain other non-U.S., non-regulated subsidiaries.

In conjunction with the August refinancing, certain existing covenants were amended. The Amended First Lien Facility is subject to a collateral coverage covenant (based on CIT’s book value in accordance with GAAP) of 2.5x the outstanding loan balance, which is tested quarterly and upon the transfer, disposition or release of certain collateral. The Amended First Lien Facility also contains a number of additional covenants, some of which do not impose restrictions on the Company if CIT continues to maintain a collateral coverage ratio of 2.75x or greater.

15



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


Series A and B Notes

The Series A Notes and Series B Notes (“Second Lien Notes”) are generally secured by second-priority security interests in substantially all the assets securing the Amended First Lien Facility. The Series B Notes are further secured by Delaware Funding’s pledge of inter-company notes issued by CIT Financial Ltd., which are the primary assets of CIT Group Funding Company of Delaware LLC (“Delaware Funding”).

The Second Lien Notes Indentures also limit the ability of the Company, Delaware Funding and the Company’s restricted subsidiaries to make certain payments or investments, incur indebtedness (including guarantees), issue preferred stock, incur liens, enter into sale and leaseback transactions, pay dividends, sell assets, and enter into transactions with affiliates.

In late October and early November 2010, CIT redeemed the $1.4 billion of the 10.25% Series B Second Lien Notes that mature from 2013 through 2016 at a redemption price of 103.5% of the aggregate principal amount redeemed. After these redemptions, approximately $0.8 billion of Series B Notes maturing in 2017 remain outstanding.

Further information on Long-term Borrowings can be found in the Company’s 2009 Form 10-K.

NOTE 5 – DERIVATIVE FINANCIAL INSTRUMENTS

The hedge strategy currently employed by the Company relates to currency risk management of investments in foreign operations. The Company utilizes cross-currency swaps and foreign currency forward contracts to effectively convert U.S. dollar denominated debt to a foreign currency. These transactions are classified as either foreign currency net investment hedges, or foreign currency cash flow hedges, with resulting gains and losses reflected in accumulated other comprehensive income, a separate component of equity. For hedges of foreign currency net investment positions the “forward” method is applied whereby effectiveness is assessed and measured based on the amounts and currencies of the individual hedged net investments versus the notional amounts and underlying currencies of the derivative contract. For those hedging relationships where 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 is recognized on an accrual basis as an adjustment to other income or as interest expense to correspond with the hedged position.

See the Company’s Form 10-K Note 1 for a further description of its derivative transaction policies.

Due to the reorganization (see Note 1) none of the Company’s derivatives entered into prior to December 31, 2009 qualify for hedge accounting. The Company continues to reassess hedge requirements and is reestablishing counterparty relationships to facilitate hedging where economically appropriate. New derivative instruments are cash collateralized.

The following table presents fair values and notional values of derivative financial instruments:


Fair and Notional Values of Derivative Financial Instruments (dollars in millions)

  September 30, 2010   December 31, 2009
Qualifying Hedges Notional
Amount
  Asset Fair
Value
  Liability Fair
Value
  Notional
Amount
  Asset
Fair Value
  Liability
Fair Value
 
 
 
 
 
 
Cross currency swaps $ 404.5    $ 0.2     $ (1.6 )    $    $    $  
Foreign currency forward exchange – cash                                      
flow hedges   139.3         (5.4 )              
Foreign currency forward exchange – net                                      
investment hedges   1,436.1     0.6     (42.5 )              
 
 
 
   
 
 
 
Total Qualifying Hedges $ 1,979.9   $ 0.8   $ (49.5 )   $   $   $  
 
 
 
   
 
 
 
Non-Qualifying Hedges                                      
Cross currency swaps $ 1,635.1   $ 30.8   $ (22.7 )   $ 646.7   $   $ (8.8 )
Interest rate swaps   1,145.1     5.9     (55.9 )     3,165.9     23.4     (25.7 )
Written options   504.8               1,009.8         (0.1 )
Purchased options   1,374.0     3.0           1,524.1     18.4      
Foreign currency forward exchange contracts   2,126.0     5.5     (44.4 )     1,055.1     2.3     (7.3 )
TRS   471.5               107.9          
 
 
 
   
 
 
 
Total Non-qualifying Hedges $ 7,256.5   $ 45.2   $ (123.0 )   $ 7,509.5   $ 44.1   $ (41.9 )
 
 
 
   
 
 
 

16



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


A financing facility with Goldman Sachs International (GSI) is structured as a total return swap (TRS), under which amounts available for advances are accounted for as a derivative. Estimated fair value of the derivative is based on a hypothetical transfer value, considering current market conditions and other factors. At September 30, 2010 and December 31, 2009, the estimated fair value was not significant.

The following table presents the impact of derivatives on the statement of operations:


Derivative Instrument Gains and Losses (dollars in millions)
Derivative Instruments Gain / (Loss)
Recognized
    Quarter
Ended
September 30,

2010
  Nine Months
Ended
September 30,

2010


 
   
Qualifying Hedges      
Foreign currency exchange rate fluctuations – cash flow hedges Other income   $ (10.7 )   $ (1.4 )
 
   
 
Total Qualifying Hedges     $ (10.7 )     $ (1.4 )
Non Qualifying Hedges                  
Cross currency swaps Other income   $ (89.0 )   $ 24.1  
Interest rate swaps Other income     (18.4 )     (68.5 )
Foreign currency forward exchange contracts Other income     (92.7 )     72.1  
Total return swap (1) Other income            
 
   
 
Total Non-qualifying Hedges     $ (200.1 )   $ 27.7  
 
   
 
Total derivatives-income statement impact     $ (210.8 )   $ 26.3  
 
   
 
 
     
      Quarter Ended
September 30,
  Nine Months
Ended
September 30,
      2009   2009
     
   
Qualifying Hedges     Predecessor CIT
Ineffectiveness of derivative instruments designated                  
as hedging instruments                  
Interest rate swaps – cash flow hedges Other income   $     $ 3.9  
Cross currency swaps – fair value hedges Interest expense     7.1       (6.2 )
Foreign currency forward exchange – cash flow hedges Other income            
 
   
 
Total     $ 7.1     $ (2.3 )
Discontinuance of cash flow and fair value hedge accounting                  
Interest rate swaps – cash flow hedges Other income   $ (32.3 )   $ (32.3 )
Interest rate swaps – fair value hedges Interest expense     63.9       63.9  
Cross currency swaps – fair value hedges Interest expense     21.7       21.7  
 
   
 
Total     $ 53.3     $ 53.3  
Reclassification of accumulated other comprehensive                  
loss to earnings for cash flow hedges                  
Interest rate swaps – cash flow hedges Interest expense     (53.9 )     (53.9 )
 
   
 
Total qualifying hedges     $ 6.5     $ (2.9 )
 
   
 
Non Qualifying Hedges                  
Cross currency swaps Other income   $ (1.1 )   $ (42.3 )
Interest rate swaps Other income     35.4       67.3  
Foreign currency forward exchange contracts Other income     3.5       5.0  
Total return swap (1) Other income     (285.0 )     (285.0 )
Warrant Other income           70.6  
 
   
 
Total Non-qualifying Hedges     $ (247.2 )   $ (184.4 )
 
   
 
Total derivatives-income statement impact     $ (240.7 )   $ (187.3 )
 
   
 

(1)      Effect of change in valuation of derivative related to GSI facility

17



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


The gains and (losses) on qualifying and non-qualifying hedges recorded in Other Income are partially offset by the impact of foreign currency changes.

NOTE 6 – FAIR VALUE

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of financial instruments required to be valued on a recurring basis based on priority ranking of valuation inputs are presented in the following tables:


Assets and Liabilities Measured at Fair Value on a Recurring Basis (dollars in millions):
September 30, 2010 Total Level 1   Level 2   Level 3
 
 
 
 
Assets                            
Securities available for sale $ 12.9      $ 12.9    $      $  
Trading assets at fair value - derivatives   45.2           45.2        
Derivative counterparty assets at fair value (1)   0.8           0.8        
 
   
 
   
 
Total Assets $ 58.9     $ 12.9   $ 46.0     $  
 
   
 
   
 
Liabilities                            
Trading liabilities at fair value - derivatives $ (123.0 )   $   $ (122.7 )   $ (0.3 )
Derivative counterparty liabilities at fair value   (49.5 )         (49.5 )      
 
   
 
   
 
Total Liabilities $ (172.5 )   $   $ (172.2 )   $ (0.3 )
 
   
 
   
 
December 31, 2009                            
Assets                            
Retained interests – securitizations $ 139.7     $   $     $ 139.7  
Trading assets at fair value - derivatives   44.1           44.1        
 
   
 
   
 
Total Assets $ 183.8     $   $ 44.1     $ 139.7  
 
   
 
   
 
Liabilities                            
Trading liabilities at fair value - derivatives $ (41.9 )   $   $ (40.4 )   $ (1.5 )
 
   
 
   
 

(1)      Includes the GSI TRS for which estimated Level 3 fair value was not significant.

18



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


Level 3 Gains and Losses

The tables below set forth changes in Level 3 estimated fair value of financial instruments:


Level 3 Gains and Losses (dollars in millions)
CIT Total   Retained Interests
in Securitizations
  Derivatives



June 30, 2010 $ (0.6 ) $ $ (0.6 )
Gains or (losses) realized/unrealized
  Included in Other income 0.3 0.3



September 30, 2010 $ (0.3 ) $ $ (0.3 )



December 31, 2009 $ 138.2 $ 139.7 $ (1.5 )
Gains or (losses) realized/unrealized
  Included in Other income 1.2 1.2
  Included in Other comprehensive income
Other (retained interest)(1) (139.7 ) (139.7 )



September 30, 2010 $ (0.3 ) $ $ (0.3 )



Predecessor CIT
June 30, 2009 $ 153.9 $ 169.5 $ (15.6 )
Gains or (losses) realized/unrealized
  Included in Other income (274.3 ) 2.9 (277.2 )
  Included in Other comprehensive income (0.8 ) (0.8 )
Other (retained interest) (6.3 ) (6.3 )



September 30, 2009 $ (127.5 ) $ 165.3 $ (292.8 )



December 31, 2008 $ 224.6 $ 229.4 $ (4.8 )
Gains or (losses) realized/unrealized
  Included in Other income (314.6 ) (10.0 ) (304.6 )
  Included in Other comprehensive income 14.1 (2.5 ) 16.6
Other (retained interest) (51.6 ) (51.6 )



September 30, 2009 $ (127.5 ) $ 165.3 $ (292.8 )




(1)      The change in the retained interest in 2010 is attributed to a new accounting pronouncement effective January 1, 2010.

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

The following tables present financial instruments for which a non-recurring change in fair value has been recorded:


Assets and Liabilities Measured at Fair Value on a Non-recurring Basis (dollars in millions):
September 30, 2010 Total   Level 1   Level 2   Level 3   Net Losses(1)
Assets                              
Assets held for sale $ 476.2    $    $    $ 476.2    $ (18.8 )
Impaired loans   58.4             58.4      
 
 
 
 
 
 
Total $ 534.6   $   $   $ 534.6   $ (18.8 )
 
 
 
 
 
 

(1) Reflects pretax amounts recorded in provision for loan losses (Impaired loans) in the Statements of Operation for declines in fair values.

19



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


The Company remeasured assets and liabilities as of December 31, 2009 in FSA. See Form 10-K, Note 12, for complete listing of non-recurring changes in fair value as of December 31, 2009.

The carrying and estimated fair values of financial instruments presented below exclude leases and certain other assets, which are not required for disclosure:


Financial Instruments at Carrying and Fair Values (dollars in millions)
  September 30, 2010   December 31, 2009(1)
  Carrying
Value
  Estimated
Fair Value
  Carrying
Value
  Estimated
Fair Value
 
 
   
 
 
Assets                              
Trading assets at fair value - derivatives $ 45.2      $ 45.2      $ 44.1      $ 44.1  
Derivative counterparty assets at fair value   0.8     $ 0.8              
Investments - retained interest in securitizations               139.7       139.7  
Assets held for sale   887.7       887.7       343.8       343.8  
Loans (excluding leases)   20,206.6       20,916.0       27,279.3       27,279.3  
Other assets and unsecured counterparty receivable(2)    2,109.1       2,109.1       2,336.2       2,336.2  

Liabilities                              
Deposits(3) $ (4,827.6 )   $ (4,878.7 )   $ (5,253.1 )    $ (5,253.1 )
Trading liabilities at fair value - derivatives   (123.0 )     (123.0 )     (41.9 )     (41.9 )
Derivative counterparty liabilities at fair value   (49.5 )     (49.5 )            
Long-term borrowings(3)   (36,200.6 )   (38,275.0 )     (43,441.5 )   (43,441.5 )
Other liabilities(4)   (1,650.4 )     (1,650.4 )     (1,701.7 )     (1,701.7 )

(1) Revision to December 2009 Loans and other assets subject to fair value disclosure are not presented as the revision was immaterial. See Note 2 - Prior Period Revisions for details.

(2) 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.

(3) Deposits and long-term borrowings include accrued interest.

(4) Other liabilities include accrued liabilities and deferred federal income taxes. Accrued liabilities have a fair value that approximates carrying value.

Assumptions used in valuing financial instruments as of September 30, 2010 are the same as disclosed in Note 12 of Form 10-K.

The net carrying value of lease finance receivables not subject to fair value disclosure totaled $5.2 billion at September 30, 2010.

NOTE 7 – INCOME TAXES

CIT’s tax provision of $64.2 million for the quarter and $187.2 million for the nine months ended September 30, 2010, equated to 32.9% and 30.9% effective tax rates, respectively, compared with 3.1% and 0.4% for the respective 2009 periods. The effective tax rate is primarily reflective of expenses recognized as income from certain international operations and valuation allowances recorded against U.S. losses.

Included in the third quarter and year to date 2010 tax provisions are $7.7 million and $31.2 million of tax expense related primarily to changes in liabilities for uncertain tax positions and valuation allowances against international deferred tax assets recorded in the previous quarters of 2010. The Company anticipates that it is reasonably possible that the total unrecognized tax benefits will decrease due to the settlement of audits and the expiration of statutes of limitation prior to September 30, 2011 in the range of $10-25 million.

20



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


As of December 31, 2009, we had federal net operating losses (NOL’s) of $7.2 billion prior to cancellation of indebtedness income. As a result of the Company’s emergence from bankruptcy, federal NOL carry forwards were reduced due to cancellation of indebtedness income to approximately $2.6 billion, which will expire from 2027 through 2029. The Company has not finalized its assessment of the tax effects of bankruptcy emergence, and estimates are subject to revision. Based on the disclosures made with the 2009 consolidated federal income tax return, the Company could have significant future benefits, which have not been recorded in the financial statements and would represent an uncertain tax position.

CIT’s reorganization in 2009 constituted an ownership change under Section 382 of the Code, which places an annual dollar limit on the use of NOL carry forwards. There are two relief provisions for limitations on NOL usage in Chapter 11 bankruptcy. Under one relief provision, Sec. 382(l)(5), the Company would not have had any limitation on our use of NOL carry forwards, but the amount of the NOL would have been calculated without taking into account deductions for certain interest expense with respect to notes that were exchanged for equity, effectively reducing the Company’s NOL by more than $1 billion. In addition, if the Company had undergone an ownership change within two years of the reorganization, our remaining NOL carry forwards, if any, would have been entirely eliminated. To reduce this risk, the Company’s Certificate of Incorporation had been amended to include restrictions on trading of the Company’s Common Stock. Under the second relief provision, Sec. 382(l)(6), the amount of NOL the Company may use annually is limited to the product of a prescribed rate of return applied against the value of equity immediately after any ownership change. Based on an equity value determined by the Company’s opening stock price on December 10, 2009, the Company estimates its NOL usage would be limited to $230 million per annum. However, under Sec. 382(l)(6), there is no reduction in the amount of the NOL for certain interest expense and the requirement to eliminate unused NOL carry forwards upon a change of ownership within two years of the reorganization does not apply.

With the filing of the 2009 consolidated federal tax return, CIT elected to apply IRC Sec. 382(l)(6) to the net operating losses and other tax assets that the Company had prior to its emergence from bankruptcy on December 10, 2009. In light of the Company’s election to apply Sec. 382(l)(6), the restrictions on trading of the Company’s Common Stock included in its Certificate of Incorporation no longer have any force or effect. The election to apply Sec. 382(l)(6) was made to preserve the greatest amount of tax attributes.

Excluding FSA adjustments, which are not included in the calculation of U.S. taxable income, third quarter 2010 U.S. results was a pre-tax loss of approximately $1.1 billion ($ 2.1 billion year to date), which will increase, net of book / tax differences, the Company’s total U.S. NOL carry forwards. Net operating losses arising post emergence are not subject to Section 382 limitations.

NOTE 8 – STOCKHOLDERS’ EQUITY

Total comprehensive income was $142.2 million for the quarter and $419.4 million for the nine months ended September 30, 2010, versus comprehensive losses of $1.0 billion and $2.9 billion before preferred stock dividends in the comparable periods in the prior year. The following table details the components of Accumulated Other Comprehensive Loss, net of tax:


Accumulated Other Comprehensive Income (Loss) (dollars in millions)
  September 30, 2010
 
 
Unrealized gain on available for sale equity and securitization investments $ 0.8  
Foreign currency translation adjustments   0.6  
Minimum pension liability adjustment   (0.3 )
 
 
Total accumulated other comprehensive income (loss) $ 1.1  
 
 

NOTE 9 – REGULATORY CAPITAL

The Company and CIT Bank are each subject to various regulatory capital requirements administered by the Federal Reserve Bank (“FRB”) and the Federal Deposit Insurance Corporation (“FDIC”). See Form 10-K for details on requirements.

21



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


Quantitative measures established by regulation to ensure capital adequacy require that the Company and CIT Bank each maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets, subject to any agreement with regulators to maintain higher capital levels. In connection with becoming a bank holding company in December 2008, the Company committed to a minimum Total Risk Based Capital Ratio of 13%. In connection with converting to a Utah state bank in December 2008, CIT Bank committed to maintaining for three years a Tier 1 Leverage Ratio of at least 15%.

The calculation of the Company’s regulatory capital ratios are subject to review and consultation with the Federal Reserve Bank, which may result in refinements to amounts reported at September 30, 2010.


Tier 1 Capital and Total Capital Components (dollars in millions)
 
      CIT Group Inc.
      CIT Bank
   September 30,
2010
 
   June 30,
2010(1)
   March 31,
2010(1)
 
   December 31,
2009(1)
 
   September 30,
2010
    June 30,
2010(1)
 
   March 31,
2010(1)
 
   December 31,
2009
 
 
 
 
 
 
 
 

Tier 1 Capital                                                              
Total stockholders’ equity $ 8,829.6      $ 8,679.8      $ 8,541.9      $ 8,400.0      $ 1,762.5       $ 1,721.4      $ 1,644.5      $ 1,590.1  
Effect of certain items in                                                              
accumulated other comprehensive                                                              
loss excluded from Tier 1 Capital   (0.5 )     (1.7 )     (1.4 )           (0.2 )     (0.2 )     (0.1 )      
 
   
   
   
   
   
   
   
 
Adjusted total equity   8,829.1       8,678.1       8,540.5       8,400.0       1,762.3       1,721.2       1,644.4       1,590.1  
Less: Goodwill   (255.1 )     (255.1 )     (255.1 )     (255.1 )                        
Disallowed intangible assets   (136.3 )     (168.5 )     (201.5 )     (225.1 )      –                    
Investment in certain subsidiaries                     (2.8 )                 –         
Other Tier 1 components(2)   (88.2 )     (88.5 )     (93.4 )     (98.5 )     (139.6 )     (147.1 )     (184.1 )     (196.9 )
 
   
   
   
   
   
   
   
 
Tier 1 Capital   8,349.5       8,166.0       7,990.5       7,818.5       1,622.7       1,574.1       1,460.3       1,393.2  
Tier 2 Capital                                                              
Qualifying reserve for credit losses   397.1       327.8       187.1             6.0       5.2       5.8        
Other Tier 2 components(3)   0.3       1.0       0.8             0.2       0.1       0.1        
 
   
   
   
   
   
   
   
 
Total qualifying capital $ 8,746.9     $ 8,494.8     $ 8,178.4     $ 7,818.5     $ 1,628.9     $ 1,579.4     $ 1,466.2     $ 1,393.2  
 
   
   
   
   
   
   
   
 
Risk-weighted assets $ 44,739.2     $ 46,646.9     $ 50,791.4     $ 54,338.3     $ 2,834.0     $ 2,662.9     $ 3,323.7     $ 3,200.5  
 
   
   
   
   
   
   
   
 
Total Capital                                                              
(to risk-weighted assets):                                                              
Actual   19.6 %     18.2 %     16.1 %     14.4 %     57.5 %     59.3 %     44.1 %     43.5 %
Required Ratio for Capital                                                              
Adequacy Purposes   13.0 %(4)     13.0 %(4)     13.0 %(4)     13.0 %(4)     8.0 %     8.0 %     8.0 %     8.0 %
Tier 1 Capital                                                              
(to risk-weighted assets):                                                              
Actual   18.7 %     17.5 %     15.7 %     14.4 %     57.3 %     59.1 %     43.9 %     43.5 %
Required Ratio for Capital                                                              
Adequacy Purposes   4.0 %     4.0 %     4.0 %     4.0 %     4.0 %     4.0 %     4.0 %     4.0 %
Tier 1 Leverage Ratio                                                              
(to adjusted average assets):                                                              
Actual   15.7 %     14.7 %     13.7 %     11.3 %     22.1 %     20.6 %     17.3 %     15.4 %
Required Ratio for Capital                                                              
Adequacy Purposes   4.0 %     4.0 %     4.0 %     4.0 %     15.0 %(4)     15.0 %(4)     15.0 %(4)     15.0 %(4)

(1) Certain balances have been revised from previously reported amounts. See Note 2 – Prior Period Revisions for details.

(2) Includes the portion of net deferred tax assets that does not qualify for inclusion in Tier 1 capital based on the capital guidelines and the Tier 1 capital charge for nonfinancial equity investments.

(3) Banking organizations are permitted to include in Tier 2 Capital up to 45% of net unrealized pretax gains on available-for-sale equity securities with readily determinable fair values.

(4) The Company has committed to maintaining capital ratios above regulatory minimum levels.

22



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


NOTE 10 – COMMITMENTS

The table below summarizes credit-related commitments, as well as purchase and funding commitments:


Commitments (dollars in millions)
  September 30, 2010    
 
   
  Due to Expire       December 31, 2009
 
       
  Within
One Year
  After
One Year
  Total
Outstanding
  Total
Outstanding
 
 
 
 
Financing Commitments                      
    Financing and leasing assets $ 535.8    $ 2,107.3    $ 2,643.1    $ 3,735.8
    Vendor receivables               889.1
Letters of credit and acceptances                      
    Standby letters of credit   114.7     203.7     318.4     539.2
    Other letters of credit   93.5     3.1     96.6     139.2
Guarantees                      
    Deferred purchase credit protection agreements   1,844.2         1,844.2     1,376.4
    Guarantees, acceptances and other recourse obligations   12.6     14.0     26.6     20.2
Purchase and Funding Commitments                      
    Aerospace and other manufacturer purchase commitments   476.6     3,755.0     4,231.6     4,777.3
Other                      
    Liabilities for uncertain tax positions   10.0     56.8     66.8     50.1

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. In addition to the amounts in the preceding table, if customers are in compliance with contractual obligations, CIT has committed to fund an additional $1.1 billion as of September 30, 2010. As these commitments are not typically fully drawn, may expire unused, be reduced or cancelled at the customer’s request and require the customer to be in compliance with certain conditions, total commitment amounts do not necessarily reflect actual future cash flow requirements.

At September 30, 2010, substantially all financing commitments were senior facilities, with approximately 46% secured by equipment or other assets and the remainder comprised of unsecured facilities relying upon cash-flow or enterprise value. The vast majority of these commitments are syndicated transactions. CIT is lead agent in 36% of the facilities. Most of our undrawn and available financing commitments are in Corporate Finance with an average facility balance of $4.2 million. The top ten undrawn commitments totaled $412 million.

The table above excludes 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 exercise their line of credit only when they need to purchase new products from a vendor and do not seek to exercise their entire available line of credit at any point in time.

Letters of Credit

In the normal course of meeting the needs of clients, CIT sometimes enters into agreements to provide financing and letters of credit. Standby letters of credit obligate the issuer of the letter of credit to pay the beneficiary if a client on whose behalf the letter of credit was issued does not meet its obligation. These financial instruments generate fees and involve, to varying degrees, elements of credit risk in excess of amounts recognized in the Consolidated Balance Sheets. To minimize potential credit risk, CIT generally requires collateral and in some cases additional forms of credit support from the client.

23



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


Deferred Purchase Agreements

A Deferred Purchase Agreement (“DPA” or “DPAs”) is provided in conjunction with factoring, whereby CIT provides a client with credit protection for trade receivables without purchasing the receivables. The trade terms are generally sixty days or less. If the client’s customer is unable to pay an undisputed receivable solely as the result of credit risk, then CIT purchases the receivable from the client. The outstanding amount of DPAs is the maximum potential exposure that CIT would be required to pay under all DPAs. This maximum amount would only occur if all receivables subject to DPAs default in the manner described above, thereby requiring CIT to purchase all such receivables from the DPA clients.

The maximum potential exposure amount has increased primarily as the result of the increased seasonal volume of receivables submitted to CIT from clients that have been in DPAs for some time and is generally not the result of CIT’s entering into new DPAs with new clients or existing factoring clients. The methodology used to determine the liability recorded for the DPAs is similar to the methodology used to determine the reserve for credit losses associated with the finance receivables, which reflects embedded losses based on various factors, including expected losses reflecting our internal customer and facility credit ratings. CIT had a liability recorded in Other Liabilities related to the DPAs that totaled $5.0 million and $7.8 million at September 30, 2010 and December 31, 2009, respectively.

Purchase and Funding Commitments

CIT’s firm purchase commitments relate predominantly to purchases of commercial aircraft and rail equipment. Commitments to purchase new commercial aircraft are with Airbus Industries and The Boeing Company. Aerospace equipment purchases are contracted for specific models, using 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 change depending on final specifications. Equipment purchases are recorded at delivery date. Commitment amounts in the preceding table are based on contracted purchase prices less pre-delivery payments to date and exclude buyer furnished equipment selected by the lessee. Pursuant to existing contractual commitments, 77 aircraft remain to be purchased. Lease commitments are in place for the 16 aircraft to be delivered over the next twelve months. Commitments exclude unexercised options to purchase aircraft. Aircraft deliveries are scheduled periodically through 2018. Other manufacturing purchase commitments relate to rail equipment; there were no rail purchase commitments at September 30, 2010.

NOTE 11 – CONTINGENCIES

In accordance with ASC 450 (formerly SFAS 5), the Company establishes accruals for litigation and regulatory matters when those matters present loss contingencies that both are probable and can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. In view of the inherent unpredictability of litigation and regulatory matters, particularly where the damages sought are substantial or indeterminate, the investigations or proceedings are in the early stages, or the matters involve novel legal theories or a large number of parties, the Company does not believe that an aggregate range of reasonably possible losses (defined by the relevant accounting literature to include all potential losses other than those deemed “remote”) can be determined for asserted and probable unasserted claims as of September 30, 2010. The Company cannot state with certainty the timing or ultimate resolution of litigation and regulatory matters.

Subject to the foregoing, it is the opinion of the Company’s management, based on current knowledge, after consultation with counsel, and after taking into account available insurance coverage and its current accruals, that the eventual outcome of such matters would not be likely to have a material adverse effect on the consolidated financial condition of the Company. Nonetheless, given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could, from time to time, have a material adverse effect on the Company’s consolidated results of operations or cash flows in particular quarterly or annual periods.

24



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


NOTE 12 – BUSINESS SEGMENT INFORMATION


Business Segments (dollars in millions)
CIT Corporate
Finance
  Transportation
Finance
  Trade
Finance
  Vendor
Finance
  Commercial
Segments
  Consumer   Total
Segments
  Corporate
and Other
  Total
 
 
 
 
 
 
 
 
 
 
For the quarter ended September 30,                                                          
2010                                                                      
Total interest income $ 370.3       $ 51.0      $ 23.2      $ 277.0      $ 721.5      $ 88.8      $ 810.3      $ 5.4       $ 815.7  
 
Total interest expense   (218.3 )     (237.6 )     (37.7 )     (160.8 )     (654.4 )     (69.3 )     (723.7 )     (8.5 )     (732.2 )
 
Provision for credit losses   (105.6 )     (17.2 )     (11.4 )     (38.5 )     (172.7 )     (7.5 )     (180.2 )     15.0       (165.2 )
 
Rental income on operating leases   6.1       308.4             83.9       398.4             398.4             398.4  
 
Other income, excluding rental income   132.5       28.7       44.1       65.8       271.1       (8.3 )     262.8       6.6       269.4  
Depreciation on operating lease                                                                      
equipment   (3.2 )     (82.2 )           (76.3 )     (161.7 )           (161.7 )           (161.7 )
 
Other expenses   (69.7 )     (36.7 )     (30.7 )     (69.6 )     (206.7 )     (19.1 )     (225.8 )     (3.0 )     (228.8 )
(Provision) benefit for income taxes and                                                                      
noncontrolling interests, after tax   (24.5 )     (4.1 )     2.0       (2.4 )     (29.0 )     0.9       (28.1 )     (36.0 )     (64.1 )
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ 87.6     $ 10.3     $ (10.5 )   $ 79.1     $ 166.5     $ (14.5 )   $ 152.0     $ (20.5 )   $ 131.5  
 
   
   
   
   
   
   
   
 
 
Select Period End Balances                                                                      
Loans including receivables pledged $ 9,252.2     $ 1,607.0     $ 2,605.5     $ 5,082.3     $ 18,547.0     $ 8,206.4     $ 26,753.4     $     $ 26,753.4  
 
Credit balances of factoring clients               (959.2 )           (959.2 )           (959.2 )           (959.2 )
 
Assets held for sale   439.3       28.1                   467.4       420.3       887.7             887.7  
 
Operating lease equipment, net   98.2       10,324.5             541.8       10,964.5             10,964.5             10,964.5  


   
   
   
   
   
   
   
 
 
Predecessor CIT                                                                      
For the quarter ended September 30,                                                                      
2009                                                                      
Interest income $ 229.0     $ 39.6     $ 33.1     $ 184.2     $ 485.9     $ 63.9     $ 549.8     $ 6.8     $ 556.6  
 
Interest expense   (115.4 )     (134.5 )     (17.4 )     (138.3 )     (405.6 )     (65.3 )     (470.9 )     (222.9 )     (693.8 )
 
Provision for credit losses   (473.4 )     (2.2 )     (11.4 )     (152.6 )     (639.6 )     (52.1 )     (691.7 )     (10.1 )     (701.8 )
 
Rental income on operating leases   10.4       343.3             118.6       472.3             472.3       (0.6 )     471.7  
Other income, excluding rental income                                                                      
on operating leases   (31.4 )     4.5       50.1       22.8       46.0       2.9       48.9       (215.7 )     (166.8 )
Depreciation on operating lease                                                                      
equipment   (6.6 )     (170.0 )           (106.2 )     (282.8 )           (282.8 )     0.2       (282.6 )
Goodwill and intangible impairment                                                                      
charges                                                    
Other expenses, excluding depreciation                                                                      
on operating lease equipment   (92.8 )     (38.2 )     (33.1 )     (87.7 )     (251.8 )     (15.8 )     (267.6 )     17.9       (249.7 )
(Provision) benefit for income taxes and                                                                      
noncontrolling interests, after tax   216.7       0.6       (7.2 )     70.8       280.9       24.6       305.5       (272.4 )     33.1  
 
   
   
   
   
   
   
   
 
 
Net (loss) income from preferred stock                                                                      
dividends $ (263.5 )   $ 43.1     $ 14.1     $ (88.4 )   $ (294.7 )   $ (41.8 )   $ (336.5 )   $ (696.8 ) $ (1,033.3 )
 
   
   
   
   
   
   
   
 
 
Select Period End Balances                                                                      
 
Loans including receivables pledged $ 16,886.3     $ 2,357.7     $ 3,889.2     $ 10,561.1     $ 33,694.3     $ 11,586.6     $ 45,280.9     $     $ 45,280.9  
 
Credit balances of factoring clients               (898.3 )           (898.3 )           (898.3 )           (898.3 )
 
Assets held for sale   365.0       25.0                   390.0       46.9       436.9             436.9  
 
Operating lease equipment, net   193.7       12,237.6             802.3       13,233.6             13,233.6             13,233.6  
 
Securitized assets   591.0                   389.1       980.1             980.1             980.1  

25



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


CIT Corporate
Finance
  Transportation
Finance
  Trade
Finance
  Vendor
Finance
  Commercial
Segments
  Consumer   Total
Segments
  Corporate
and Other
  Total
 
 
 
 
 
 
 
 
 
Nine months ended September 30,                                                          
2010                                                                      
Interest income $ 1,397.3      $ 162.6      $ 78.1      $ 969.8      $ 2,607.8      $ 279.9      $ 2,887.7      $ 15.0     $ 2,902.7  
 
Interest expense   (790.3 )     (730.7 )     (128.8 )     (519.1 )     (2,168.9 )     (204.4 )     (2,373.3 )     (4.4 )      (2,377.7 )
Provision for credit losses   (332.7 )     (21.5 )     (57.6 )     (202.9 )     (614.7 )     (21.3 )     (636.0 )           (636.0 )
Rental income on operating leases   22.2       924.4             290.8       1,237.4             1,237.4       (1.1 )     1,236.3  
Other income, excluding rental income                                                                      
on operating leases   443.5       69.1       144.7       137.8       795.1       15.8       810.9       (50.6 )     760.3  
Depreciation on operating lease                                                                      
equipment   (11.9 )     (246.7 )           (254.8 )     (513.4 )           (513.4 )     0.5       (512.9 )
Other expenses, excluding depreciation                                                                      
on operating lease equipment and                                                                      
goodwill and intangible impairment                                                                      
charges   (238.8 )     (121.8 )     (95.7 )     (242.8 )     (699.1 )     (63.3 )     (762.4 )     (4.8 )     (767.2 )
(Provision) benefit for income taxes and                                                                      
noncontrolling interests, after tax   (65.8 )     (8.1 )     4.7       (46.8 )     (116.0 )     0.3       (115.7 )     (71.5 )     (187.2 )
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ 423.5     $ 27.3     $ (54.6 )   $ 132.0     $ 528.2     $ 7.0     $ 535.2     $ (116.9 )   $ 418.3  
 
   
   
   
   
   
   
   
 
 
 
Predecessor CIT                                                                      
Nine months ended September 30,                                                            
2009                                                                      
Interest income $ 728.3     $ 124.1     $ 95.5     $ 639.0     $ 1,586.9     $ 199.8     $ 1,786.7     $ 24.0     $ 1,810.7  
 
Interest expense   (391.8 )     (410.3 )     (46.6 )     (423.2 )     (1,271.9 )     (223.3 )     (1,495.2 )     (489.3 )     (1,984.5 )
 
Provision for credit losses   (1,297.2 )     (0.8 )     (48.1 )     (310.7 )     (1,656.8 )     (124.7 )     (1,781.5 )     (44.2 )     (1,825.7 )
 
Rental income on operating leases   33.4       1,017.6             371.0       1,422.0             1,422.0       (1.6 )     1,420.4  
Other income, excluding rental income                                                                      
on operating leases   (265.9 )     27.8       160.2       64.3       (13.6 )     (9.0 )     (22.6 )     (155.0 )     (177.6 )
Depreciation on operating lease                                                                      
equipment   (21.9 )     (497.1 )           (333.0 )     (852.0 )           (852.0 )     0.8       (851.2 )
Goodwill and intangible impairment                                                                      
charges   (316.8 )           (363.8 )     (11.8 )     (692.4 )           (692.4 )           (692.4 )
Other expenses, excluding depreciation                                                                      
on operating lease equipment and                                                                      
goodwill and intangible impairment                                                                      
charges   (293.7 )     (113.5 )     (102.2 )     (259.2 )     (768.6 )     (52.8 )     (821.4 )     115.2       (706.2 )
(Provision) benefit for income taxes and                                                                      
noncontrolling interests, after tax   658.7       (9.4 )     111.9       114.0       875.2       79.3       954.5       (941.9 )     12.6  
 
   
   
   
   
   
   
   
 
 
Net (loss) income before preferred stock                                                                      
dividends $ (1,166.9 )   $ 138.4     $ (193.1 )   $ (149.6 )   $ (1,371.2 )   $ (130.7 )   $ (1,501.9 )   $ (1,492.0 )   $ (2,993.9 )
 
   
   
   
   
   
   
   
 
 

26



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


The following tables present the impacts of revising prior period segment balances. See Note 2 Prior Period Revisions for details. The changes in the provision for income taxes result from the mix of U.S and international earnings and the effect of taxes on international earnings and valuation allowances against losses.

  Quarter Ended June 30, 2010   Quarter Ended March 31, 2010   Six Months Ended June 30, 2010
 
 
 
  As
Reported
  Adjustments   As
Revised
  As
Reported
  Adjustments   As
Revised
  As
Reported
  Adjustments   As
Revised
Corporate Finance                                                                      
Total interest income $ 481.7      $ 5.8      $ 487.5      $ 504.0      $ 35.5      $ 539.5      $ 985.7      $ 41.3      $ 1,027.0  
Total interest expense   (273.6 )     (1.1 )     (274.7 )     (297.0 )     (0.3 )     (297.3 )     (570.6 )     (1.4 )     (572.0 )
Provision for credit losses   (109.2 )     16.4       (92.8 )     (94.4 )     (39.9 )     (134.3 )     (203.6 )     (23.5 )     (227.1 )
Rental income on operating leases   7.3             7.3       8.8             8.8       16.1             16.1  
Other income, excluding rental income   205.9       1.5       207.4       103.1       0.5       103.6       309.0       2.0       311.0  
Depreciation on operating lease equipment   (5.6 )     0.5       (5.1 )     (4.4 )     0.8       (3.6 )     (10.0 )     1.3       (8.7 )
Other expenses   (89.7 )           (89.7 )     (79.4 )           (79.4 )     (169.1 )           (169.1 )
 
   
   
   
   
   
   
   
 
 
Income (loss) before provision for income taxes $ 216.8     $ 23.1     $ 239.9     $ 140.7     $ (3.4 )   $ 137.3     $ 357.5     $ 19.7     $ 377.2  
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ 206.4     $ (3.6 )   $ 202.8     $ 128.3     $ 4.8     $ 133.1     $ 334.7     $ 1.2     $ 335.9  
 
   
   
   
   
   
   
   
 
 
Transportation Finance                                                                      
Total interest income $ 53.4     $ (0.1 )   $ 53.3     $ 57.5     $ 0.8     $ 58.3     $ 110.9     $ 0.7     $ 111.6  
Total interest expense   (234.6 )           (234.6 )     (258.5 )           (258.5 )     (493.1 )           (493.1 )
Provision for credit losses   (3.0 )           (3.0 )     (1.3 )           (1.3 )     (4.3 )           (4.3 )
Rental income on operating leases   316.8             316.8       299.2             299.2       616.0             616.0  
Other income, excluding rental income   18.2             18.2       22.2             22.2       40.4             40.4  
Depreciation on operating lease equipment   (85.9 )           (85.9 )     (78.6 )           (78.6 )     (164.5 )           (164.5 )
Other expenses   (45.5 )           (45.5 )     (39.6 )           (39.6 )     (85.1 )           (85.1 )
 
   
   
   
   
   
   
   
 
 
Income (loss) before provision for income                                                                      
taxes $ 19.4     $ (0.1 )   $ 19.3     $ 0.9     $ 0.8     $ 1.7     $ 20.3     $ 0.7     $ 21.0  
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ 25.1     $ (16.2 )   $ 8.9     $ (7.8 )   $ 15.9     $ 8.1     $ 17.3     $ (0.3 )   $ 17.0  
 
   
   
   
   
   
   
   
 
 
 
Trade Finance                                                                      
Total interest income $ 24.4     $     $ 24.4     $ 30.5     $     $ 30.5     $ 54.9     $     $ 54.9  
Total interest expense   (45.1 )     (4.4 )     (49.5 )     (38.5 )     (3.1 )     (41.6 )     (83.6 )     (7.5 )     (91.1 )
Provision for credit losses   (12.3 )           (12.3 )     (33.9 )           (33.9 )     (46.2 )           (46.2 )
Rental income on operating leases                                                    
Other income, excluding rental income   47.0       4.4       51.4       46.1       3.1       49.2       93.1       7.5       100.6  
Depreciation on operating lease equipment                                                    
Other expenses   (33.0 )           (33.0 )     (32.0 )           (32.0 )     (65.0 )           (65.0 )
 
   
   
   
   
   
   
   
 
 
Loss before provision for income taxes $ (19.0 )   $     $ (19.0 )   $ (27.8 )   $     $ (27.8 )   $ (46.8 )   $     $ (46.8 )
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ (16.0 )   $ (2.1 )   $ (18.1 )   $ (27.8 )   $ 1.8     $ (26.0 )   $ (43.8 )   $ (0.3 )   $ (44.1 )
 
   
   
   
   
   
   
   
 
 
 
Vendor Finance                                                                      
Total interest income $ 333.2     $     $ 333.2     $ 359.6     $     $ 359.6     $ 692.8     $     $ 692.8  
Total interest expense   (190.4 )           (190.4 )     (167.9 )           (167.9 )     (358.3 )           (358.3 )
Provision for credit losses   (111.9 )           (111.9 )     (52.5 )           (52.5 )     (164.4 )           (164.4 )
Rental income on operating leases   96.1             96.1       110.8             110.8       206.9             206.9  
Other income, excluding rental income   26.2       7.0       33.2       27.2       11.6       38.8       53.4       18.6       72.0  
Depreciation on operating lease equipment   (87.8 )           (87.8 )     (90.7 )           (90.7 )     (178.5 )           (178.5 )
Other expenses   (86.3 )           (86.3 )     (86.9 )           (86.9 )     (173.2 )           (173.2 )
 
   
   
   
   
   
   
   
 
 
Income (loss) before provision for income                                                                      
taxes $ (20.9 )   $ 7.0     $ (13.9 )   $ 99.6     $ 11.6     $ 111.2     $ 78.7     $ 18.6     $ 97.3  
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ (62.1 )   $ 24.7     $ (37.4 )   $ 96.6     $ (6.3 )   $ 90.3     $ 34.5     $ 18.4     $ 52.9  
 
   
   
   
   
   
   
   
 
 
 
Consumer                                                                      
Total interest income $ 95.8     $ 0.7     $ 96.5     $ 92.8     $ 1.8     $ 94.6     $ 188.6     $ 2.5     $ 191.1  
Total interest expense   (64.2 )           (64.2 )     (70.9 )           (70.9 )     (135.1 )           (135.1 )
Provision for credit losses   (9.3 )           (9.3 )     (4.5 )           (4.5 )     (13.8 )           (13.8 )
Rental income on operating leases                                                    
Other income, excluding rental income   18.3             18.3       5.8             5.8       24.1             24.1  
Depreciation on operating lease equipment                                                    
Other expenses   (22.7 )           (22.7 )     (21.5 )           (21.5 )     (44.2 )           (44.2 )
 
   
   
   
   
   
   
   
 
 
Income before provision for income taxes $ 17.9     $ 0.7     $ 18.6     $ 1.7     $ 1.8     $ 3.5     $ 19.6     $ 2.5     $ 22.1  
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ 14.2     $ 4.1     $ 18.3     $ 5.2     $ (2.0 )   $ 3.2     $ 19.4     $ 2.1     $ 21.5  
 
   
   
   
   
   
   
   
 
 
 
Corporate and Other                                                                      
Total interest income $ 5.0     $     $ 5.0     $ 4.6     $     $ 4.6     $ 9.6     $     $ 9.6  
Total interest expense   (5.7 )     7.8       2.1       (5.0 )     7.0       2.0       (10.7 )     14.8       4.1  
Provision for credit losses   (15.0 )           (15.0 )                       (15.0 )           (15.0 )
Rental income on operating leases   (0.5 )           (0.5 )     (0.6 )           (0.6 )     (1.1 )           (1.1 )
Other income, excluding rental income   15.0       (4.0 )     11.0       (72.2 )     4.0       (68.2 )     (57.2 )           (57.2 )
Depreciation on operating lease equipment   0.3             0.3       0.2             0.2       0.5             0.5  
Other expenses   0.2       (0.2 )           (2.5 )     0.7       (1.8 )     (2.3 )     0.5       (1.8 )
 
   
   
   
   
   
   
   
 
 
Income (loss) before provision for income                                                                      
taxes $ (0.7 )   $ 3.6     $ 2.9     $ (75.5 )   $ 11.7     $ (63.8 )   $ (76.2 )   $ 15.3     $ (60.9 )
 
   
   
   
   
   
   
   
 
 
Net income (loss) $ (25.5 )   $ 22.4     $ (3.1 )   $ (97.2 )   $ 3.9     $ (93.3 )   $ (122.7 )   $ 26.3     $ (96.4 )
 
   
   
   
   
   
   
   
 
 

27



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


NOTE 13 – SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES

In accordance with the Amended Lien Facility as well as requirements in the prepackaged bankruptcy, including the Series A Notes and Series B Notes, the following tables present three mutually exclusive sets of condensed consolidating financial statements, reflecting the following:

28




CONDENSED CONSOLIDATING BALANCE SHEETS (dollars in millions)

                                 
     CIT Group
Inc.

   CIT Group
Funding
Company of
Delaware

   C.I.T.
Leasing

Corporation

   CIT Financial Ltd
   CIT Bank
   Other
Subsidiaries

   Eliminations
   Consolidated
Total

September 30, 2010                                                      
ASSETS:                                                      
Net loans   $   $     $ 870.0   $ 1,990.1   $ 5,213.9   $ 18,549.2     $ (266.9 )   $ 26,356.3
Operating lease equipment, net               992.2     66.7         9,940.9       (35.3 )     10,964.5
Assets held for sale               20.4         78.0     791.8       (2.5 )     887.7
Cash and deposits with banks     1,837.8     7.1       2.6     713.0     1,526.1     7,107.3       (15.9 )     11,178.0
Other assets     30,382.7           18,687.6     1,180.6     609.0     1,062.8       (48,327.2 )     3,595.5
   
 
   
 
 
 
   
   
   Total Assets   $ 32,220.5   $ 7.1     $ 20,572.8   $ 3,950.4   $ 7,427.0   $ 37,452.0     $ (48,647.8 )   $ 52,982.0
   
 
   
 
 
 
   
   
LIABILITIES AND EQUITY:                                                      
Long-term borrowings, including deposits   $ 19,243.3   $ 2,192.9     $ 271.9   $ 1.0   $ 5,615.4   $ 13,420.7     $ (15.9 )   $ 40,729.3
Credit balances of factoring clients                           959.2             959.2
Other liabilities     4,143.7     (2,275.2 )     4,985.3     2,968.0     49.1     (7,163.5 )     (244.7 )     2,462.7
   
 
   
 
 
 
   
   
   Total Liabilities     23,387.0     (82.3 )     5,257.2     2,969.0     5,664.5     7,216.4       (260.6 )     44,151.2
   
 
   
 
 
 
   
   
Total Stockholders’ Equity     8,833.5     89.4       15,315.6     981.4     1,762.5     30,234.4       (48,387.2 )     8,829.6
Noncontrolling minority interests                           1.2             1.2
   
 
   
 
 
 
   
   
   Total Equity     8,833.5     89.4       15,315.6     981.4     1,762.5     30,235.6       (48,387.2 )     8,830.8
   
 
   
 
 
 
   
   
   Total Liabilities and Equity   $ 32,220.5   $ 7.1     $ 20,572.8   $ 3,950.4   $ 7,427.0   $ 37,452.0     $ (48,647.8 )   $ 52,982.0
   
 
   
 
 
 
   
   
 
December 31, 2009                                                      
ASSETS:                                                      
Net loans   $   $     $ 925.7   $ 1,953.0   $ 6,467.3   $ 25,904.9     $ (371.8 )   $ 34,879.1
Operating lease equipment, net               1,088.3     47.4     -     9,834.7       (60.4 )     10,910.0
Assets held for sale               13.5     272.2     34.0     24.1             343.8
Cash and deposits with banks     1,099.1     1.4       0.3     510.3     1,705.4     6,509.5       (0.1 )     9,825.9
Other assets     29,314.0     9.9       18,526.2     1,582.0     763.8     1,250.2       (47,375.8 )     4,070.3
   
 
   
 
 
 
   
   
   Total Assets   $ 30,413.1   $ 11.3     $ 20,554.0   $ 4,364.9   $ 8,970.5   $ 43,523.4     $ (47,808.1 )   $ 60,029.1
   
 
   
 
 
 
   
   
LIABILITIES AND EQUITY:                                                      
Long-term borrowings, including deposits   $ 19,340.5   $ 2,198.2     $ 630.6   $ 37.0   $ 7,326.0   $ 19,104.3     $ (155.0 )   $ 48,481.6
Credit balances of factoring clients                           892.9             892.9
Other liabilities     2,667.6     (2,389.9 )     4,719.6     3,362.3     54.4     (5,876.0 )     (284.8 )     2,253.2
   
 
   
 
 
 
   
   
   Total Liabilities     22,008.1     (191.7 )     5,350.2     3,399.3     7,380.4     14,121.2       (439.8 )     51,627.7
   
 
   
 
 
 

   
Total Stockholders’ Equity     8,405.0     203.0       15,203.8     965.6     1,590.1     29,400.8       (47,368.3 )     8,400.0
Noncontrolling minority interests                           1.4             1.4
   
 
   
 
 
 
   
   
   Total Equity     8,405.0     203.0       15,203.8     965.6     1,590.1     29,402.2       (47,368.3 )     8,401.4
   
 
   
 
 
 
   
   
                                                       
   Total Liabilities and Equity   $ 30,413.1   $ 11.3     $ 20,554.0   $ 4,364.9   $ 8,970.5   $ 43,523.4     $ (47,808.1 )   $ 60,029.1
   
 
   
 
 
 
   
   

29




CONSOLIDATING STATEMENTS OF OPERATION (dollars in millions)

                                 
     CIT Group Inc.
   CIT Group
Funding

Company of

Delaware

   C.I.T.
Leasing

Corporation
 
   CIT
Financial
Ltd

   CIT Bank
   Other
Subsidiaries

   Eliminations
   Consolidated
Total

Nine Months Ended September 30, 2010                                              
Interest income   $ 1.8     $ 46.1     $ 74.7     $ 197.2     $ 239.2     $ 2,360.8     $ (17.1 )   $ 2,902.7  
Interest expense     (1,291.0 )     (159.9 )     (178.8 )     23.3       (102.6 )     (685.8 )     17.1       (2,377.7 )
   
   
   
   
   
   
   
   
 
Net interest revenue     (1,289.2 )     (113.8 )     (104.1 )     220.5       136.6       1,675.0             525.0  
Provision for credit losses     (27.4 )           (5.8 )     (41.9 )     (16.2 )     (544.7 )           (636.0 )
   
   
   
   
   
   
   
   
 
Net interest revenue, after credit provision     (1,316.6 )     (113.8 )     (109.9 )     178.6       120.4       1,130.3       -       (111.0 )
Equity in net income of subsidiaries     1,279.2             896.2       16.5                   (2,191.9 )      
Other Income                                                                
Rental income on operating leases                 121.1       22.4             1,093.8       (1.0 )     1,236.3  
Other     93.6       0.1       15.8       154.5       29.6       472.2       (5.5 )     760.3  
   
   
   
   
   
   
   
   
 
Total other income     93.6       0.1       136.9       176.9       29.6       1,566.0       (6.5 )     1,996.6  
   
   
   
   
   
   
   
   
 
Total net revenue, net of interest expense
and credit provision
    56.2       (113.7 )     923.2       372.0       150.0       2,696.3       (2,198.4 )     1,885.6  
   
   
   
   
   
   
   
   
 
Other Expenses                                                                
Depreciation on operating lease equipment                 (37.9 )     (15.1 )           (460.4 )     0.5       (512.9 )
Operating expenses     23.9             (62.9 )     (31.7 )     (32.0 )     (680.3 )     15.8       (767.2 )
   
   
   
   
   
   
   
   
 
Total other expenses     23.9             (100.8 )     (46.8 )     (32.0 )     (1,140.7 )     16.3       (1,280.1 )
   
   
   
   
   
   
   
   
 
Income (loss) before income taxes     80.1       (113.7 )     822.4       325.2       118.0       1,555.6       (2,182.1 )     605.5  
Benefit (provision) for income taxes     338.2             (1.2 )     (100.2 )     (44.6 )     (380.0 )     0.6       (187.2 )
   
   
   
   
   
   
   
   
 
Income (loss) before attribution of
noncontrolling interests
    418.3       (113.7 )     821.2       225.0       73.4       1,175.6       (2,181.5 )     418.3  
Income attributable to noncontrolling
interests, after tax
                                               
   
   
   
   
   
   
   
   
 
Net income (loss)   $ 418.3     ($ 113.7 )   $ 821.2     $ 225.0     $ 73.4     $ 1,175.6     $ (2,181.5 )   $ 418.3  
   
   
   
   
   
   
   
   
 

30




CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (dollars in millions)

 
     CIT Group Inc.
   CIT Group
Funding

Company of

Delaware

   C.I.T.
Leasing

Corporation

   CIT
Financial
Ltd

   CIT Bank
   Other
Subsidiaries

   Eliminations
   Consolidated
Total

Nine Months Ended September 30, 2010                                                      
Cash Flows From Operating Activities:                                                                
Net cash flows provided by (used for) operations   $ 2,403.0     $ (87.3 )   $ 964.5     $ 469.3     $ 284.6     $ (3,752.9 )   $     $ 281.2  
   
   
   
   
   
   
   
   
 
Cash Flows From Investing                                                                
Activities:                                                                
Net decrease in financing and leasing assets                                                                
and other investing activities     11.9             101.2       181.5       1,206.2       7,371.3             8,872.1  
(Increase) decrease in inter-company loans                                                                
and investments     (1,579.0 )                                   1,579.0        
   
   
   
   
   
   
   
   
 
Net cash flows (used for) provided by                                                                
investing activities     (1,567.1 )           101.2       181.5       1,206.2       7,371.3       1,579.0       8,872.1  
   
   
   
   
   
   
   
   
 
Cash Flows From Financing Activities:                                                                
Net decrease in debt and other                                                                
financing activities     (97.2 )     (5.3 )     (358.7 )     (36.0 )     (1,710.6 )     (5,760.8 )           (7,968.6 )
Inter-company financing           98.3       (704.7 )     (412.2 )     90.3       2,507.3       (1,579.0 )      
   
   
   
   
   
   
   
   
 
Net cash flows provided by (used for)                                                                
financing activities     (97.2 )     93.0       (1,063.4 )     (448.2 )     (1,620.3 )     (3,253.5 )     (1,579.0 )     (7,968.6 )