The table below summarizes the results of simulation modeling produced by our asset/liability management system. The results reflect the percentage change in net interest income and economic value of equity over the next twelve months assuming an immediate 100 basis point parallel increase and decrease in interest rates.
The change to the Economic Value of Equity figure for 2011 was driven by the improvement in prices of our second lien debt. The convergence of the market price to the call price reduces the duration or sensitivity of these instruments to changes in interest rates. The simulation modeling assumes we take no action in response to the assumed changes in interest rates. Our net interest income is asset sensitive to a parallel shift in interest rates at March 31, 2012.
Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, size, and prepayment characteristics of our balance sheet. They also do not account for other business developments that could affect net income, or for management actions that could affect net income or that could be taken to change our risk profile. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. Further, such simulations do not represent our current view of expected future interest rate movements.
Portfolio collections, capital markets, securitizations, various credit facilities, secured borrowings and deposits provide our sources of funding and liquidity. The Company also maintains a portfolio of cash and investment securities and a committed $2 billion Revolving Credit Facility to satisfy funding and other operating obligations, while also providing protection against unforeseen stress events, for instance unanticipated funding obligations, such as customer line draws, or disruptions to capital markets or other funding sources.
Cash and short-term investment securities totaled $7,336.1 million at March 31, 2012 ($6,336.1 million of cash and $1.0 billion of short-term investments), down from $8,372.8 million at December 31, 2011. The declines largely reflect cash used for the repayment of debt. Cash and short-term investment securities at March 31, 2012 consisted of $2.8 billion at the bank holding company, $2.6 billion at CIT Bank, $1.0 billion at operating subsidiaries and $0.9 billion in restricted balances, associated with secured borrowings.
Our short-term investments include $1.0 billion of U.S. Treasury bills. All these investments are classified as available for sale and have maturities of 91 days or less. We anticipate continued investment of our cash in various types of liquid, high-grade, short-term investments.
In addition to the cash and short-term investment securities, CIT had approximately $1.9 billion of unused and committed liquidity under the Revolving Credit Facility at March 31, 2012. Including the Revolving Credit Facility, secured committed facilities at March 31, 2012, totaled $6.1 billion, of which $2.6 billion was undrawn.
During the first quarter of 2012, CIT redeemed approximately $6.5 billion of the Series A Notes, which represented the entire remaining balance of the Series A Notes. In aggregate, these transactions reduced 2012 pre-tax income by $620 million due to accelerated FSA accretion and loss on debt extinguishment. The elimination of our remaining Series A Notes resulted in all of our Series C Notes becoming unsecured. In addition, the Revolving Credit Facility also became unsecured upon our completion of certain administrative requirements as set forth under the Revolving Credit Facility.
In February 2012, CIT closed a private placement of $3.25 billion aggregate principal amount of Series C Notes (discussed further below in “Series C Notes”), consisting of $1.5 billion principal amount due 2015 at a rate of 4.75% and $1.75 billion principal amount due 2019 at a rate of 5.50%. In March 2012, CIT filed a “shelf” registration statement and issued $1.5 billion of senior unsecured 5.25% notes that mature in 2018.
These activities, in conjunction with net deposit growth of $0.6 billion during the 2012 first quarter, reduced our weighted average coupon rates on outstanding deposits and long-term borrowings to 4.24% from 4.71% and 5.24% at December 31, 2011 and March 31, 2011, respectively. Including the $2 billion of unsecured debt issued on May 4, 2012 and $4.1 billion of Series C redemptions either announced or completed during the second quarter ($1.6 billion on April 16 and $0.5 billion on May 2 and $2.0 billion announced on May 7, 2012), the weighted average coupon rates on outstanding deposits and long-term borrowings would have been 3.93% at March 31, 2012.
Since January 2010, including redemptions completed or announced in the second quarter of 2012, CIT will have eliminated or refinanced approximately $26 billion of high cost debt, including over $4 billion during the 2012 second quarter. Over the same time period, we have entered into over $15.5 billion of new financings.
In addition, CIT repaid approximately $0.6 billion of other debt during the first quarter of 2012, generally from collections on the underlying receivables.
Unsecured Borrowings
As a result of redeeming the remaining Series A Notes during the 2012 first quarter, the Revolving Credit Facility and all of our Series C Notes became unsecured.
Revolving Credit Facility
On August 25, 2011, CIT and certain of its subsidiaries entered into a Revolving Credit and Guaranty Agreement, among CIT Group Inc., certain subsidiaries of CIT Group Inc., as guarantors, the lenders party thereto from time to time and Bank of America, N.A., as administrative agent, collateral agent and letter of credit issuer (the “Revolving Credit Facility”). The total commitment amount under the Revolving Credit Facility is $2 billion consisting of a $1.65 billion revolving loan tranche and a $350 million revolving loan tranche that can also be utilized for issuance of letters of credit. The Revolving Credit Facility matures on August 14, 2015 and will accrue interest at a per annum rate of LIBOR plus a margin of 2.00% to 2.75% (with no floor) or Base Rate plus a margin of 1.00% to 1.75% (with no floor). The applicable margin will be determined by reference to the long-term senior unsecured, non-credit enhanced debt rating of the Company by S&P and Moody’s effective at relevant times during the life of the Revolving Credit Facility. Due to the Company’s credit rating upgrade (discussed later in this section), the applicable margin for LIBOR loans is now 2.50% and the applicable margin for Base Rate loans is now 1.50% at March 31, 2012.
The Revolving Credit Facility may be prepaid and re-borrowed from time to time at the option of CIT. The amount available to draw upon at March 31, 2012 was approximately $1.9 billion, with the remaining portion reflecting letter of credit usage. Also, the unutilized portion of any commitment under the Revolving Credit Facility may be reduced permanently or terminated by CIT at any time without penalty.
Once the Company extinguished the Series A Second-Priority Secured Notes (“Series A Notes”) during the 2012 first quarter, all the collateral and subsidiary guarantees under the Revolving Credit Facility were released, except for subsidiary guarantees from eight of the Company’s domestic operating subsidiaries (“Continuing Guarantors”). Once the Revolving Credit Facility became unsecured, the collateral coverage covenant was replaced by an asset coverage covenant (based on the book value of eligible assets of the Continuing Guarantors) of 2.0x the committed facility size, tested monthly and upon certain dispositions or encumbrances of eligible assets of the Continuing Guarantors. At March 31, 2012, the asset coverage ratio was 2.7x.
The Revolving Credit Facility is also subject to a $6 billion minimum consolidated net worth covenant, tested quarterly, and limits the Company’s ability to create liens, merge or consolidate, sell, transfer, lease or dispose of all or substantially all of its assets, grant a negative pledge or make certain restricted payments during the occurrence and continuance of an event of default.
Series C Notes
Series C Notes 4.75% & 5.50% – In February 2012, the Company issued $3.25 billion aggregate principal amount of Series C Notes, consisting of $1.5 billion principal amount due 2015 (the “2015 Notes”) and $1.75 billion principal amount due 2019 (the “2019 Notes,” together with the 2015 Notes, the “Notes”). The 2015 Notes priced at par and bear interest at a rate of 4.75% and the 2019 Notes priced at par and bear interest at a rate of 5.50%. The proceeds of the transaction were used in conjunction with available cash, to redeem the remaining Series A Notes in March 2012.
Series C Notes 5.25% & 6.625% – In March 2011, the Company issued $2 billion of new Series C Notes, consisting of $1.3 billion of three-year 5.25% fixed rate notes and $700 million of seven-year 6.625% fixed rate notes. The proceeds of the transaction were used in May 2011, in conjunction with available cash, to redeem $2.5 billion of 7% Series A Notes.
Series C Notes 7% (Exchanged) – In June 2011, the Company successfully completed an Exchange Offer and Consent Solicitation for outstanding 7% Series A Notes maturing in 2015, 2016 and 2017. At the Offer Expiration, tenders with consents or separate consents were received from holders of approximately $10.9 billion in aggregate principal amount of Series A Notes, made up of $8.76 billion (pre-FSA) of Series A Notes tendered and accepted for exchange, and $2.17 billion of Series A Notes separately consented, including a majority of each maturity of these Series A Notes. As a result, $8.76 billion principal amount of Series C Notes (pre-FSA) with the same interest rate and interest payment dates, but maturing one business day later than the Series A Notes for which they were exchanged, were issued in exchange for the Series A Notes tendered and accepted.
Consents were solicited to replace the covenants and events of default in the 2015 – 2017 Series A Notes Indentures with the same covenants and events of default as those in the Indenture that govern the existing 5.250% Series C Notes due 2014 and 6.625% Series C Notes due 2018. The covenants in the Series C Notes are more consistent with covenants of investment-grade rated bonds. Approximately $27 million of consent fees were paid to Series A Note holders that delivered consents and were capitalized and will be amortized as an adjustment of interest expense over the life of the Series C Notes issued in exchange.
On May 7, 2012 CIT announced its intention to redeem on June 4, 2012, approximately $2.0 billion of 7% Series C
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 67
Notes maturing in 2017. On April 16, 2012 CIT redeemed $1.6 billion of 7% Series C Notes maturing in 2015 and on May 2, 2012, CIT redeemed $500 million of 7% Series C Notes maturing in 2017. These redemptions will increase second quarter 2012 interest expense by up to $260 million for the acceleration of FSA discount amortization. In addition, there may be a loss on debt extinguishment related to the redemptions. The final amount of FSA to be accelerated and the amount of loss on debt extinguishment will not be known until after the redemptions have occurred.
Once the Company’s remaining Series A Notes were redeemed during the 2012 first quarter, all the collateral and subsidiary guarantees under the Series C Notes were released.
The Series C Notes Indentures limit the Company’s ability to create liens, merge or consolidate, or sell, transfer, lease or dispose of all or substantially all of its assets. Upon a Change of Control Triggering Event as defined in the Series C Indentures, holders of the Series C Notes will have the right to require the Company, as applicable, to repurchase all or a portion of the Series C Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest to the date of such repurchase.
SeeNote 15 — Subsequent Events regarding details on 2012 second quarter Series C Notes redemptions.
Other Unsecured Debt
In March 2012, CIT filed a “shelf” registration statement and issued at par $1.5 billion of senior unsecured notes that mature in 2018 and bear interest at a rate of 5.25%. These rank equal in right of payment with the Series C Notes and the Revolving Credit Facility.
On May 4, 2012, CIT issued at par $1.25 billion of senior unsecured notes that mature in 2017 and bear interest at a rate of 5.00% and $750 million of senior unsecured notes that mature in 2020 and bear interest at a rate of 5.375%. The net proceeds from the offering will be used for general corporate purposes and the refinancing of its outstanding 7% Series C Notes maturing in 2016 and/or 2017.
Series A Notes
On December 10, 2009, pursuant to the Plan of Reorganization the Company issued $21.04 billion principal amount of its 7.0% Series A Second-Priority Secured Notes with maturities each year from 2013 to 2017 (the “Series A Notes”).
During the 2012 first quarter, CIT redeemed the remaining $6.5 billion of Series A Notes, which resulted in the acceleration of $597 million of FSA discount accretion and a loss on debt extinguishment of $23 million reflecting a portion of the underwriting fees on the $3.25 billion issuance of Series C Notes in February 2012.
The elimination of our remaining Series A Notes resulted in all of our Series C Notes becoming unsecured. In addition, the Cash Sweep requirement was eliminated. See Series C Notes above for discussion on covenants and also Item 1 Consolidated Financial Statements,Note 5 — Long-Term Borrowings.
Secured Borrowings
Our secured financing transactions do not meet accounting requirements for sale treatment and are recorded as secured borrowings, with the assets remaining on-balance sheet. The debt associated with these transactions is collateralized by receivables, leases and/or equipment. Certain related cash balances are restricted.
Secured borrowings, which include securitizations, totaled $10.3 billion at March 31, 2012, down slightly from December 31, 2011 reflecting net repayments on existing structures corresponding to cash flows received on the underlying collateral.
In April 2012, CIT closed a $753 million equipment lease securitization, secured by a pool of equipment leases from CIT’s Vendor Finance business segment. The weighted average fixed coupon was 1.45%, which represented a weighted average credit spread of 0.88% over benchmark rates for the six classes of notes and the net advance rate was 92.5%.
GSI Facilities
On October 26, 2011, CIT Group Inc. (“CIT”) amended its existing $2.125 billion total return swap facility between CIT Financial Ltd. (“CFL”) and Goldman Sachs International (“GSI”) in order to provide greater flexibility for certain assets to be funded under the facility. The size of the existing CFL facility was reduced to $1.5 billion, and the $625 million formerly available under the existing CFL facility was transferred to a new total return swap facility between GSI and CIT TRS Funding B.V. (“BV”), a wholly-owned subsidiary of CIT. The CFL Facility and the BV Facility are together referred to below as the GSI Facilities.
At March 31, 2012, a total of $3,752.4 million, after FSA, of financing and leasing assets, comprised of $623.4 million in Corporate Finance, $1,175.0 million in Consumer and $1,954.0 million in commercial aerospace and rail assets in Transportation Finance, were pledged in conjunction with $2,323.7 million in secured debt issued to investors under the GSI Facilities. After adjustment to the amount of actual qualifying borrowing base under terms of the GSI Facilities, this $2,323.7 million of secured debt provided for usage of $1,971.4 million of the maximum notional amount of the GSI Facilities at March 31, 2012. The remaining $153.6 million of the maximum notional amount represents the unused portion of the GSI Facilities and constitutes the notional amount of derivative financial instruments. Actual terms of the GSI Facilities, including facility usage and collateral coverage, are measured on a pre-FSA basis.
68 CIT GROUP INC
Unsecured counterparty receivable of $700.1 million, net of FSA, is owed to CIT from GSI for debt discount, return of collateral posted to GSI and settlements resulting from market value changes to asset-backed securities underlying the structures at March 31, 2012.
The CFL Facility was originally executed on June 6, 2008, and under an October 28, 2009 amendment, the maximum notional amount of the CFL Facility was reduced from $3.0 billion to $2.125 billion. During the first half of 2008, CIT experienced significant constraints on its ability to raise funding through the debt capital markets and access the Company’s historical sources of funding. The CFL Facility provided a swapped rate on qualifying secured funding at a lower cost than available to CIT through other funding sources. The CFL Facility was structured as a TRS to satisfy the specific requirements to obtain this funding commitment from GSI. Pursuant to applicable accounting guidance, only the unutilized portion of the total return swap is accounted for as a derivative and recorded at fair value. Under the terms of the GSI Facilities, CIT raises cash from the issuance of Asset Backed Securities (“ABS”) to investors designated by GSI under the total return swap, equivalent to the face amount of the ABS less an adjustment for any Original Issue Discount (OID) which equals the market price of the ABS. CIT is also required to deposit a portion of the face amount of the ABS with GSI as additional collateral prior to funding ABS through the GSI Facilities.
Amounts deposited with GSI can increase or decrease over time depending on the market value of the ABS and / or changes in the ratings of the ABS. CIT and GSI engage in periodic settlements based on the timing and amount of coupon and principal payments actually made on the ABS. GSI is obligated to return those same amounts to CIT plus a proportionate amount of the initial deposit.
CIT is obligated to pay GSI (1) principal in an amount equal to the initial market price less the initial deposit, in each case, as a percentage of the ABS times the principal amount returned by GSI and (2) interest equal to LIBOR times the adjusted qualifying borrowing base of the ABS. On a quarterly basis, CIT pays the fixed facility fee of 2.85% per annum times the maximum facility commitment amount, currently $1.5 billion under the CFL Facility and $625 million under the BV Facility, to GSI.
Valuation of the derivatives related to the GSI Facilities is based on several factors using a discounted cash flow (DCF) methodology, including:
n | | CIT’s funding costs for similar recent financings based on the current market environment; |
n | | Forecasted usage of the long-dated GSI Facilities through the final maturity date in 2028; and |
n | | Forecasted amortization, including prepayment assumptions, due to principal payments on the underlying ABS, which impacts the amount of the unutilized portion. |
Based on the Company’s valuation, it was determined that the derivatives had no value at March 31, 2012.
Interest expense related to the GSI Facilities is affected by the following:
n | | A fixed facility fee of 2.85% per annum times the maximum facility commitment amount, currently $1.5 billion under the CFL Facility and $625 million under the BV Facility |
n | | A variable amount based on one-month or three-month USD LIBOR times the “utilized amount” (effectively the “adjusted qualifying borrowing base”) of the total return swap, and |
n | | A reduction in interest expense due to the recognition of the payment of any OID from GSI on the various ABS. |
Cash Sweep and Required Cash Sweep Payments
Under the terms of the Series A Notes, the Company was required to use certain cash collections to repay the Revolving Credit Facility and Series A Notes on an accelerated basis (the “Cash Sweep”). Once all of the Company’s remaining Series A Notes were redeemed on March 9, 2012, the Cash Sweep provision was eliminated.
Debt Ratings
Our debt ratings at March 31, 2012 are presented in the following table. Changes since December 31, 2011 include: 1) On February 13, 2012, DBRS increased our debt ratings one notch to an issuer / counterparty credit rating and Series C debt rating of “BB (Low)” and the Revolving Credit Facility rating was increased to “BB (High)”, 2) On February 16, 2012, Moody’s Investor Service increased our debt ratings one notch to an issuer / counterparty credit rating and Series C debt rating of “B1” and 3) On March 9, 2012 S&P Ratings Services increased our debt ratings one notch to an issuer / counterparty credit rating and Series C debt rating to “BB-”, lowered its rating one notch on the Revolving Credit Facility to “BB-” and changed the outlook to stable.
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 69
Debt Ratings as of March 31, 2012
| | | | S&P Ratings
Services
| | Moody’s
Investors
Service
| | DBRS
|
|---|
| Issuer / Counterparty Credit Rating | | | | BB–
| | B1
| | | BB (Low) | |
| Revolving Credit Facility Rating | | | | BB–
| | Ba3
| | | BB (High) | |
| Series C Notes / Unsecured Debt Rating | | | | BB–
| | B1
| | | BB (Low) | |
| Outlook | | | | Stable
| | Stable
| | | Positive | |
Debt ratings can influence the cost and availability of short-and long-term funding, the terms and conditions on which such funding may be available, the collateral requirements, if any, for borrowings and certain derivative instruments, the acceptability of our letters of credit, and the number of investors and counterparties willing to lend to the Company. A decrease, or potential decrease, in credit ratings could impact access to the capital markets and/or increase the cost of debt, and thereby adversely affect liquidity and financial condition.
Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current legislative and regulatory environment, including implied government support. In addition, rating agencies themselves have been subject to scrutiny arising from the financial crisis and could make or be required to make substantial changes to their ratings policies and practices, particularly in response to legislative and regulatory changes, including as a result of provisions in Dodd-Frank. Potential changes in the legislative and regulatory environment and the timing of those changes could impact our ratings, which as noted above, could impact our liquidity and financial condition.
A debt rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.
Tax Implications on Cash in Foreign Subsidiaries
Cash and short term investments held by foreign subsidiaries at March 31, 2012 and December 31, 2011 totaled $1.7 billion and $1.6 billion, respectively.
With respect to the Company’s investments in foreign subsidiaries, Management has historically asserted the intent to indefinitely reinvest the unremitted earnings of its foreign subsidiaries with very limited exceptions. However, in 2009, Management determined that it would no longer make this assertion because of certain cash flow and funding uncertainties consequent to its recent emergence from bankruptcy and the fact that Management was still in the early stages of developing its long-term strategic and liquidity plans. By 2010, the Company had a new leadership team charged with re-evaluating the Company’s long-term business and strategic plans. Their initial post-bankruptcy plan was to aggressively grow the Company’s international business. Accordingly, in 2010, with very limited exceptions, Management decided to assert indefinite reinvestment of the unremitted earnings of its foreign subsidiaries. This resulted in the reversal of certain previously established deferred income taxes including $10 million of deferred withholding taxes and $64 million of deferred domestic income tax. The latter $64 million deferred tax was fully offset by a corresponding adjustment to the domestic valuation allowance resulting in no impact to the income tax provision.
In the quarter ended December 31, 2011, Management decided to no longer assert its intent to indefinitely reinvest its foreign earnings, except for its Chinese subsidiary. This decision was driven by events over the last year that culminated in Management’s conclusion during the quarter that the Company may need to repatriate foreign earnings to address certain long-term investment and funding strategies. Some of the significant events that impacted Management’s decision included the re-evaluation of the Company’s debt and capital structures of its subsidiaries, and the need to pay-down the Company’s high cost debt in the U.S. In addition, certain restrictions on the Company’s first and second lien debt were removed during the 2011 fourth quarter upon the repayment of the remaining 2014 Series A debt. The removal of these restrictions allows the Company to transfer and repatriate cash to repay its high cost debt in the U.S. and recapitalize certain foreign subsidiaries. All these events contributed to Management’s decision to no longer assert indefinite reinvestment of its foreign earnings, with the exception of its Chinese subsidiary. As of the quarter ended March 31, 2012, there has been no change to this decision.
Contractual Payments and Commitments
The following tables summarize significant contractual payments and contractual commitment expirations at March 31, 2012. Certain amounts in the payments table are not the same as the respective balance sheet totals, because this table is before FSA, in order to better reflect projected contractual payments. Likewise, actual cash flows will vary materially from those depicted in the payments table as further explained in the table footnotes.
70 CIT GROUP INC
Payments and Collections for the Twelve Months Ended March 31(1) (dollars in millions)
| | | | Total
| | 2013
| | 2014
| | 2015
| | 2016
| | 2017+
|
|---|
Secured borrowings(2) | | | | $ | 10,781.7 | | | $ | 1,275.7 | | | $ | 1,457.9 | | | $ | 844.4 | | | $ | 861.0 | | | $ | 6,342.7 | |
Unsecured (Series C Notes Exchanged)(3) | | | | | 8,765.0 | | | | 2,054.2 | | | | – | | | | – | | | | – | | | | 6,710.8 | |
| Unsecured (Series C Notes other) | | | | | 5,250.0 | | | | – | | | | – | | | | 2,800.0 | | | | – | | | | 2,450.0 | |
| Senior unsecured | | | | | 1,500.0 | | | | – | | | | – | | | | – | | | | – | | | | 1,500.0 | |
| Other debt | | | | | 136.6 | | | | 1.8 | | | | 1.4 | | | | – | | | | – | | | | 133.4 | |
Total Long-term borrowings | | | | | 26,433.3 | | | | 3,331.7 | | | | 1,459.3 | | | | 3,644.4 | | | | 861.0 | | | | 17,136.9 | |
| Deposits | | | | | 6,804.6 | | | | 2,413.0 | | | | 1,592.8 | | | | 1,147.4 | | | | 652.5 | | | | 998.9 | |
| Credit balances of factoring clients | | | | | (1,109.8 | ) | | | (1,109.8 | ) | | | – | | | | – | | | | – | | | | – | |
| Lease rental expense | | | | | 236.0 | | | | 63.3 | | | | 28.0 | | | | 26.8 | | | | 25.0 | | | | 92.9 | |
Total contractual payments | | | | $ | 32,364.1 | | | $ | 4,698.2 | | | $ | 3,080.1 | | | $ | 4,818.6 | | | $ | 1,538.5 | | | $ | 18,228.7 | |
(1) | | Projected payments of debt interest expense and obligations relating to postretirement programs are excluded. |
(2) | | Includes non-recourse secured borrowings, which are generally repaid in conjunction with the pledged receivable maturities. |
(3) | | The Unsecured (Series C Notes Exchanged) reflects the redemption of all 2015 Notes ($1.6 billion) on April 16, 2012 and $500 million 2017 Notes on May 2, 2012 within the twelve months ended March 31, 2013. |
Commitment Expiration by Twelve Month Periods Ended March 31(dollars in millions)
| | | | Total
| | 2013
| | 2014
| | 2015
| | 2016
| | 2017+
|
|---|
Financing commitments(1) | | | | $ | 2,759.9 | | | $ | 357.1 | | | $ | 323.1 | | | $ | 273.3 | | | $ | 700.1 | | | $ | 1,106.3 | |
Aerospace and other manufacturer purchase commitments(2) | | | | | 8,783.7 | | | | 1,271.2 | | | | 1,155.4 | | | | 1,059.6 | | | | 1,406.7 | | | | 3,890.8 | |
| Letters of credit | | | | | 300.0 | | | | 105.6 | | | | 22.2 | | | | 15.0 | | | | 40.5 | | | | 116.7 | |
| Deferred purchase credit protection agreements | | | | | 1,615.4 | | | | 1,615.4 | | | | – | | | | – | | | | – | | | | – | |
| Guarantees, acceptances and other recourse obligations | | | | | 27.2 | | | | 18.7 | | | | 7.0 | | | | 1.5 | | | | – | | | | – | |
Liabilities for unrecognized tax obligations(3) | | | | | 559.3 | | | | 10.0 | | | | 549.3 | | | | – | | | | – | | | | – | |
| Total contractual commitments | | | | $ | 14,045.5 | | | $ | 3,378.0 | | | $ | 2,057.0 | | | $ | 1,349.4 | | | $ | 2,147.3 | | | $ | 5,113.8 | |
(1) | | Financing commitments do not include certain unused, cancelable lines of credit to customers in connection with third-party vendor programs, which can be reduced or cancelled by CIT at any time without notice. |
(2) | | Aerospace commitments are net of amounts on deposit with manufacturers. |
(3) | | The balance cannot be estimated past 2014; therefore the remaining balance is reflected in 2014. |
Financing commitments increased less than 1% from December 31, 2011 to $2.8 billion at March 31, 2012. At March 31, 2012, substantially all financing commitments were senior facilities, with approximately 70% secured by equipment or other assets and the remainder comprised of cash flow or enterprise value facilities. Most of our undrawn and available financing commitments are in Corporate Finance. The top ten undrawn commitments totaled $313 million at March 31, 2012.
The table above includes approximately $0.5 billion of commitments at March 31, 2012 and $0.4 billion at December 31, 2011 that were not available for draw due to requirements for collateral availability or covenant conditions.
Risk Weighted Assets
For a BHC, capital adequacy is based upon risk-weighted asset ratios calculated in accordance with quantitative measures established by the Federal Reserve. Under these guidelines, certain commitments and off-balance sheet transactions are assigned asset equivalent balances, and together with on-balance sheet assets, are divided into risk categories, each of which is assigned a risk weighting ranging from 0% (for example U.S. Treasury Bonds) to 100% (for example commercial loans). The reconciliation of balance sheet assets to risk-weighted assets is presented below:
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 71
Risk-Weighted Assets(dollars in millions)
| | | | March 31,
2012
| | December 31,
2011
|
|---|
| Balance sheet assets | | | | $ | 44,148.3 | | | $ | 45,235.4 | |
| Risk weighting adjustments to balance sheet assets | | | | | (10,428.6 | ) | | | (12,332.3 | ) |
Off balance sheet items(1) | | | | | 11,801.4 | | | | 11,913.4 | |
| Risk-weighted assets | | | | $ | 45,521.1 | | | $ | 44,816.5 | |
(1) | | Primarily reflects commitments to purchase aircraft and for unused lines of credit and letters of credit. See Note 13 — Regulatory Capital for more information. |
Regulatory Capitalization
The Company is subject to various regulatory capital requirements set by the Federal Reserve Board. CIT committed to its regulators to maintain a 13% Total Capital Ratio at the BHC and a 15% Tier 1 Leverage Ratio at CIT Bank for at least three years.
Tier 1 Capital and Total Capital Components (dollars in millions)
| | | | March 31,
2012
| | December 31,
2011
|
|---|
Tier 1 Capital
| | | | | | | | | | |
| Total stockholders’ equity | | | | $ | 8,453.2 | | | $ | 8,888.5 | |
| Effect of certain items in accumulated other comprehensive loss excluded from Tier 1 Capital | | | | | 53.0 | | | | 54.3 | |
| Adjusted total equity | | | | | 8,506.2 | | | | 8,942.8 | |
Less: Goodwill(1) | | | | | (338.0 | ) | | | (338.0 | ) |
Disallowed intangible assets(1) | | | | | (55.6 | ) | | | (63.6 | ) |
| Investment in certain subsidiaries | | | | | (38.5 | ) | | | (36.6 | ) |
Other Tier 1 components(2) | | | | | (63.6 | ) | | | (58.1 | ) |
| Tier 1 Capital | | | | | 8,010.5 | | | | 8,446.5 | |
Tier 2 Capital | | | | | | | | | | |
Qualifying reserve for credit losses and other reserves(3) | | | | | 445.7 | | | | 429.9 | |
| Less: Investment in certain subsidiaries | | | | | (38.5 | ) | | | (36.6 | ) |
| Total qualifying capital | | | | $ | 8,417.7 | | | $ | 8,839.8 | |
| Risk-weighted assets | | | | $ | 45,521.1 | | | $ | 44,816.5 | |
BHC Ratios | | | | | | | | | | |
| Tier 1 Capital Ratio | | | | | 17.6 | % | | | 18.8 | % |
| Total Capital Ratio | | | | | 18.5 | % | | | 19.7 | % |
| Tier 1 Leverage Ratio | | | | | 17.9 | % | | | 18.9 | % |
CIT Bank Ratios | | | | | | | | | | |
| Tier 1 Capital Ratio | | | | | 32.0 | % | | | 36.5 | % |
| Total Capital Ratio | | | | | 32.9 | % | | | 37.5 | % |
| Tier 1 Leverage Ratio | | | | | 23.1 | % | | | 24.7 | % |
(1) | | Goodwill and disallowed intangible assets adjustments also reflect the portion included within assets held for sale. |
(2) | | Includes the portion of net deferred tax assets that does not qualify for inclusion in Tier 1 capital based on the capital guidelines, the Tier 1 capital charge for nonfinancial equity investments and the Tier 1 capital deduction for net unrealized losses on available-for-sale marketable securities (net of tax). |
(3) | | “Other reserves” represents additional credit loss reserves for unfunded lending commitments, letters of credit, and deferred purchase agreements, all of which are recorded in Other Liabilities. |
Regulatory capital guidelines are based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I). We compute capital ratios in accordance with Federal Reserve capital guidelines for assessing adequacy of capital. To be well capitalized, a BHC generally must maintain Tier 1 and Total Capital Ratios of at least 6% and 10%, respectively. The Federal Reserve Board also has established minimum guidelines. The minimum ratios are: Tier 1 Capital Ratio of 4.0%, Total Capital Ratio of 8.0% and Tier 1 Leverage Ratio of 4.0%. In order to be considered a “well capitalized” depository institution under FDIC guidelines, CIT Bank must maintain a Tier 1 Capital Ratio of at least 6%, a Total Capital Ratio of at least 10%, and a Tier 1 Leverage Ratio of at least 5%.
In 2004, the Basel Committee published a new capital accord (Basel II) to replace Basel I. We do not meet the thresholds to be a “core bank” and are therefore not
72 CIT GROUP INC
required to comply with the advanced approaches of Basel II.
On August 12, 2009, CIT entered into a Written Agreement with the Federal Reserve Bank of New York (the “FRBNY”). Among other requirements, the Written Agreement requires regular reporting to the FRBNY and prior written approval by the FRBNY for payment of dividends and distributions and the purchase or redemption of stock.
In December 2010, the Basel Committee on Banking Supervision released its final framework for strengthening international capital and liquidity regulation (“Basel III”). Basel III requirements include higher minimum capital ratios, increased limitations on qualifying capital, minimum liquidity requirements and a more constrained leverage ratio requirement. The U.S. bank regulatory agencies have not yet set forth a formal timeline for a notice of proposed rulemaking or final adoption of regulations responsive to Basel III. The U.S. banking agencies have indicated informally that they expect to propose regulations in the first half of 2012 regarding the implementation of Basel III.
Basel III revisions governing capital requirements are subject to a prolonged and phased-in transition period which begins on January 1, 2013, with full implementation on January 1, 2019. If Basel III is fully implemented in the U.S. as currently proposed, CIT will be required to maintain risk-based capital ratios at January 1, 2019 as follows:
| | | | Minimum Capital Requirements – January 1, 2019
| |
|---|
| | | | Tier 1 Common
Equity
| | Tier 1 Capital
| | Total Capital
|
|---|
| Stated minimum Ratio | | | | | 4.5 | % | | | 6.0 | % | | | 8.0 | % |
| Capital conservation buffer | | | | | 2.5 | % | | | 2.5 | % | | | 2.5 | % |
| Effective minimum ratio | | | | | 7.0 | % | | | 8.5 | % | | | 10.5 | % |
In addition, Basel III also includes a countercyclical buffer of up to 2.5% that regulators could require in periods of excess credit growth.
Given our current capital ratios, capital composition and liquidity position, we expect the impact of Basel III to be minimal. However, the final impact will not be completely known until the U.S. banking regulators finalize the rulemaking to implement Basel III.
See the “Regulation” section of Item 1 Business Overview of our 2011 Form 10-K for further detail regarding regulatory matters.
CIT Bank is a state-chartered bank headquartered in Salt Lake City, Utah and is the Company’s principal bank subsidiary. CIT Bank originates and funds lending activity in the U.S. of various business segments. Asset origination activity reflected increased volume from the year-ago period in Corporate Finance, Vendor Finance and Transportation Finance. Committed loan volume more than doubled from the year-ago period and rose 18% from the prior quarter to $1.6 billion, of which nearly $1.2 billion was funded. The sequential quarter increase reflected growth in Corporate Finance activity, including volume from real estate and equipment finance. Additionally, the Bank purchased a $200 million portfolio of loans secured by aircraft.
Total assets were $9.6 billion, up from $6.8 billion at March 31, 2011 and $9.0 billion at December 31, 2011. Loans (including held-for-sale) totaled $6.6 billion, up from $5.2 billion at March 31, 2011 and $6.1 billion at December 31, 2011. Commercial loans of $5.0 billion increased $3.4 billion from the prior-year quarter and $1.1 billion during the first quarter. Assets held for sale totaled $1.1 billion (which were sold in April 2012), down from $1.6 billion at December 31, 2011 as $0.5 billion of student loans were sold during the first quarter. Cash was $2.6 billion at March 31, 2012 up from $2.5 billion at December 31, 2011. CIT Bank’s capital and leverage ratios remain well above required levels.
Total deposits were $6.7 billion at March 31, 2012, up from $6.1 billion at December 31, 2011 and $4.3 billion at March 31, 2011. During the first quarter, CIT Bank originated over $750 million of deposits at an average rate of approximately 1.1% that replaced maturing deposits at higher rates. Deposits originated through online channels exceeded $1.1 billion and, in March 2012, CIT Bank online launched a savings account product to supplement the current range of CD offerings to consumers.
The following presents condensed financial information for CIT Bank.
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 73
Condensed Balance Sheets(dollars in millions)
| | | | March 31, 2012
| | December 31, 2011
|
|---|
ASSETS: | | | | | | | | | | |
| Cash and deposits with banks | | | | $ | 2,564.5 | | | $ | 2,462.1 | |
| Investment securities | | | | | 162.9 | | | | 166.7 | |
| Assets held for sale | | | | | 1,079.5 | | | | 1,627.5 | |
| Commercial loans | | | | | 4,979.5 | | | | 3,912.4 | |
| Consumer loans | | | | | 554.5 | | | | 565.5 | |
| Allowance for loan losses | | | | | (60.9 | ) | | | (49.0 | ) |
| Operating lease equipment, net | | | | | 91.1 | | | | 31.3 | |
| Other assets | | | | | 227.9 | | | | 252.2 | |
Total Assets | | | | $ | 9,599.0 | | | $ | 8,968.7 | |
LIABILITIES AND EQUITY: | | | | | | | | | | |
| Deposits | | | | $ | 6,731.7 | | | $ | 6,124.9 | |
| Long-term borrowings | | | | | 511.5 | | | | 576.7 | |
| Other liabilities | | | | | 147.1 | | | | 150.5 | |
Total Liabilities | | | | | 7,390.3 | | | | 6,852.1 | |
Total Equity | | | | | 2,208.7 | | | | 2,116.6 | |
Total Liabilities and Equity | | | | $ | 9,599.0 | | | $ | 8,968.7 | |
Capital Ratios: | | | | | | | | | | |
| Total Capital Ratio | | | | | 32.9 | % | | | 37.5 | % |
| Tier 1 Capital Ratio | | | | | 32.0 | % | | | 36.5 | % |
| Tier 1 Leverage ratio | | | | | 23.1 | % | | | 24.7 | % |
Condensed Statements of Operations(dollars in millions)
| | | | Quarters Ended March 31,
| |
|---|
| | | | 2012
| | 2011
|
|---|
| Interest income | | | | $ | 83.6 | | | $ | 64.4 | |
| Interest expense | | | | | (37.5 | ) | | | (26.8 | ) |
| Net interest revenue | | | | | 46.1 | | | | 37.6 | |
| Provision for credit losses | | | | | (12.9 | ) | | | (1.7 | ) |
| Net interest revenue, after credit provision | | | | | 33.2 | | | | 35.9 | |
| Rental income on operating leases | | | | | 2.9 | | | | – | |
| Other income | | | | | 24.3 | | | | 13.4 | |
| Total net revenue, net of interest expense and credit provision | | | | | 60.4 | | | | 49.3 | |
| Operating expenses | | | | | (30.0 | ) | | | (12.0 | ) |
| Depreciation on operating lease equipment | | | | | (2.4 | ) | | | – | |
| Income before income taxes | | | | | 28.0 | | | | 37.3 | |
| Provision for income taxes | | | | | (9.6 | ) | | | (14.6 | ) |
Net income | | | | $ | 18.4 | | | $ | 22.7 | |
New business originations – funded | | | | $ | 1,160.3 | | | $ | 408.7 | |
New business originations – committed | | | | $ | 1,607.6 | | | $ | 777.2 | |
74 CIT GROUP INC
As detailed in the following table, net finance revenue (NFR) increased from the prior-year quarter as increased assets and lower funding costs offset lower FSA accretion. Average earning assets increased nearly 28% from the first quarter of 2011 reflecting higher commercial assets. Net FSA accretion increased NFR by $11 million during 2012, compared to an increase of $29 million in 2011, due primarily to lower interest income accretion.
Net Finance Revenue (dollars in millions)
| | | | Quarters Ended March 31,
| |
|---|
| | | | 2012
| | 2011
|
|---|
| Interest income | | | | $ | 83.6 | | | $ | 64.4 | |
| Rental income on operating leases | | | | | 2.9 | | | | – | |
| Finance revenue | | | | | 86.5 | | | | 64.4 | |
| Interest expense | | | | | (37.5 | ) | | | (26.8 | ) |
| Depreciation on operating lease equipment | | | | | (2.4 | ) | | | – | |
| Net finance revenue | | | | $ | 46.6 | | | $ | 37.6 | |
| Average Earning Assets (“AEA”) | | | | $ | 6,554.2 | | | $ | 5,138.7 | |
As a % of AEA: | | | | | | | | | | |
| Interest income | | | | | 5.10 | % | | | 5.01 | % |
| Rental income on operating leases | | | | | 0.18 | % | | | – | |
| Finance revenue | | | | | 5.28 | % | | | 5.01 | % |
| Interest expense | | | | | (2.29 | )% | | | (2.08 | )% |
| Depreciation on operating lease equipment | | | | | (0.15 | )% | | | – | |
| Net finance revenue | | | | | 2.84 | % | | | 2.93 | % |
Net finance revenue is a non-GAAP measure.
NFR as a percentage of average earning assets (“Net Finance Margin”) decreased from the prior-year quarter, as the decrease in FSA accretion offset the revenue earned from higher-yielding commercial assets. Excluding the FSA impacts, net finance margin increased, reflecting a shift in weighting as commercial loans grow and become a more significant proportion of the earning assets, while the lower yielding consumer assets, principally student loans, run-off. However, the margin increase is partially offset by the relatively high proportion of low-yielding assets, student loans and cash.
Adjusted Net Finance Revenue as a % of AEA (dollars in millions)
| | | | Quarters Ended March 31,
| |
|---|
| | | | 2012
| | 2011
| |
|---|
| Net finance revenue | | | | $ | 46.6 | | | | 2.84 | % | | $ | 37.6 | | | | 2.93 | % |
| FSA impact on net finance revenue | | | | | (11.1 | ) | | | (0.68 | )% | | | (28.8 | ) | | | (2.27 | )% |
| Adjusted net finance revenue | | | | $ | 35.5 | | | | 2.16 | % | | $ | 8.8 | | | | 0.66 | % |
Net finance revenue is a non-GAAP measure.
The following table presents the Bank’s pre-tax net income and adjusted pre-tax net income:
Impacts of FSA Accretion and Debt-related Transaction Costs on Pre-tax Income (Loss)(dollars in millions)
| | | | Quarters Ended March 31,
| |
|---|
| | | | 2012
| | 2011
|
|---|
| Pre-tax Income/(Loss) – Reported | | | | $ | 28.0 | | | $ | 37.3 | |
| Net FSA Accretion (excluding debt related acceleration) | | | | | (11.1 | ) | | | (28.8 | ) |
| Pre-tax Income (Loss) – Excluding FSA Net Accretion | | | | $ | 16.9 | | | $ | 8.5 | |
Pre-tax Income (Loss) – Excluding FSA Net Accretion is a non-GAAP measure.
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 75
SELECT QUARTERLY FINANCIAL DATA
Select Quarterly Data (dollars in millions)
| | | | Quarters Ended
| |
|---|
| | | | March 31,
2012
| | December 31,
2011
| | March 31,
2011
|
|---|
Select Statement of Operations Data | | | | | | | | | | | | | | |
| Net interest revenue | | | | $ | (668.1 | ) | | $ | (194.1 | ) | | $ | (59.8 | ) |
| Provision for credit losses | | | | | (42.6 | ) | | | (15.8 | ) | | | (122.4 | ) |
| Total other income | | | | | 688.7 | | | | 637.0 | | | | 679.3 | |
| Total other expenses | | | | | (383.7 | ) | | | (346.7 | ) | | | (365.1 | ) |
| Income (loss) before provision for income taxes | | | | | (405.7 | ) | | | 80.4 | | | | 132.0 | |
| Net (loss) income | | | | | (446.5 | ) | | | 43.6 | | | | 65.6 | |
Per Common Share Data | | | | | | | | | | | | | | |
| Income (loss) income per share-diluted | | | | $ | (2.22 | ) | | $ | 0.22 | | | $ | 0.33 | |
| Book value per common share | | | | $ | 42.09 | | | $ | 44.30 | | | $ | 44.88 | |
| Tangible book value per common share | | | | $ | 40.20 | | | $ | 42.33 | | | $ | 42.69 | |
Performance Ratios | | | | | | | | | | | | | | |
| Return on average common stockholders’ equity | | | | | (20.3 | )% | | | 2.0 | % | | | 2.9 | % |
| Net finance revenue as a percentage of average earning assets | | | | | (4.43 | )% | | | 1.15 | % | | | 2.14 | % |
| Return on average total assets | | | | | (3.98 | )% | | | 0.39 | % | | | 0.52 | % |
| Total ending equity to total ending assets | | | | | 19.2 | % | | | 19.7 | % | | | 17.6 | % |
Balance Sheet Data | | | | | | | | | | | | | | |
| Loans including receivables pledged | | | | $ | 20,490.6 | | | $ | 19,885.5 | | | $ | 23,794.4 | |
| Allowance for loan losses | | | | | (420.0 | ) | | | (407.8 | ) | | | (402.5 | ) |
| Operating lease equipment, net | | | | | 11,904.0 | | | | 11,991.6 | | | | 11,039.2 | |
| Goodwill and intangible assets, net | | | | | 380.8 | | | | 394.4 | | | | 439.5 | |
| Total cash and short-term investments | | | | | 7,336.1 | | | | 8,372.8 | | | | 11,844.4 | |
| Total assets | | | | | 44,148.3 | | | | 45,235.4 | | | | 51,086.3 | |
| Total debt and deposits | | | | | 31,915.8 | | | | 32,481.8 | | | | 38,023.9 | |
| Total common stockholders’ equity | | | | | 8,453.2 | | | | 8,888.5 | | | | 8,999.4 | |
Credit Quality | | | | | | | | | | | | | | |
| Non-accrual loans as a percentage of finance receivables | | | | | 2.35 | % | | | 3.53 | % | | | 5.49 | % |
| Net credit losses as a percentage of average finance receivables | | | | | 0.42 | % | | | 0.45 | % | | | 2.32 | % |
| Reserve for credit losses as a percentage of finance receivables | | | | | 2.05 | % | | | 2.05 | % | | | 1.69 | % |
Financial Ratios | | | | | | | | | | | | | | |
| Tier 1 Capital | | | | | 17.6 | % | | | 18.8 | % | | | 20.0 | % |
| Total Risk-based Capital | | | | | 18.5 | % | | | 19.7 | % | | | 20.9 | % |
76 CIT GROUP INC
Quarterly Average Balances(1) and Associated Income (dollars in millions)
| | | | March 31, 2012
| | December 31, 2011
| | March 31, 2011
| |
|---|
| | | | Average
Balance
| | Interest
| | Average
Rate (%)
| | Average
Balance
| | Interest
| | Average
Rate (%)
| | Average
Balance
| | Interest
| | Average
Rate (%)
|
|---|
| Deposits with banks | | | | $ | 6,533.9 | | | $ | 4.9 | | | | 0.30 | % | | $ | 6,907.4 | | | $ | 6.6 | | | | 0.38 | % | | $ | 9,246.8 | | | $ | 6.3 | | | | 0.27 | % |
| Investments | | | | | 1,707.8 | | | | 2.9 | | | | 0.68 | % | | | 942.4 | | | | 2.6 | | | | 1.10 | % | | | 1,890.9 | | | | 2.1 | | | | 0.44 | % |
Loans and leases (including held for sale)(2)(3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. | | | | | 17,848.6 | | | | 306.9 | | | | 7.35 | % | | | 18,917.8 | | | | 365.5 | | | | 8.24 | % | | | 20,028.7 | | | | 462.3 | | | | 9.70 | % |
| Non-U.S. | | | | | 4,228.2 | | | | 96.9 | | | | 9.17 | % | | | 4,172.1 | | | | 117.7 | | | | 11.29 | % | | | 5,121.7 | | | | 168.1 | | | | 13.14 | % |
Total loans and leases(2) | | | | | 22,076.8 | | | | 403.8 | | | | 7.72 | % | | | 23,089.9 | | | | 483.2 | | | | 8.82 | % | | | 25,150.4 | | | | 630.4 | | | | 10.43 | % |
Total interest earning assets / interest income(2)(3) | | | | | 30,318.5 | | | | 411.6 | | | | 5.64 | % | | | 30,939.7 | | | | 492.4 | | | | 6.62 | % | | | 36,288.1 | | | | 638.8 | | | | 7.23 | % |
Operating lease equipment, net(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S.(4) | | | | | 5,835.5 | | | | 137.9 | | | | 9.45 | % | | | 5,508.7 | | | | 123.6 | | | | 8.97 | % | | | 4,893.1 | | | | 103.7 | | | | 8.48 | % |
Non-U.S.(4) | | | | | 6,123.2 | | | | 163.9 | | | | 10.71 | % | | | 6,041.3 | | | | 166.9 | | | | 11.05 | % | | | 6,247.8 | | | | 145.0 | | | | 9.28 | % |
Total operating lease equipment, net(4) | | | | | 11,958.7 | | | | 301.8 | | | | 10.09 | % | | | 11,550.0 | | | | 290.5 | | | | 10.06 | % | | | 11,140.9 | | | | 248.7 | | | | 8.93 | % |
Total earning assets(2) | | | | | 42,277.2 | | | $ | 713.4 | | | | 6.94 | % | | | 42,489.7 | | | $ | 782.9 | | | | 7.58 | % | | | 47,429.0 | | | $ | 887.5 | | | | 7.64 | % |
| Non interest earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash due from banks | | | | | 163.1 | | | | | | | | | | | | 200.0 | | | | | | | | | | | | 253.7 | | | | | | | | | |
| Allowance for loan losses | | | | | (410.6 | ) | | | | | | | | | | | (416.7 | ) | | | | | | | | | | | (413.1 | ) | | | | | | | | |
| All other non-interest earning assets | | | | | 2,855.5 | | | | | | | | | | | | 2,784.5 | | | | | | | | | | | | 3,303.0 | | | | | | | | | |
Total Average Assets | | | | $ | 44,885.2 | | | | | | | | | | | $ | 45,057.5 | | | | | | | | | | | $ | 50,572.6 | | | | | | | | | |
Average Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Borrowings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | $ | 6,552.5 | | | $ | 36.3 | | | | 2.22 | % | | $ | 5,639.5 | | | $ | 33.3 | | | | 2.36 | % | | $ | 4,460.3 | | | $ | 24.4 | | | | 2.19 | % |
Long-term borrowings(5) | | | | | 25,719.6 | | | | 1,043.4 | | | | 16.23 | % | | | 26,757.5 | | | | 653.2 | | | | 9.76 | % | | | 33,174.2 | | | | 674.2 | | | | 8.13 | % |
| Total interest-bearing liabilities | | | | | 32,272.1 | | | $ | 1,079.7 | | | | 13.38 | % | | | 32,397.0 | | | $ | 686.5 | | | | 8.48 | % | | | 37,634.5 | | | $ | 698.6 | | | | 7.43 | % |
| Credit balances of factoring clients | | | | | 1,143.4 | | | | | | | | | | | | 1,180.3 | | | | | | | | | | | | 962.7 | | | | | | | | | |
| Other non-interest bearing liabilities | | | | | 2,685.2 | | | | | | | | | | | | 2,571.3 | | | | | | | | | | | | 3,011.2 | | | | | | | | | |
| Noncontrolling interests | | | | | 3.7 | | | | | | | | | | | | 1.9 | | | | | | | | | | | | (1.7 | ) | | | | | | | | |
| Stockholders’ equity | | | | | 8,780.8 | | | | | | | | | | | | 8,907.0 | | | | | | | | | | | | 8,965.9 | | | | | | | | | |
Total Average Liabilities and Stockholders’ Equity | | | | $ | 44,885.2 | | | | | | | | | | | $ | 45,057.5 | | | | | | | | | | | $ | 50,572.6 | | | | | | | | | |
| Net revenue spread | | | | | | | | | | | | | (6.44 | )% | | | | | | | | | | | (0.90 | )% | | | | | | | | | | | 0.21 | % |
| Impact of non-interest bearing sources | | | | | | | | | | | | | 2.88 | % | | | | | | | | | | | 1.83 | % | | | | | | | | | | | 1.42 | % |
Net revenue/yield on earning assets(2) | | | | | | | | $ | (366.3 | ) | | | (3.56 | )% | | | | | | $ | 96.4 | | | | 0.93 | % | | | | | | $ | 188.9 | | | | 1.63 | % |
(1) | | The average balances presented are derived based on month end balances during the year. Tax exempt income was not significant in any of the years presented. Average rates are impacted by FSA accretion and amortization. |
(2) | | The rate presented is calculated net of average credit balances for factoring clients. |
(3) | | Non-accrual loans and related income are included in the respective categories. |
(4) | | Operating lease rental income is a significant source of revenue; therefore, we have presented the rental revenues net of depreciation. |
(5) | | Interest and average rates include FSA accretion, including amounts accelerated due to redemptions or extinguishments, as well as prepayment penalties on the Series A Notes, the Series B Notes and the student lending securitization. |
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 77
The average long-term borrowings balances presented below are derived based on daily balances and the average rates are based on a 30 days per month day count convention. The average rates include FSA amortization and prepayment fees, which due to the annualizing, can distort the derived rate. The debt coupon rates at March 31, 2012, on a pre-FSA basis, are as follows: Senior Unsecured Notes — 5.25%, Series C Notes (exchanged) — 7.00%, Series C Notes (other) — 5.37%, Other Debt — 6.00%, and Secured Borrowings — 2.25%. The aggregate portfolio weighted average at March 31, 2012 was 4.64%.
Average Daily Long-term Borrowings Balances and Rates (dollars in millions)
| | | | Quarters Ended
| |
|---|
| | | | March 31, 2012
| | December 31, 2011
| | March 31, 2011
| |
|---|
| | | | Average
Balance
| | Interest
| | Average
Rate (%)
| | Average
Balance
| | Interest
| | Average
Rate (%)
| | Average
Balance
| | Interest
| | Average
Rate (%)
|
|---|
Unsecured | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revolving Credit Facility | | | | $ | 210.8 | | | $ | 1.7 | | | | 3.22 | % | | $ | – | | | $ | – | | | | – | | | $ | – | | | $ | – | | | | – | |
| Senior Unsecured | | | | | 266.7 | | | | 3.5 | | | | 5.25 | % | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Series C Notes – (Exchanged) | | | | | 7,982.4 | | | | 189.6 | | | | 9.50 | % | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Series C Notes – (other) | | | | | 3,942.5 | | | | 55.4 | | | | 5.62 | % | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Other debt | | | | | 86.4 | | | | 2.7 | | | | 12.42 | % | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Total Unsecured Debt | | | | | 12,488.8 | | | | 252.9 | | | | 8.10 | % | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
Secured | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Secured borrowings(1)(3) | | | | $ | 10,328.2 | | | $ | 106.7 | | | | 4.13 | % | | $ | 9,623.6 | | | $ | 204.3 | | | | 8.50 | % | | $ | 10,707.3 | | | $ | 129.2 | | | | 4.83 | % |
| First Lien Term Facility | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 3,042.5 | | | | 50.4 | | | | 6.62 | % |
| Revolving Credit Facility | | | | | – | | | | – | | | | – | | | | 1,303.0 | | | | 10.2 | | | | 3.14 | % | | | – | | | | – | | | | – | |
Series A Notes(2)(3) | | | | | 3,424.8 | | | | 683.8 | | | | 79.86 | % | | | 5,962.5 | | | | 217.1 | | | | 14.56 | % | | | 18,756.6 | | | | 487.1 | | | | 10.39 | % |
| Series B Notes | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 25.1 | | | | 2.1 | | | | 16.03 | % |
| Series C Notes – (other) | | | | | – | | | | – | | | | – | | | | 2,000.0 | | | | 30.1 | | | | 6.02 | % | | | 22.0 | | | | 0.8 | | | | 6.02 | % |
Series C Notes (Exchanged from Series A)(2)(3) | | | | | – | | | | – | | | | – | | | | 7,947.8 | | | | 188.7 | | | | 9.50 | % | | | – | | | | – | | | | – | |
| Other debt | | | | | – | | | | – | | | | – | | | | 86.2 | | | | 2.8 | | | | 12.99 | % | | | 159.4 | | | | 4.6 | | | | 11.46 | % |
| Total Secured Debt | | | | | 13,753.0 | | | | 790.5 | | | | 22.99 | % | | | 26,923.1 | | | | 653.2 | | | | 9.71 | % | | | 32,712.9 | | | | 674.2 | | | | 8.24 | % |
Total Long-term Borrowings | | | | $ | 26,241.8 | | | $ | 1,043.4 | | | | 15.90 | % | | $ | 26,923.1 | | | $ | 653.2 | | | | 9.71 | % | | $ | 32,712.9 | | | $ | 674.2 | | | | 8.24 | % |
(1) | | The increase in average rate for the December quarter reflects the impact of accelerated FSA accretion on redeemed debt related to a student lending securitization. |
(2) | | The increase to interest and applicable annualized rate reflect accelerated FSA accretion due to the repayment and prepayment penalties as noted below. |
(3) | | The interest expense for the Series A Notes (including those exchanged), Series B Notes and Student Lending Facility include the following accelerated FSA accretion (amortization) and prepayment penalties: |
Accelerated FSA accretion (amortization) and prepayment penalties (dollars in millions)
| | | | Quarters Ended
| |
|---|
| | | | March 31, 2012
| | December 31, 2011
| | March 31, 2011
|
|---|
| Series A Notes – accelerated FSA | | | | $ | 596.9 | | | $ | 64.3 | | | $ | 24.7 | |
| Series A Notes – prepayment penalty | | | | | – | | | | 9.2 | | | | 20.0 | |
| Series B Notes – accelerated FSA | | | | | – | | | | – | | | | (13.5 | ) |
| Series B Notes – prepayment penalty | | | | | – | | | | – | | | | 15.0 | |
| Student lending facility | | | | | – | | | | 88.0 | | | | – | |
| Total accelerated FSA and prepayment penalty | | | | $ | 596.9 | | | $ | 161.5 | | | $ | 46.2 | |
78 CIT GROUP INC
CRITICAL ACCOUNTING ESTIMATESThe preparation of financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect reported amounts of assets and liabilities, the reported amounts of income and expense during the reporting period and the disclosure of contingent assets and liabilities at the date of the financial statements. We consider accounting estimates relating to the following to be critical in applying our accounting policies:
n | | Assumptions and estimates recorded upon adoption of fresh start accounting |
n | | Allowance for Loan Losses |
n | | Fair Value Determinations |
n | | Goodwill and Intangible Assets |
n | | Liabilities and Tax Reserves |
There have been no significant changes to the methodologies and processes used in developing estimates relating to these items from those described in our 2011 Annual Report on Form 10-K.
The Internal Controls Working Group (“ICWG”), which reports to the Disclosure Committee, is responsible for monitoring and improving internal controls over financial reporting and overseeing the internal controls attestation mandated by Section 404 of the Sarbanes-Oxley Act of 2002 (“SARBOX”). The ICWG is chaired by the Controller and is comprised of senior executives in Finance and the Chief Auditor. SeeItem 4. Controls and Procedures for more information.
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 79
NON-GAAP FINANCIAL MEASUREMENTSThe SEC adopted regulations that apply to any public disclosure or release of material information that includes a non-GAAP financial measure. The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosure about Market Risk contain certain non-GAAP financial measures. Non-GAAP financial measures are meant to provide additional information and insight regarding operating results and financial position of the business and in certain cases to provide financial information that is presented to rating agencies and other users of financial information. These measures are not in accordance with, or a substitute for, GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. See footnotes below the tables for additional explanation of non-GAAP measurements.
Non-GAAP Reconciliations (dollars in millions)
| | | | Quarters Ended
| |
|---|
| | | | March 31,
2012
| | December 31,
2011
| | March 31,
2011
|
|---|
Total Net Revenues(1) | | | | | | | | | | | | | | |
| Interest income | | | | $ | 411.6 | | | $ | 492.4 | | | $ | 638.8 | |
| Rental income on operating leases | | | | | 439.3 | | | | 427.6 | | | | 408.9 | |
| Finance revenue | | | | | 850.9 | | | | 920.0 | | | | 1,047.7 | |
| Interest expense | | | | | (1,079.7 | ) | | | (686.5 | ) | | | (698.6 | ) |
| Depreciation on operating lease equipment | | | | | (137.5 | ) | | | (137.1 | ) | | | (160.2 | ) |
Net finance revenue | | | | | (366.3 | ) | | | 96.4 | | | | 188.9 | |
| Other income | | | | | 249.4 | �� | | | 209.4 | | | | 270.4 | |
Total net revenues | | | | $ | (116.9 | ) | | $ | 305.8 | | | $ | 459.3 | |
Net Operating Lease Revenue(2) | | | | | | | | | | | | | | |
| Rental income on operating leases | | | | $ | 439.3 | | | $ | 427.6 | | | $ | 408.9 | |
| Depreciation on operating lease equipment | | | | | (137.5 | ) | | | (137.1 | ) | | | (160.2 | ) |
Net operating lease revenue | | | | $ | 301.8 | | | $ | 290.5 | | | $ | 248.7 | |
| | | | | | | | | | | | | | | |
Net Finance Revenue as a % of Average Earning Assets(3)
| | | | Quarters Ended
| |
|---|
| | | | March 31, 2012
| | December 31, 2011
| | March 31, 2011
| |
|---|
| Net finance revenue | | | | $ | (366.3 | ) | | | (4.43 | )% | | $ | 96.4 | | | | 1.14 | % | | $ | 188.9 | | | | 2.14 | % |
| FSA impact on net finance revenue | | | | | 546.3 | | | | 6.40 | % | | | 88.2 | | | | 0.83 | % | | | (83.1 | ) | | | (1.08 | )% |
| Secured debt prepayment penalties | | | | | – | | | | – | | | | 9.2 | | | | 0.10 | % | | | 35.0 | | | | 0.35 | % |
| Adjusted net finance revenue | | | | $ | 180.0 | | | | 1.97 | % | | $ | 193.8 | | | | 2.07 | % | | $ | 140.8 | | | | 1.41 | % |
80 CIT GROUP INC
Impacts of FSA Accretion and Debt-related Transaction Costs on Pre-tax Income (Loss) by Segment
| | | | Quarter Ended March 31, 2012
| |
|---|
| | | | Corporate
Finance
| | Transportation
Finance
| | Trade
Finance
| | Vendor
Finance
| | Consumer
| | Corporate
& Other
| | Total
|
|---|
| Pre-tax Income/(Loss) – Reported | | | | $ | 70.3 | | | $ | (198.2 | ) | | $ | (17.0 | ) | | $ | (113.1 | ) | | $ | (24.2 | ) | | $ | (123.5 | ) | | $ | (405.7 | ) |
| Accelerated FSA Net Discount/(Premium) on Debt Extinguishments and Repurchases | | | | | 107.1 | | | | 278.8 | | | | 21.2 | | | | 99.1 | | | | 15.9 | | | | 74.8 | | | | 596.9 | |
| Debt Related – Loss on Debt Extinguishments | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 22.9 | | | | 22.9 | |
| Pre-tax Income (Loss) – Excluding Accelerated FSA Net Discount/(Premium) on Debt Extinguishments and Repurchases and Loss on Debt Extinguishments | | | | | 177.4 | | | | 80.6 | | | | 4.2 | | | | (14.0 | ) | | | (8.3 | ) | | | (25.8 | ) | | | 214.1 | |
| Net FSA Accretion (excluding debt related acceleration) | | | | | (36.9 | ) | | | (26.9 | ) | | | 1.9 | | | | (9.2 | ) | | | 4.6 | | | | 6.9 | | | | (59.6 | ) |
| Pre-tax Income (Loss) – Excluding FSA Net Accretion & Debt Related Costs | | | | $ | 140.5 | | | $ | 53.7 | | | $ | 6.1 | | | $ | (23.2 | ) | | $ | (3.7 | ) | | $ | (18.9 | ) | | $ | 154.5 | |
| | | | | | |
|---|
| | | | Quarter Ended December 31, 2011
| |
|---|
| Pre-tax Income/(Loss) – Reported | | | | $ | 167.9 | | | $ | 23.5 | | | $ | 8.6 | | | $ | 33.3 | | | $ | (109.3 | ) | | $ | (43.6 | ) | | $ | 80.4 | |
| Accelerated FSA Net Discount/(Premium) on Debt Extinguishments and Repurchases | | | | | 13.8 | | | | 28.7 | | | | 2.7 | | | | 10.2 | | | | 89.9 | | | | 7.0 | | | | 152.3 | |
| Debt Related – Prepayment Penalties | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 9.2 | | | | 9.2 | |
| Debt Related – Loss on Debt Extinguishments | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (11.8 | ) | | | (11.8 | ) |
| Pre-tax Income (Loss) – Excluding Accelerated FSA Net Discount/(Premium) on Debt Extinguishments and Repurchases and Loss on Debt Extinguishments | | | | | 181.7 | | | | 52.2 | | | | 11.3 | | | | 43.5 | | | | (19.4 | ) | | | (39.2 | ) | | | 230.1 | |
| Net FSA Accretion (excluding debt related acceleration) | | | | | (65.8 | ) | | | (23.0 | ) | | | 2.5 | | | | (15.1 | ) | | | 4.2 | | | | 7.1 | | | | (90.1 | ) |
| Pre-tax Income (Loss) – Excluding FSA Net Accretion & Debt Related Costs | | | | $ | 115.9 | | | $ | 29.2 | | | $ | 13.8 | | | $ | 28.4 | | | $ | (15.2 | ) | | $ | (32.1 | ) | | $ | 140.0 | |
| | | | | | |
|---|
| | | | Quarter Ended March 31, 2011
| |
|---|
| Pre-tax Income/(Loss) – Reported | | | | $ | 124.7 | | | $ | 43.1 | | | $ | (3.0 | ) | | $ | 9.9 | | | $ | 2.4 | | | $ | (45.1 | ) | | $ | 132.0 | |
| Accelerated FSA Net Discount/(Premium) on Debt Extinguishments and Repurchases | | | | | 2.6 | | | | 4.4 | | | | 0.5 | | | | 2.4 | | | | 0.2 | | | | 1.1 | | | | 11.2 | |
| Debt Related – Prepayment Penalties | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 35.0 | | | | 35.0 | |
| Pre-tax Income (Loss) – Excluding Accelerated FSA Net Discount/(Premium) on Debt Extinguishments and Repurchases and Loss on Debt Extinguishments | | | | | 127.3 | | | | 47.5 | | | | (2.5 | ) | | | 12.3 | | | | 2.6 | | | | (9.0 | ) | | | 178.2 | |
| Net FSA Accretion (excluding debt related acceleration) | | | | | (74.0 | ) | | | (21.1 | ) | | | 3.1 | | | | (28.6 | ) | | | (10.6 | ) | | | 6.8 | | | | (124.4 | ) |
| Pre-tax Income (Loss) – Excluding FSA Net Accretion & Debt Related Costs | | | | $ | 53.3 | | | $ | 26.4 | | | $ | 0.6 | | | $ | (16.3 | ) | | $ | (8.0 | ) | | $ | (2.2 | ) | | $ | 53.8 | |
| | | | | | | | | | |
|---|
Earning Assets(3)
| | | | March 31,
2012
| | December 31,
2011
| | March 31,
2011
| |
|---|
| Loans | | | | $ | 20,490.6 | | | $ | 19,885.5 | | | $ | 23,794.4 | | | | | | | | | | | | | | | | | |
| Operating lease equipment, net | | | | | 11,904.0 | | | | 11,991.6 | | | | 11,039.2 | | | | | | | | | | | | | | | | | |
| Assets held for sale | | | | | 1,701.9 | | | | 2,332.3 | | | | 1,183.0 | | | | | | | | | | | | | | | | | |
| Credit balances of factoring clients | | | | | (1,109.8 | ) | | | (1,225.5 | ) | | | (1,101.5 | ) | | | | | | | | | | | | | | | | |
| Total earning assets | | | | $ | 32,986.7 | | | $ | 32,983.9 | | | $ | 34,915.1 | | | | | | | | | | | | | | | | | |
| Commercial earning assets | | | | $ | 27,307.9 | | | $ | 26,638.5 | | | $ | 27,012.7 | | | | | | | | | | | | | | | | | |
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 81
Tangible Book Value
| | | | March 31,
2012
| | December 31,
2011
| | March 31,
2011
| |
|---|
| Total common stockholders’ equity | | | | $ | 8,453.2 | | | $ | 8,888.5 | | | $ | 8,999.4 | | | | | | | | | | | | | | | | | |
| Less: Goodwill | | | | | (330.8 | ) | | | (330.8 | ) | | | (340.4 | ) | | | | | | | | | | | | | | | | |
| Intangible assets | | | | | (50.0 | ) | | | (63.6 | ) | | | (99.1 | ) | | | | | | | | | | | | | | | | |
| Tangible book value | | | | $ | 8,072.4 | | | $ | 8,494.1 | | | $ | 8,559.9 | | | | | | | | | | | | | | | | | |
(1) | | Total net revenues are the combination of net finance revenue and other income and is an aggregation of all sources of revenue for the Company. Total net revenues is used by management to monitor business performance. |
(2) | | Total net operating lease revenue is the combination of rental income on operating leases less depreciation on operating lease equipment. Total net operating lease revenues are used by management to monitor portfolio performance. |
(3) | | Earning assets are utilized in certain revenue and earnings ratios. Earning assets are net of credit balances of factoring clients. This net amount represents the amounts we fund. |
82 CIT GROUP INC
FORWARD-LOOKING STATEMENTSCertain statements contained in this document are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements contained herein that are not clearly historical in nature are forward-looking and the words “anticipate,” “believe,” “could,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “potential,” “project,” “target” and similar expressions are generally intended to identify forward-looking statements. Any forward-looking statements contained herein, in press releases, written statements or other documents filed with the Securities and Exchange Commission or in communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls, concerning our operations, economic performance and financial condition are subject to known and unknown risks, uncertainties and contingencies. Forward-looking statements are included, for example, in the discussions about:
n | | our liquidity risk and capital management, including our capital, leverage, and credit ratings, our liquidity plan, and our plans and the potential transactions designed to enhance our liquidity and capital, |
n | | our plans to change our funding mix and to access new sources of funding to broaden our use of deposit taking capabilities, |
n | | our credit risk management and credit quality, |
n | | our asset/liability risk management, |
n | | accretion and amortization of FSA adjustments, |
n | | our funding, borrowing costs and net finance revenue, |
n | | our operational risks, including success of systems enhancements and expansion of risk management and control functions, |
n | | our mix of portfolio asset classes, including growth initiatives, acquisitions and divestitures, new products, new business and customer retention, |
n | | our commitments to extend credit or purchase equipment, and |
n | | how we may be affected by legal proceedings. |
All forward-looking statements involve risks and uncertainties, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Also, forward-looking statements are based upon management’s estimates of fair values and of future costs, using currently available information.
Therefore, actual results may differ materially from those expressed or implied in those statements. Factors, in addition to those disclosed in “Risk Factors”, that could cause such differences include, but are not limited to:
n | | capital markets liquidity, |
n | | risks of and/or actual economic slowdown, downturn or recession, |
n | | industry cycles and trends, |
n | | uncertainties associated with risk management, including credit, prepayment, asset/liability, interest rate and currency risks, |
n | | estimates and assumptions used to fair value the balance sheet in accordance with FSA and actual variation between the estimated fair values and the realized values, |
n | | adequacy of reserves for credit losses, |
n | | risks inherent in changes in market interest rates and quality spreads, |
n | | funding opportunities, deposit taking capabilities and borrowing costs, |
n | | risks that the restructuring of the Company’s capital structure did not result in sufficient additional capital or improved liquidity, |
n | | risks that the Company will be unable to comply with the terms of the Written Agreement with the Reserve Bank, |
n | | conditions and/or changes in funding markets and our access to such markets, including commercial paper, secured and unsecured term debt and the asset-backed securitization markets, |
n | | risks of implementing new processes, procedures, and systems, |
n | | risks associated with the value and recoverability of leased equipment and lease residual values, |
n | | application of fair value accounting in volatile markets, |
n | | application of goodwill accounting in a recessionary economy, |
n | | changes in laws or regulations governing our business and operations, |
n | | changes in competitive factors, |
n | | customer retention rates, |
n | | future acquisitions and dispositions of businesses or asset portfolios, and |
n | | regulatory changes and/or developments. |
Any or all of our forward-looking statements here or in other publications may turn out to be wrong, and there are no guarantees about our performance. We do not assume the obligation to update any forward-looking statement for any reason.
Item 2: Management’s Discussion and Analysis andItem 3:Quantitative and Qualitative Disclosures about Market Risk 83
Item 4. Controls and Procedures(a) Evaluation of Disclosure Controls and Procedures
Under the supervision of and with the participation of management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) as of March 31, 2012. Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2012.
(b) Changes In Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
84 CIT GROUP INC
Part Two — Other Information
ITEM 1. Legal Proceedings
CIT is currently involved, and from time to time in the future may be involved, in a number of judicial, regulatory, and arbitration proceedings relating to matters that arise in connection with the conduct of its business (collectively, “Litigation”), certain of which Litigation matters are described inNote 13 — Contingencies ofItem 1. Consolidated Financial Statements. In view of the inherent difficulty of predicting the outcome of Litigation matters, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, CIT cannot state with confidence what the eventual outcome of the pending Litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter may be, if any. In accordance with applicable accounting guidance, CIT establishes reserves for Litigation when those matters present loss contingencies as to which it is both probable that a loss will occur and the amount of such loss can be reasonably estimated. Based on currently available information, CIT believes that the results of Litigation that is currently pending, taken together, will not have a material adverse effect on the Company’s financial condition, but may be material to the Company’s operating results or cash flows for any particular period, depending in part on its operating results for that period. The actual results of resolving such matters may be substantially higher than the amounts reserved.
For more information about pending legal proceedings, including an estimate of certain reasonably possible losses in excess of reserved amounts, seeNote 13 — Contingencies ofItem 1. Consolidated Financial Statements.
For a discussion of certain risk factors affecting CIT, seePart I, Item 1A: Risk Factors, of CIT’s 2011 Annual Report on Form 10-K and Forward-Looking Statements of this Form 10-Q.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
No purchases of CIT equity securities were made during the 2012 first quarter and there were no such equity securities that may yet be purchased under any repurchase plans or programs.
ITEM 4. Mine Safety DisclosureNot applicable.
Item 4: Controls and Procedures 85
(a)Exhibits
| 3.1 | | | | Third Amended and Restated Certificate of Incorporation of the Company, dated December 8, 2009 (incorporated by reference to Exhibit 3.1 to Form 8-K filed December 9, 2009). |
| |
| 3.2 | | | | Amended and Restated By-laws of the Company, as amended through December 8, 2009 (incorporated by reference to Exhibit 3.2 to Form 8-K filed December 9, 2009). |
| |
| 4.1 | | | | Indenture dated as of December 10, 2009 between CIT Group Inc. and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1 to Form 8-K filed December 16, 2009). |
| |
| 4.2 | | | | First Supplemental Indenture dated as of December 10, 2009 among CIT Group Inc., certain Guarantors named therein and Deutsche Bank Trust Company Americas for the issuance of series A second-priority secured notes (incorporated by reference to Exhibit 4.2 to Form 8-K filed December 16, 2009). |
| |
| 4.3 | | | | First Amendment to Series A First Supplemental Indenture among CIT, certain Guarantors named therein, and Deutsche Bank Trust Company Americas, dated as of May 31, 2011 (incorporated by reference to Exhibit 4.4 to Form 8-K filed June 20, 2011). |
| |
| 4.4 | | | | Indenture dated as of December 10, 2009 between CIT Group Funding Company of Delaware, LLC and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.3 to Form 8-K filed December 16, 2009). |
| |
| 4.5 | | | | First Supplemental Indenture dated as of December 10, 2009 among CIT Group Funding Company of Delaware, LLC, CIT Group Inc. and the other Guarantors named therein and Deutsche Bank Trust Company Americas for the issuance of series B second-priority secured notes (incorporated by reference to Exhibit 4.4 to Form 8-K filed December 16, 2009). |
| |
| 4.6 | | | | Indenture dated as of January 20, 2006 between CIT Group Inc. and The Bank of New York Mellon (as successor to JPMorgan Chase Bank N.A.) for the issuance of senior debt securities (incorporated by reference to Exhibit 4.3 to Form S-3 filed January 20, 2006). |
| |
| 4.7 | | | | First Supplemental Indenture dated as of February 13, 2007 between CIT Group Inc. and The Bank of New York Mellon (as successor to JPMorgan Chase Bank N.A.) for the issuance of senior debt securities (incorporated by reference to Exhibit 4.1 to Form 8-K filed on February 13, 2007). |
| |
| 4.8 | | | | Third Supplemental Indenture dated as of October 1, 2009, between CIT Group Inc. and The Bank of New York Mellon (as successor to JPMorgan Chase Bank N.A.) relating to senior debt securities (incorporated by reference to Exhibit 4.4 to Form 8-K filed on October 7, 2009). |
| |
| 4.9 | | | | Fourth Supplemental Indenture dated as of October 16, 2009 between CIT Group Inc. and The Bank of New York Mellon (as successor to JPMorgan Chase Bank N.A.) relating to senior debt securities (incorporated by reference to Exhibit 4.1 to Form 8-K filed October 19, 2009). |
| |
| 4.10 | | | | Framework Agreement, dated July 11, 2008, among ABN AMRO Bank N.V., as arranger, Madeleine Leasing Limited, as initial borrower, CIT Aerospace International, as initial head lessee, and CIT Group Inc., as guarantor, as amended by the Deed of Amendment, dated July 19, 2010, among The Royal Bank of Scotland N.V. (f/k/a ABN AMRO Bank N.V.), as arranger, Madeleine Leasing Limited, as initial borrower, CIT Aerospace International, as initial head lessee, and CIT Group Inc., as guarantor, as supplemented by Letter Agreement No. 1 of 2010, dated July 19, 2010, among The Royal Bank of Scotland N.V., as arranger, CIT Aerospace International, as head lessee, and CIT Group Inc., as guarantor, as amended and supplemented by the Accession Deed, dated July 21, 2010, among The Royal Bank of Scotland N.V., as arranger, Madeleine Leasing Limited, as original borrower, and Jessica Leasing Limited, as acceding party, as supplemented by Letter Agreement No. 2 of 2010, dated July 29, 2010, among The Royal Bank of Scotland N.V., as arranger, CIT Aerospace International, as head lessee, and CIT Group Inc., as guarantor, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets (incorporated by reference to Exhibit 4.11 to Form 10-K filed March 10, 2011). |
86 CIT GROUP INC
| |
| 4.11 | | | | Form of All Parties Agreement among CIT Aerospace International, as head lessee, Madeleine Leasing Limited, as borrower and lessor, CIT Group Inc., as guarantor, various financial institutions, as original ECA lenders, ABN AMRO Bank N.V., Paris Branch, as French national agent, ABN AMRO Bank N.V., Niederlassung Deutschland, as German national agent, ABN AMRO Bank N.V., London Branch, as British national agent, ABN AMRO Bank N.V., London Branch, as ECA facility agent, ABN AMRO Bank N.V., London Branch, as security trustee, and CIT Aerospace International, as servicing agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.12 to Form 10-K filed March 10, 2011). |
| |
| 4.12 | | | | Form of ECA Loan Agreement among Madeleine Leasing Limited, as borrower, various financial institutions, as original ECA lenders, ABN AMRO Bank N.V., Paris Branch, as French national agent, ABN AMRO Bank N.V., Niederlassung Deutschland, as German national agent, ABN AMRO Bank N.V., London Branch, as British national agent, ABN AMRO Bank N.V., London Branch, as ECA facility agent, ABN AMRO Bank N.V., London Branch, as security trustee, and CIT Aerospace International, as servicing agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.13 to Form 10-K filed March 10, 2011). |
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| 4.13 | | | | Form of Aircraft Head Lease between Madeleine Leasing Limited, as lessor, and CIT Aerospace International, as head lessee, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.14 to Form 10-K filed March 10, 2011). |
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| 4.14 | | | | Form of Proceeds and Intercreditor Deed among Madeleine Leasing Limited, as borrower and lessor, various financial institutions, ABN AMRO Bank N.V., Paris Branch, as French national agent, ABN AMRO Bank N.V., Niederlassung Deutschland, as German national agent, ABN AMRO Bank N.V., London Branch, as British national agent, ABN AMRO Bank N.V., London Branch, as ECA facility agent, ABN AMRO Bank N.V., London Branch, as security trustee, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.15 to Form 10-K filed March 10, 2011). |
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| 4.15 | | | | Form of All Parties Agreement among CIT Aerospace International, as head lessee, Jessica Leasing Limited, as borrower and lessor, CIT Group Inc., as guarantor, various financial institutions, as original ECA lenders, Citibank International plc, as French national agent, Citibank International plc, as German national agent, Citibank International plc, as British national agent, The Royal Bank of Scotland N.V., London Branch, as ECA facility agent, The Royal Bank of Scotland N.V., London Branch, as security trustee, CIT Aerospace International, as servicing agent, and Citibank, N.A., as administrative agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.16 to Form 10-K filed March 10, 2011). |
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| 4.16 | | | | Form of ECA Loan Agreement among Jessica Leasing Limited, as borrower, various financial institutions, as original ECA lenders, Citibank International plc, as French national agent, Citibank International plc, as German national agent, Citibank International plc, as British national agent, The Royal Bank of Scotland N.V., London Branch, as ECA facility agent, The Royal Bank of Scotland N.V., London Branch, as security trustee, and Citibank, N.A., as administrative agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.17 to Form 10-K filed March 10, 2011). |
Item 6: Exhibits 87
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| 4.17 | | | | Form of Aircraft Head Lease between Jessica Leasing Limited, as lessor, and CIT Aerospace International, as head lessee, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.18 to Form 10-K filed March 10, 2011). |
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| 4.18 | | | | Form of Proceeds and Intercreditor Deed among Jessica Leasing Limited, as borrower and lessor, various financial institutions, as original ECA lenders, Citibank International plc, as French national agent, Citibank International plc, as German national agent, Citibank International plc, as British national agent, The Royal Bank of Scotland N.V., London Branch, as ECA facility agent, The Royal Bank of Scotland N.V., London Branch, as security trustee, and Citibank, N.A., as administrative agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.19 to Form 10-K filed March 10, 2011). |
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| 4.19 | | | | Indenture, dated as of March 30, 2011, between CIT Group Inc. and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed March 31, 2011). |
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| 4.20 | | | | First Supplemental Indenture, dated as of March 30, 2011, between CIT Group Inc., the Guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (including the Form of 5.250% Note due 2014 and the Form of 6.625% Note due 2018) (incorporated by reference to Exhibit 4.2 to Form 8-K filed March 31, 2011). |
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| 4.21 | | | | Second Supplemental Indenture among CIT, certain Guarantors named therein and Deutsche Bank Trust Company Americas (as trustee, Series C parent collateral agent, and Series C subsidiary collateral agent), dated as of June 15, 2011 (incorporated by reference to Exhibit 4.1 to Form 8-K filed June 20, 2011). |
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| 4.22 | | | | Registration Rights Agreement, dated as of March 30, 2011, among CIT Group Inc., the Guarantors named therein, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, as representatives for the initial purchasers named therein (incorporated by reference to Exhibit 10.1 to Form 8-K filed March 31, 2011). |
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| 4.23 | | | | Registration Rights Agreement, dated as of June 15, 2011, among CIT Group Inc., the Guarantors named therein, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as dealer-manager (incorporated by reference to Exhibit 10.1 to Form 8-K filed June 20, 2011). |
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| 4.24 | | | | Third Supplemental Indenture, dated as of February 7, 2012, between CIT Group Inc., the Guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (including the Form of Notes) (incorporated by reference to Exhibit 4.4 of Form 8-K dated February 13, 2012). |
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| 4.25 | | | | Registration Rights Agreement, dated as of February 7, 2012, among CIT Group Inc., the Guarantors named therein, and JP Morgan Securities LLC, as representative for the initial purchasers named therein (incorporated by reference to Exhibit 10.1 of Form 8-K dated February 13, 2012). |
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| 4.26 | | | | Revolving Credit and Guaranty Agreement, dated as of August 25, 2011 among CIT Group Inc., certain subsidiaries of CIT Group Inc., the lenders party thereto from time to time and Bank of America, N.A., as Administrative Agent, Collateral Agent, and L/C Issuer (incorporated by reference to Exhibit 4.1 to Form 8-K filed August 26, 2011). |
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| 4.27 | | | | Indenture, dated as of March 15, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (incorporated by reference to Exhibit 4.1 of Form 8-K filed March 16, 2012). |
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| 4.28 | | | | First Supplemental Indenture, dated as of March 15, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 5.25% Senior Unsecured Note due 2018) (incorporated by reference to Exhibit 4.2 of Form 8-K filed March 16, 2012). |
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| 4.29 | | | | Second Supplemental Indenture, dated as of May 4, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 5.000% Senior Unsecured Note due 2017 and the Form of 5.375% Senior Unsecured Note due 2020) (incorporated by reference to Exhibit 4.2 of Form 8-K filed May 4, 2012). |
88 CIT GROUP INC
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| 10.1 | | | | Form of Separation Agreement by and between Tyco International Ltd. and CIT (incorporated by reference to Exhibit 10.2 to Amendment No. 3 to the Registration Statement on Form S-1 filed June 26, 2002). |
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| 10.2 | | | | Form of Financial Services Cooperation Agreement by and between Tyco International Ltd. and CIT (incorporated by reference to Exhibit 10.3 to Amendment No. 2 to the Registration Statement on Form S-1 filed June 12, 2002). |
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| 10.3* | | | | Amended and Restated CIT Group Inc. Long-Term Incentive Plan (as amended and restated effective December 10, 2009) (incorporated by reference to Exhibit 4.1 to Form S-8 filed January 11, 2010). |
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| 10.4* | | | | CIT Group Inc. Supplemental Retirement Plan (As Amended and Restated Effective as of January 1, 2008) (incorporated by reference to Exhibit 10.27 to Form 10-Q filed May 12, 2008). |
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| 10.5* | | | | CIT Group Inc. Supplemental Savings Plan (As Amended and Restated Effective as of January 1, 2008) (incorporated by reference to Exhibit 10.28 to Form 10-Q filed May 12, 2008). |
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| 10.6* | | | | New Executive Retirement Plan of CIT Group Inc. (As Amended and Restated as of January 1, 2008) (incorporated by reference to Exhibit 10.29 to Form 10-Q filed May 12, 2008). |
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| 10.7* | | | | Letter Agreement, effective February 8, 2010, between CIT Group Inc. and John A. Thain (incorporated by reference to Exhibit 10.1 to Form 8-K filed February 8, 2010). |
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| 10.8* | | | | Form of CIT Group Inc. Three Year Stock Salary Award Agreement, dated February 8, 2010 (incorporated by reference to Exhibit 10.2 to Form 8-K filed February 8, 2010). |
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| 10.9* | | | | Form of CIT Group Inc. One Year Stock Salary Award Agreement, dated February 8, 2010 (incorporated by reference to Exhibit 10.3 to Form 8-K filed February 8, 2010). |
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| 10.10 | | | | Written Agreement, dated August 12, 2009, between CIT Group Inc. and the Federal Reserve Bank of New York (incorporated by reference to Exhibit 10.1 of Form 8-K filed August 13, 2009). |
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| 10.11 | | | | Form of CIT Group Inc. Two Year Restricted Stock Unit Award Agreement, dated July 29, 2010 (incorporated by reference to Exhibit 10.31 to Form 10-Q filed August 9, 2010). |
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| 10.12* | | | | Letter Agreement, dated June 2, 2010, between CIT Group Inc. and Scott T. Parker (incorporated by reference to Exhibit 99.3 to Form 8-K filed July 6, 2010). |
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| 10.13 | | | | Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Unit Retention Award Agreement (incorporated by reference to Exhibit 10.33 to Form 10-Q filed August 9, 2010). |
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| 10.14 | | | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.34 to Form 10-Q filed August 9, 2010). |
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| 10.15 | | | | Form of CIT Group Inc. Long-term Incentive Plan Stock Option Award Agreement (One Year Vesting) (incorporated by reference to Exhibit 10.35 to Form 10-Q filed August 9, 2010). |
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| 10.16 | | | | Form of CIT Group Inc. Long-term Incentive Plan Stock Option Award Agreement (Three Year Vesting) (incorporated by reference to Exhibit 10.36 to Form 10-Q filed August 9, 2010). |
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| 10.17 | | | | Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Award Agreement (One Year Vesting) (incorporated by reference to Exhibit 10.37 to Form 10-Q filed August 9, 2010). |
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| 10.18 | | | | Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Award Agreement (Three Year Vesting) (incorporated by reference to Exhibit 10.38 to Form 10-Q filed August 9, 2010). |
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| 10.19 | | | | Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Unit Director Award Agreement (Initial Grant) (incorporated by reference to Exhibit 10.39 to Form 10-Q filed August 9, 2010). |
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| 10.20 | | | | Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Unit Director Award Agreement (Annual Grant) (incorporated by reference to Exhibit 10.40 to Form 10-Q filed August 9, 2010). |
Item 6: Exhibits 89
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| 10.21 | | | | Form of Tax Agreement by and between Tyco International Ltd. and CIT (incorporated by reference to Exhibit 10.27 to Amendment No. 2 to the Registration Statement on Form S-1 filed June 12, 2002). |
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| 10.22* | | | | Amended and Restated Employment Agreement, dated as of May 7, 2008, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.35 to Form 10-K filed March 2, 2009). |
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| 10.23* | | | | Extension of Term of Employment Agreement, dated as of November 24, 2008, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.36 to Form 10-K filed March 2, 2009). |
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| 10.24* | | | | Amendment to Employment Agreement, dated December 22, 2008, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.37 to Form 10-K filed March 2, 2009). |
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| 10.25* | | | | Extension of Term of Employment Agreement, dated December 21, 2009, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.24 to Form 10-K filed March 16, 2010). |
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| 10.26* | | | | Extension of Term of Employment Agreement, dated March 14, 2011, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.30 of Form 10-Q filed August 9, 2011). |
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| 10.27* | | | | Letter Agreement, dated April 21, 2010, between CIT Group Inc. and Nelson J. Chai (incorporated by reference to Exhibit 10.31 of Form 10-Q filed August 9, 2011). |
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| 10.28* | | | | Letter Agreement, dated April 8, 2010, between CIT Group Inc. and Lisa K. Polsky (incorporated by reference to Exhibit 10.32 of Form 10-Q filed August 9, 2011). |
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| 10.29 | | | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (with Good Reason) (incorporated by reference to Exhibit 10.33 of Form 10-Q filed August 9, 2011). |
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| 10.30 | | | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (without Good Reason) (incorporated by reference to Exhibit 10.34 of Form 10-Q filed August 9, 2011). |
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| 10.31** | | | | Airbus A320 NEO Family Aircraft Purchase Agreement, dated as of July 28, 2011, between Airbus S.A.S. and C.I.T. Leasing Corporation (incorporated by reference to Exhibit 10.35 of Form 10-Q/A filed February 1, 2012). |
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| 10.32** | | | | Confirmation, Credit Support Annex, and ISDA Master Agreement and Schedule, each dated October 26, 2011, between CIT TRS Funding B.V. and Goldman Sachs International evidencing a $625 billion securities based financing facility (incorporated by reference to Exhibit 99.1 to Form 8-K filed November 1, 2011). |
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| 10.33** | | | | Second Amended and Restated Confirmation and Amended and Restated ISDA Master Agreement Schedule, each dated October 26, 2011 between CIT Financial Ltd. and Goldman Sachs International (incorporated by reference to Exhibit 99.2 of Form 8-K dated November 1, 2011). |
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| 10.34** | | | | Credit Support Annex, dated June 6, 2008, between CIT Financial Ltd. and Goldman Sachs International related to a $1.5 billion securities based financing facility (incorporated by reference to Exhibit 10.34 to Form 10-Q filed August 11, 2008). |
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| 10.35* | | | | Letter Agreement, dated February 24, 2012, between CIT Group Inc. and Andrew T. Brandman (incorporated by reference to Exhibit 99.2 of Form 8-K dated filed April 12, 2012). |
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| 10.36 | | | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Stock Unit Award Agreement (with Good Reason). |
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| 10.37 | | | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Stock Unit Award Agreement (without Good Reason). |
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| 10.38 | | | | Extension of Term of Employment Agreement, dated March 28, 2012, between CIT Group Inc. and C. Jeffrey Knittel. |
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| 12.1 | | | | CIT Group Inc. and Subsidiaries Computation of Ratio of Earnings to Fixed Charges. |
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| 31.1 | | | | Certification of John A. Thain pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Commission, as promulgated pursuant to Section 13(a) of the Securities Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002. |
90 CIT GROUP INC
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| 31.2 | | | | Certification of Scott T. Parker pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Commission, as promulgated pursuant to Section 13(a) of the Securities Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002. |
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| 32.1*** | | | | Certification of John A. Thain pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 32.2*** | | | | Certification of Scott T. Parker pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 99.1 | | | | Senior Intercreditor and Subordination Agreement, dated as of December 10, 2009, among Bank of America, N.A., as First Lien Credit Facility Representative and First Lien Agent, Deutsche Bank Trust Company of America, as Series A Representative and Series A Collateral Agent and as Series B Representative and Series B Collateral Agent, CIT Group Funding Company of Delaware, LLC, as CIT Leasing Secured Party, and CIT Group Inc. and certain of its subsidiaries, as obligors (incorporated by reference to Exhibit 99.1 to Form 8-K/A filed May 13, 2010). |
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| 99.2 | | | | Junior Intercreditor Agreement, dated as of December 10, 2009, among Deutsche Bank Trust Company of America, as Series A Collateral Agent and as Series B Collateral Agent, CIT Group Funding Company of Delaware, LLC, as CIT Leasing Secured Party, and CIT Group Inc. and certain of its subsidiaries, as obligors (incorporated by reference to Exhibit 99.2 to Form 8-K/A filed May 13, 2010). |
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| 101.INS | | | | XBRL Instance Document (Includes the following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.) |
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| 101.SCH | | | | XBRL Taxonomy Extension Schema Document. |
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| 101.CAL | | | | XBRL Taxonomy Extension Calculation Linkbase Document. |
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| 101.LAB | | | | XBRL Taxonomy Extension Label Linkbase Document. |
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| 101.PRE | | | | XBRL Taxonomy Extension Presentation Linkbase Document. |
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| 101.DEF | | | | XBRL Taxonomy Extension Definition Linkbase Document. |
* | | Indicates a management contract or compensatory plan or arrangement. |
** | | Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission in accordance with an order granting confidential treatment pursuant to the Securities Exchange Act of 1934, as amended. |
*** | | This information is furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any filing under the Securities Act of 1933. |
Item 6: Exhibits 91
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| May 10, 2012 | | | | CIT GROUP INC. |
| | | | | /s/ Scott T. Parker |
| | | | | Scott T. Parker |
| | | | | Executive Vice President and Chief Financial Officer |
| |
| | | | | /s/ Carol Hayles |
| | | | | Carol Hayles |
| | | | | Executive Vice President and Controller |
92 CIT GROUP INC
