Cit (CIT) 10-Q 2021 Q3 Quarterly report

0001171825 cit:CommercialBankingBusinessSegmentMember us-gaap:OperatingSegmentsMember 2020-07-01 2020-09-30

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2021

Commission File Number: 001-31369

CIT GROUP INC.

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	65-1051192 (IRS Employer Identification Number)
11 West 42nd Street, New York, New York (Address of Registrant’s principal executive offices)	10036 (Zip Code)
(212) 461-5200 (Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CIT	New York Stock Exchange
5.625% Non-Cumulative Perpetual Preferred Stock, Series B, par value $0.01 per share	CITPRB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ‘large accelerated filer,’ ‘accelerated filer’, ‘smaller reporting company’ and ‘emerging growth company’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of October 22, 2021, there were 99,169,700 shares of the registrant’s common stock outstanding.

CONTENTS
Part One — Financial Information:
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets (Unaudited)	2
	Condensed Consolidated Statements of Operations (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
	and
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	77
Part Two — Other Information:
Item 1.	Legal Proceedings	78
Item 1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 4.	Mine Safety Disclosures	78
Item 6.	Exhibits	79
Signatures		81

Part One — Financial Information

Item 1. Financial Statements

CIT GROUP INC. AND SUBSIDIARIES

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

	September 30,			December 31,
	2021			2020
Assets
Cash and due from banks, including restricted balances of $34.2 at September 30, 2021 and $41.7 at December 31, 2020 (see Note 8 for amounts pledged)	$	169.7		$	174.6
Interest bearing cash, including restricted balances of $59.4 at September 30, 2021 and $2.6 at December 31, 2020 (see Note 8 for amounts pledged)		4,428.8			3,837.1
Securities purchased under agreement to resell		100.0			150.0
Investment securities (see Notes 6 and 8 for amounts pledged)		5,775.2			6,889.0
Assets held for sale		95.8			721.2
Loans (see Note 8 for amounts pledged)		33,461.0			36,144.6
Allowance for credit losses		(790.4	)		(1,063.8	)
Total loans, net of allowance for credit losses		32,670.6			35,080.8
Operating lease equipment, net (see Note 8 for amounts pledged)		7,937.5			7,836.6
Bank-owned life insurance		1,193.4			1,168.8
Other assets, including $268.5 at September 30, 2021 and $431.6 at December 31, 2020 at fair value		2,049.0			2,248.5
Total Assets	$	54,420.0		$	58,106.6
Liabilities
Deposits	$	40,237.3		$	43,071.6
Credit balances of factoring clients		1,556.6			1,719.9
Other liabilities, including $77.9 at September 30, 2021 and $79.2 at December 31, 2020 at fair value		2,203.9			1,754.9
Borrowings, including $1,147.0 at September 30, 2021 and $500.0 at December 31, 2020 contractually due within twelve months		4,247.6			5,837.3
Total Liabilities		48,245.4			52,383.7
Stockholders’ Equity
Preferred Stock: $0.01 par value, 100,000,000 shares authorized, 8,325,000 shares issued and outstanding at September 30, 2021 and December 31, 2020		525.0			525.0
Common Stock: $0.01 par value, 600,000,000 shares authorized
Issued: 164,134,157 at September 30, 2021 and 163,309,861 at December 31, 2020		1.6			1.6
Outstanding: 99,167,023 at September 30, 2021 and 98,609,395 at December 31, 2020
Paid-in capital		6,930.1			6,892.0
Retained earnings		2,011.0			1,428.3
Accumulated other comprehensive income (loss)		(121.2	)		35.7
Treasury stock: 64,967,134 shares at September 30, 2021 and 64,700,466 shares at December 31, 2020 at cost		(3,171.9	)		(3,159.7	)
Total Common Stockholders’ Equity		5,649.6			5,197.9
Total Equity		6,174.6			5,722.9
Total Liabilities and Equity	$	54,420.0		$	58,106.6

The accompanying notes are an integral part of these consolidated financial statements.

2

CIT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (dollars in millions — except per share data)

	Quarters Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021			2020
Interest income
Interest and fees on loans	$	341.9		$	395.8	$	1,061.6		$	1,280.6
Other interest and dividends		17.9			27.5		59.4			103.2
Interest income		359.8			423.3		1,121.0			1,383.8
Interest expense
Interest on deposits		47.3			103.2		159.2			398.1
Interest on borrowings		55.7			62.3		170.2			195.6
Interest expense		103.0			165.5		329.4			593.7
Net interest revenue		256.8			257.8		791.6			790.1
Provision for credit losses		(67.1	)		63.3		(256.7	)		800.8
Net interest revenue, after credit provision		323.9			194.5		1,048.3			(10.7	)
Non-interest income
Rental income on operating leases		186.2			201.3		569.1			612.0
Other non-interest income		124.7			146.0		515.3			379.2
Total non-interest income		310.9			347.3		1,084.4			991.2
Total revenue, net of interest expense and credit provision		634.8			541.8		2,132.7			980.5
Non-interest expenses
Depreciation on operating lease equipment		85.1			82.5		252.6			241.9
Maintenance and other operating lease expenses		50.5			48.6		156.9			158.3
Operating expenses		268.2			295.5		793.4			990.3
Goodwill impairment		—			—		—			344.7
(Gain) loss on debt extinguishment and deposit redemption		—			—		0.1			(14.8	)
Total non-interest expenses		403.8			426.6		1,203.0			1,720.4
Income (loss) before provision (benefit) for income taxes		231.0			115.2		929.7			(739.9	)
Provision (benefit) for income taxes		55.5			29.5		223.5			(116.0	)
Net income (loss)	$	175.5		$	85.7	$	706.2		$	(623.9	)
Preferred stock dividends		2.8			2.8		17.9			18.9
Net income (loss) available to common shareholders	$	172.7		$	82.9	$	688.3		$	(642.8	)
Income (loss) per common share
Basic	$	1.74		$	0.84	$	6.95		$	(6.54	)
Diluted	$	1.72		$	0.84	$	6.89		$	(6.54	)
Average number of common shares (thousands)
Basic		99,168			98,523		99,031			98,350
Diluted		100,432			98,556		99,950			98,350

The accompanying notes are an integral part of these consolidated financial statements.

3

CIT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(dollars in millions)

	Quarters Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	175.5		$	85.7		$	706.2		$	(623.9	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		10.3			0.6			10.2			(0.4	)
Net unrealized (losses) gains on available for sale securities		(16.5	)		(20.1	)		(168.2	)		95.9
Changes in benefit plans net gains and prior service (cost)/credit		0.4			0.1			1.1			3.0
Other comprehensive (loss) income, net of tax	$	(5.8	)	$	(19.4	)	$	(156.9	)	$	98.5
Comprehensive income (loss)	$	169.7		$	66.3		$	549.3		$	(525.4	)

The accompanying notes are an integral part of these consolidated financial statements.

4

CIT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (dollars in millions)

	Preferred Stock		Common Stock		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock, at Cost			Total Equity
June 30, 2021	$	525.0	$	1.6	$	6,922.5		$	1,873.7		$	(115.4	)	$	(3,171.6	)	$	6,035.8
Net income		—		—	—				175.5			—			—			175.5
Other comprehensive loss, net of tax		—		—		—			—			(5.8	)		—			(5.8	)
Dividends paid ($0.35 per common share and $0.35 per preferred B share)		—		—	—				(38.2	)		—			—			(38.2	)
Amortization of stock compensation expenses		—		—		6.7			—			—			(0.3	)		6.4
Employee stock purchase plan		—		—		0.9		—				—			—			0.9
September 30, 2021	$	525.0	$	1.6	$	6,930.1		$	2,011.0		$	(121.2	)	$	(3,171.9	)	$	6,174.6
June 30, 2020	$	525.0	$	1.6	$	6,885.5		$	1,419.4		$	65.8		$	(3,158.0	)	$	5,739.3
Net income		—		—		—			85.7			—			—			85.7
Other comprehensive loss, net of tax	—		—		—			—				(19.4	)	—				(19.4	)
Dividends paid ($0.35 per common share and $0.35 per preferred B share)		—		—		—			(38.0	)		—			—			(38.0	)
Amortization of stock compensation expenses		—		—		(4.6	)		—			—			(0.2	)		(4.8	)
Employee stock purchase plan		—		—		1.2			—			—			—			1.2
September 30, 2020	$	525.0	$	1.6	$	6,882.1		$	1,467.1		$	46.4		$	(3,158.2	)	$	5,764.0
December 31, 2020	$	525.0	$	1.6	$	6,892.0		$	1,428.3		$	35.7		$	(3,159.7	)	$	5,722.9
Net income		—		—		—			706.2			—			—			706.2
Other comprehensive loss, net of tax		—		—		—			—			(156.9	)		—			(156.9	)
Dividends paid ($1.05 per common share and $29.00 per preferred A share and $1.05 per preferred B share)		—		—		—			(123.5	)		—			—			(123.5	)
Amortization of stock compensation expenses		—		—		35.2			—			—			(12.2	)		23.0
Employee stock purchase plan		—		—		2.9			—			—			—			2.9
September 30, 2021	$	525.0	$	1.6	$	6,930.1		$	2,011.0		$	(121.2	)	$	(3,171.9	)	$	6,174.6
December 31, 2019	$	525.0	$	1.6	$	6,853.7		$	2,307.6		$	(52.1	)	$	(3,296.8	)	$	6,339.0
Adoption of ASU 2016-13		—		—		—			(82.4	)		—			—			(82.4	)
Net loss		—		—		—			(623.9	)		—			—			(623.9	)
Other comprehensive income, net of tax		—		—		—			—			98.5			—			98.5
Dividends paid ($1.05 per common share and $29.00 per preferred A share and $1.18 per preferred B share)		—		—		—			(124.1	)		—			—			(124.1	)
Issuance of common stock - acquisition		—		—		—			(10.1	)		—			151.3			141.2
Amortization of stock compensation expenses		—		—		25.3			—			—			(12.7	)		12.6
Employee stock purchase plan		—		—		3.1			—			—			—			3.1
September 30, 2020	$	525.0	$	1.6	$	6,882.1		$	1,467.1		$	46.4		$	(3,158.2	)	$	5,764.0

The accompanying notes are an integral part of these consolidated financial statements.

5

CIT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (dollars in millions)

	Nine Months Ended September 30,
	2021			2020
Cash Flows from Operations
Net income (loss)	$	706.2		$	(623.9	)
Adjustments to reconcile net income (loss) to net cash flows from operations:
(Benefit) provision for credit losses		(256.7	)		800.8
Depreciation on operating lease equipment		252.6			241.9
Amortization of stock compensation expenses		35.2			25.3
Net gain on asset sales and impairments on assets held for sale		(284.6	)		(150.2	)
Loss on debt extinguishment and deposit redemption		0.1			(14.8	)
Provision (benefit) for deferred income taxes		193.4			(115.9	)
Increase in loans held for sale		(24.5	)		(25.4	)
Goodwill impairment		—			344.7
Decrease (increase) in other assets		240.0			(285.8	)
Decrease in other liabilities		(286.6	)		(44.9	)
Other operating activities		72.2			52.7
Net cash flows provided by operations		647.3			204.5
Cash Flows from Investing Activities
Changes in loans, net		2,009.2			(203.6	)
Purchases of investment securities and securities purchased under agreement to resell		(2,643.3	)		(4,147.8	)
Proceeds from sales and maturities of investment securities and securities purchased under agreement to resell		4,185.7			6,619.9
Proceeds from asset and receivable sales		1,505.0			494.5
Purchases of assets to be leased and other equipment		(550.9	)		(857.7	)
Proceeds from sale of OREO, net of repurchases		1.6			11.9
Purchase of bank owned life insurance		—			(100.0	)
Acquisition, net of cash received		—			(720.1	)
Other investing activities		5.6			(67.4	)
Net cash flows provided by investing activities		4,512.9			1,029.7
Cash Flows from Financing Activities
Proceeds from the issuance of term debt and FHLB advances		604.8			2,204.8
Repayments of term debt and FHLB advances		(2,212.5	)		(1,675.9	)
Net (decrease) increase in deposits		(2,835.1	)		2,581.6
Dividends paid		(123.5	)		(124.1	)
Other financing activities		(7.0	)		(199.1	)
Net cash flows (used in) provided by financing activities		(4,573.3	)		2,787.3
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(0.1	)		(1.5	)
Increase (decrease) in cash, cash equivalents and restricted cash		586.8			4,020.0
Cash, cash equivalents and restricted cash beginning of period		4,011.7			2,685.6
Cash, cash equivalents and restricted cash end of period	$	4,598.5			6,705.6
Supplementary Cash Flow Disclosures
Interest paid	$	(355.0	)		(630.1	)
Federal, foreign, state and local income taxes (paid) refunded, net		(12.4	)		72.1
Supplementary Non Cash Flow Disclosure
Transfer of assets from held for investment to held for sale	$	495.5			190.8
Transfer of assets from held for sale to held for investment		11.2			25.7
Transfers of assets to OREO		4.3			0.3
Commitments extended during the period on affordable housing investment credits		80.4			84.9
Issuance of common stock - acquisition		—			141.2

The following tables shows a reconciliation of cash, cash equivalents and restricted cash on the Balance Sheet to that presented in the above Statements of Cash Flow.

	Nine Months Ended September 30,
	2021		2020
Cash and due from banks, including restricted balances of $34.2 and $27.8 at September 30, 2021 and 2020, respectively	$	169.7	$	175.7
Interest-bearing cash, including restricted balances of $59.4 and $2.0 at September 30, 2021 and 2020, respectively		4,428.8		6,529.9
Total cash, cash equivalents, and restricted cash shown in the Statement of Cash Flows	$	4,598.5	$	6,705.6

The accompanying notes are an integral part of these consolidated financial statements.

6

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CIT Group Inc. is a bank holding company ("BHC") and a financial holding company ("FHC"). CIT Group Inc., together with its subsidiaries (collectively "we", "our", "CIT" or the "Company"), is regulated by the Board of Governors of the Federal Reserve System ("FRB") and the Federal Reserve Bank of New York ("FRBNY") under the U.S. Bank Holding Company Act of 1956, as amended. CIT was formed in 1908 and provides financing, leasing and advisory services, principally to middle-market companies in a wide variety of industries, primarily in North America.

We also provide banking and related services to commercial and individual customers through our banking subsidiary, CIT Bank, N.A. ("CIT Bank" or the "Bank"), which includes a regional branch network of approximately 80 branches and its online bank.  

CIT Bank is regulated by the Office of the Comptroller of the Currency of the U.S. Department of the Treasury ("OCC"). In addition, CIT Bank, as an insured depository institution, is supervised by the Federal Deposit Insurance Corporation (“FDIC”).

BASIS OF PRESENTATION

Basis of Financial Information

These consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial information and accordingly do not include all information and note disclosures required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, the financial statements in this Form 10-Q include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of CIT’s financial position, results of operations and cash flows in accordance with GAAP. These consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 Form 10-K").

The accounting and financial reporting policies of CIT conform to GAAP and the preparation of the consolidated financial statements is in conformity with GAAP, which requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates and assumptions. Some of the more significant estimates include: Allowance for Credit Losses (“ACL”) and the realizability of deferred tax assets. Additionally, where applicable, the policies conform to accounting and reporting guidelines prescribed by bank regulatory authorities.

Principles of Consolidation

The accompanying consolidated financial statements include financial information related to CIT and its majority-owned subsidiaries and those variable interest entities (“VIEs”) where the Company is the primary beneficiary (“PB”), if any.

In preparing the consolidated financial statements, inter-company accounts and transactions have been eliminated. Assets held in an agency or fiduciary capacity are not included in the consolidated financial statements.

The current period’s results of operations do not necessarily indicate the results that may be expected for any other interim period or for the full year as a whole.

Announcement of Definitive Merger Agreement

On October 16, 2020, First Citizens BancShares, Inc. ("First Citizens"), the parent company of First-Citizens Bank & Trust Company, and CIT, the parent company of CIT Bank, N.A., jointly announced that they had entered into a definitive agreement under which the companies will combine in an all-stock merger. On July 14, 2021, CIT and First Citizens jointly announced that the proposal to merge the two companies received regulatory approval from the FDIC. The merger had already received approval from the Office of the North Carolina Commissioner of Banks. Completion of the proposed merger remains subject to approval from the FRB, and the satisfaction or waiver of other customary closing conditions.

On September 30, 2021, CIT Group Inc. and First Citizens jointly announced that the two companies agreed to extend the merger agreement from October 15, 2021, to March 1, 2022.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and Interagency Statement

On March 27, 2020, the CARES Act was signed into law. The CARES Act gives financial institutions temporary relief from the accounting and disclosure requirements related to troubled debt restructurings (“TDRs”) under ASC 310-40 and past due and non-accrual reporting in certain situations relating to the COVID-19 pandemic. With respect to past due and non-accrual loans, the CARES Act provides that financial institutions are not expected to designate loans with payment accommodations granted due to COVID-19 as past due or non-accrual if they were current on the date used to determine the borrower’s delinquency status for the purpose of providing the deferment.

7

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

Additionally, on April 7, 2020, a group of federal and state government banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) (the “Interagency Statement”) that offers some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. The Interagency Statement interprets, but does not suspend, ASC 310-40. Under the Interagency Statement, any loan modification that meets either of these practical expedients would not automatically be considered a TDR because the borrower is presumed not to be experiencing financial difficulty at the time of the loan modification.

CIT applies the TDR provisions of the CARES Act on a product-type basis, or on a loan-by-loan basis, for eligible loan modifications. For eligible loans for which the CARES Act is not applied, CIT follows the applicable guidance of the Interagency Statement. For payment deferrals granted to borrowers impacted by COVID-19, CIT has elected to continue to recognize interest income (at a modified effective rate) subject to consideration of whether the loan should be placed on non-accrual status. In addition, CIT monitors deferred amounts and establishes a credit loss reserve for the estimated amount of any balances that will not be recovered for COVID-19 loans.

After the initial payment deferral period granted due to COVID-19, on a case by case basis where requested, borrowers may be offered an additional deferral of up to 90 days pursuant to the CARES Act or Interagency Statement guidance outlined above. After the deferral period, amounts deferred must be repaid based on modified terms, including adding the unpaid amounts to the end of the contract term, spread throughout the remaining term, or other arrangements made on a case by case basis.

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic

On April 10, 2020, the FASB Staff issued a question-and-answer document (the “Lease Concessions Q&A”) on Topic 842: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. The Lease Concessions Q&A provides that entities may elect to apply or not apply the lease modification guidance in ASC 842, Leases, for lease concessions provided by lessors as a result of the COVID-19 pandemic. This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. CIT has elected not to apply the lease modification guidance in ASC 842 for such lease concessions as permitted by the Lease Concessions Q&A. We account for these lease concessions prospectively recognizing income on a straight-line basis for operating leases and a modified effective rate for finance leases.

SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are included in the Company's 2020 Form 10-K. There were no material changes to these policies during the nine months ended September 30, 2021.

Financial Accounting Standards Adopted as of January 1, 2021

The following pronouncements were issued by the Financial Accounting Standards Board (“FASB”) and adopted by CIT as of January 1, 2021. Refer to Note 1 – Business and Summary of Significant Accounting Policies in our 2020 Form 10-K for a detailed description of these pronouncements:  

• ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The adoption of this standard did not have a material impact on CIT’s consolidated financial statements and disclosures.

• ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762. The adoption of this standard did not have a material impact on CIT’s consolidated financial statements and disclosures.

• ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. The adoption of this standard did not have a significant impact on CIT’s consolidated financial statements and disclosures.

Recent Accounting Pronouncements

The following accounting pronouncements were issued by the FASB but are not yet effective for CIT.

Standard	Summary of Guidance	Effect on CIT's Financial Statements
ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and subsequent related ASUs Issued March 2020 with Updates through January 2021	•The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. •The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. •For contract modifications, the amendments provide the optional relief of accounting for the modification as a continuation of the existing contract without additional analysis. In addition, companies can consider embedded features to be clearly and closely related to the host contract without reassessment. •For hedge accounting, entities can continue hedge accounting when certain critical terms of a hedging relationship change. Moreover, companies can perform some effectiveness assessments in ways that disregard certain potential sources of ineffectiveness. •Entities may make a one-time election to sell and/or transfer debt securities classified as held-to-maturity (“HTM”), that both reference an eligible reference rate and were classified as HTM before January 1, 2020. This one-time election may be made at any time after March 12, 2020 but no later than December 31, 2022. •The ASU applies prospectively to contract modifications and hedging relationships. •ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. •An entity may elect to apply the amendments in this update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued.	•The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. •In the fourth quarter of 2020, CIT elected to apply the contract modification relief to the interest rate swap contracts for which the discount rate changed from the Federal Funds Rates to the Secured Overnight Financing Rate (“SOFR”) due to discounting transition by the Central Counterparties (i.e., Chicago Mercantile Exchange and LCH Clearnet). In addition, CIT elected to apply the hedge accounting relief to interest rate hedge swaps, which allows the Company to not consider a change in the interest rate used for the discounting of a derivative hedging instrument as a change to the critical terms of the hedging relationship. •On October 23, 2020, the International Swaps and Derivatives Association ("ISDA") published the Interbank offered rate ("IBOR") Fallbacks Supplement and IBOR Fallbacks Protocol, effective January 25, 2021. The supplement incorporates the fallbacks into new covered IBOR derivatives referencing the 2006 ISDA Definitions unless the parties specifically agree to exclude them. CIT adhered to the protocol beginning in January 2021. •The HTM one-time election was not applicable to CIT as the Company did not have any HTM debt securities as of January 1, 2020. •CIT is currently evaluating the impact of the optional expedients on the Company’s consolidated financial statements and disclosures.

8

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity Issued August 2020	•The amendments in this update reduce the number of models used to account for convertible instruments, amend diluted earnings per share calculations for convertible instruments, amend the requirements for a contract (or embedded derivative) that is potentially settled in an entity’s own shares to be classified in equity, and expand disclosure requirements for convertible instruments.	•Effective for CIT as of January 1, 2022. Early adoption is permitted. •This ASU is not expected to have a material impact on CIT’s consolidated statements and disclosures as the Company currently does not have any convertible instrument within the scope of this ASU.
ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options Issued May 2021	•The amendments in this update clarifies an issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU requires that such modifications or exchanges be treated as an exchange of the original instrument for a new instrument. An issuer should measure the effect of such modifications or exchanges based on analysis of the difference between the fair value of the modified instrument and the fair value of that instrument immediately before modification or exchange. Recognition of a modification or an exchange of a freestanding equity-classified written call option is then based upon the substance of the transaction.	•Effective for CIT as of January 1, 2022. Early adoption is permitted. •This ASU is not expected to have a material impact on CIT’s consolidated statements and disclosures as the Company currently does not have any freestanding equity-classified written call options within the scope of this ASU.

9

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

ASU 2021-05, Leases, (Topic 842), Lessors - Certain Leases with Variable Lease Payments   Issued July 2021 •The amendments in this update improve lessor accounting for certain leases with variable lease payments so that lessors are no longer required to recognize a day-one selling loss upon lease commencement when specified criteria are met.  Specifically this ASU requires a lessor to classify a lease with variable payments that do not depend on a reference index or a rate as an operating lease if classifying the lease as a sales-type lease or a direct financing lease would result in the recognition of a day-one selling loss at lease commencement.  A day-one selling loss is not recognized under operating lease accounting. •Effective for CIT as of January 1, 2022. Early adoption is permitted. •This ASU is not expected to have a material impact on CIT’s consolidated statements and disclosures as the Company has not originated finance leases which required a day-one selling loss at lease commencement.  

NOTE 2 — ACQUISITIONS

On January 1, 2020, CIT Bank acquired Mutual of Omaha Bank (“MOB”), the savings bank subsidiary of Mutual of Omaha Insurance Company and Omaha Financial Holdings, Inc., for approximately $1 billion in exchange for 100% of all outstanding shares of MOB common stock. The original consideration was comprised of approximately $850 million in cash and approximately 3.1 million shares of CIT Group Inc. common stock (valued at approximately $141 million based on the closing market price on December 31, 2019, the last trading price before the acquisition).

The acquisition enhances CIT’s deposit and commercial banking capabilities by adding a new channel of deposits related to homeowners’ associations (“HOA”) and enhances CIT’s middle-market commercial banking business through the addition of relationship banking teams and expanded product and technology solutions. The acquisition was accounted for as a business combination.

Assets acquired totaled approximately $8.6 billion, including $6.3 billion of loans, $115.2 million of goodwill and $102.6 million of intangible assets and included $7.6 billion of assumed liabilities, including $7.0 billion of deposits, and 25 bank branches. The assets acquired, liabilities assumed, and consideration exchanged were recorded at their estimated fair values.

Interest income, non-interest income and net loss of $191.7 million, $27.6 million and $61.8 million, respectively, related to MOB were included in CIT’s Consolidated Statement of Operations for the nine months ended September 30, 2020. The MOB net loss included $44.8 million of MOB day 1 provision for credit losses related to the non-PCD loans. Operating expenses for the nine months ended September 30, 2020 included $49.6 million of merger and integration costs related to MOB. Operations of MOB were fully integrated during 2020.

NOTE 3 — LOANS

Unless otherwise noted, loans held for sale are not included in the amounts presented throughout this note.

Loans by Product (dollars in millions)

	September 30, 2021		December 31, 2020
Commercial Loans	$	26,055.9	$	27,410.9
Financing Leases and Leverage Leases		2,119.4		2,318.0
Total commercial		28,175.3		29,728.9
Consumer Loans		5,285.7		6,415.7
Total loans	$	33,461.0	$	36,144.6

10

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents loans by segment, based on obligor location:

Loans (dollars in millions)

	September 30, 2021						December 31, 2020
	Domestic		International		Total		Domestic		International		Total
Commercial Banking	$	25,851.9	$	1,365.2	$	27,217.1	$	27,323.4	$	1,313.1	$	28,636.5
Consumer Banking(1)		6,243.9		—		6,243.9		7,508.1		—		7,508.1
Total	$	32,095.8	$	1,365.2	$	33,461.0	$	34,831.5	$	1,313.1	$	36,144.6

⁽¹⁾ The Consumer Banking segment includes certain commercial loans, primarily consisting of a portfolio of Small Business Administration ("SBA") loans and Community Development Lending loans. These loans are excluded from the Consumer loan balances and included in the Commercial loan balances in product related tables in this note.

The following table presents selected components of the net investment in loans:

Components of Net Investment (dollars in millions)

	September 30,			December 31,
	2021			2020
Unearned income	$	(353.8	)	$	(373.9	)
Unamortized (discounts) premiums		(284.4	)		(434.4	)
Net unamortized deferred costs		39.8			35.8

Certain of the following tables present credit-related information at the “class” level. A class is generally a disaggregation of a portfolio segment. In determining the classes, CIT considered the loan characteristics and methods it applies in monitoring and assessing credit risk and performance.

Credit Quality Indicators

Management monitors credit quality of commercial loans and financing leases based upon risk rating classifications consistent with bank regulatory guidance and consumer loans based upon FICO scores and loan-to-value ratios (“LTV”).

The definitions of the commercial loan ratings are as follows:

• Pass — loans in this category do not meet the criteria for classification in one of the categories below.

• Special mention — loans in this category exhibit potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of a loan’s repayment prospects.

• Classified — loans in this category range from: (1) loans that exhibit a well-defined weakness and are inadequately protected by the current sound worth and paying capacity of the borrower, and are characterized by the distinct possibility that some loss will be sustained if the deficiencies are not corrected to (2) loans with weaknesses that make collection or liquidation in full unlikely on the basis of current facts, conditions, and values. Classified loans can accrue interest or be placed on non-accrual depending on the Company’s evaluation of these factors.

Commercial criticized loans include loans with a rating of special mention or classified.

For consumer loans, we monitor credit quality utilizing current LTV of the underlying collateral to assess potential loss severity in the event of default and the borrower FICO scores to evaluate borrowers’ credit payment history. The Company examines LTV migration and stratifies LTV into categories to monitor risk in the loan classes. The Company periodically updates the property values of real estate collateral (for home equity and residential mortgages) to calculate current LTV ratios, adjusted based on the Case-Shiller Home Price Indices. A loan to a borrower with a low FICO score (less than 660) is considered to be of higher risk than a loan to a borrower with a higher FICO score. Generally, a loan to a borrower with a high LTV ratio and a low FICO score is at greater risk of default than a loan to a borrower that has both a high LTV ratio and a high FICO score.

11

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes commercial loans disaggregated by year of origination and by risk rating, while the consumer loan LTV ratios and FICO scores tables summarize loans by year of origination. These tables reflect the amortized cost basis of the respective commercial and consumer loans. Accrued interest receivable is not reported with the loan’s amortized cost basis and is reported in other assets.

Commercial Loans — Risk Rating by Class⁽¹⁾ (dollars in millions)

	Term Loans by Origination Year														Revolving Loans Converted
Grade	2021		2020		2019		2018		2017		2016 & Prior		Revolving Loans		to Term Loans		Total
September 30, 2021
Commercial Finance
Pass	$	4,518.2	$	2,426.7	$	1,984.6	$	1,414.5	$	460.9	$	943.5	$	2,486.0	$	60.6	$	14,295.0
Special Mention		22.3		69.4		185.8		146.7		3.0		72.4		147.7		0.5		647.8
Classified-accrual		35.7		71.2		237.0		132.7		108.4		184.5		158.8		2.8		931.1
Classified-non-accrual		—		—		1.3		24.4		10.8		112.5		76.3		—		225.3
Total Commercial Finance		4,576.2		2,567.3		2,408.7		1,718.3		583.1		1,312.9		2,868.8		63.9		16,099.2
Real Estate Finance
Pass		457.0		1,112.9		1,824.6		666.9		335.6		797.6		2.8		—		5,197.4
Special Mention		—		87.1		100.3		79.5		58.9		13.3		—		—		339.1
Classified-accrual		—		0.3		411.5		240.7		96.4		82.0		—		—		830.9
Classified-non-accrual		—		—		—		0.2		1.9		61.3		—		—		63.4
Total Real Estate Finance		457.0		1,200.3		2,336.4		987.3		492.8		954.2		2.8		—		6,430.8
Business Capital
Pass		1,437.9		1,263.1		957.1		465.2		154.5		33.0		7.8		—		4,318.6
Special Mention		12.7		25.2		36.9		18.7		10.7		2.9		—		—		107.1
Classified-accrual		21.7		33.3		58.9		31.4		10.2		1.4		—		—		156.9
Classified-non-accrual		2.6		9.5		12.5		10.5		2.9		2.8		—		—		40.8
Total Business Capital		1,474.9		1,331.1		1,065.4		525.8		178.3		40.1		7.8		—		4,623.4
Rail
Pass		—		—		0.6		—		—		63.1		—		—		63.7
Total Rail		—		—		0.6		—		—		63.1		—		—		63.7
Commercial Banking
Pass		6,413.1		4,802.7		4,766.9		2,546.6		951.0		1,837.2		2,496.6		60.6		23,874.7
Special Mention		35.0		181.7		323.0		244.9		72.6		88.6		147.7		0.5		1,094.0
Classified-accrual		57.4		104.8		707.4		404.8		215.0		267.9		158.8		2.8		1,918.9
Classified-non-accrual		2.6		9.5		13.8		35.1		15.6		176.6		76.3		—		329.5
Total Commercial Banking		6,508.1		5,098.7		5,811.1		3,231.4		1,254.2		2,370.3		2,879.4		63.9		27,217.1
Consumer Banking - Consumer and Community Banking (2)
Pass		166.1		274.1		145.3		97.7		47.0		82.0		2.4		—		814.6
Special Mention		—		—		10.0		3.2		4.4		3.7		—		—		21.3
Classified-accrual		—		7.4		27.3		26.9		12.0		16.8		—		—		90.4
Classified-non-accrual		—		—		17.0		3.6		4.2		7.1		—		—		31.9
Total Consumer Banking		166.1		281.5		199.6		131.4		67.6		109.6		2.4		—		958.2
Commercial Loans
Pass		6,579.2		5,076.8		4,912.2		2,644.3		998.0		1,919.2		2,499.0		60.6		24,689.3
Special Mention		35.0		181.7		333.0		248.1		77.0		92.3		147.7		0.5		1,115.3
Classified-accrual		57.4		112.2		734.7		431.7		227.0		284.7		158.8		2.8		2,009.3
Classified-non-accrual		2.6		9.5		30.8		38.7		19.8		183.7		76.3		—		361.4
Total Commercial Loans	$	6,674.2	$	5,380.2	$	6,010.7	$	3,362.8	$	1,321.8	$	2,479.9	$	2,881.8	$	63.9	$	28,175.3

^{(1), (2)}See footnotes below table on the next page.

12

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

Commercial Loans — Risk Rating by Class⁽¹⁾ (dollars in millions) (continued)

	Term Loans by Origination Year														Revolving Loans Converted
Grade	2020		2019		2018		2017		2016		2015 & Prior		Revolving Loans		to Term Loans		Total
December 31, 2020
Commercial Finance
Pass	$	4,819.9	$	2,132.5	$	2,000.1	$	678.0	$	181.1	$	745.6	$	3,329.4	$	61.1	$	13,947.7
Special Mention		81.2		206.4		210.8		18.4		30.8		119.9		313.3		2.8		983.6
Classified-accrual		82.4		161.7		49.8		169.2		107.2		183.1		314.2		5.6		1,073.2
Classified-non-accrual		0.5		9.0		53.9		9.6		22.1		60.7		83.6		—		239.4
Total Commercial Finance		4,984.0		2,509.6		2,314.6		875.2		341.2		1,109.3		4,040.5		69.5		16,243.9
Real Estate Finance
Pass		1,075.9		2,089.2		1,212.3		663.5		480.3		493.0		28.1		—		6,042.3
Special Mention		65.9		333.7		126.4		225.5		93.5		46.3		—		—		891.3
Classified-accrual		0.3		184.4		124.2		74.6		78.0		75.8		—		—		537.3
Classified-non-accrual		—		33.3		0.2		15.3		0.2		28.0		6.2		—		83.2
Total Real Estate Finance		1,142.1		2,640.6		1,463.1		978.9		652.0		643.1		34.3		—		7,554.1
Business Capital
Pass		1,678.9		1,371.4		809.5		299.3		106.3		15.6		14.4		0.8		4,296.2
Special Mention		29.6		67.2		42.4		32.4		12.3		0.3		—		—		184.2
Classified-accrual		34.3		80.8		71.5		25.9		11.2		0.9		—		—		224.6
Classified-non-accrual		8.0		33.0		17.1		10.9		2.8		1.0		—		—		72.8
Total Business Capital		1,750.8		1,552.4		940.5		368.5		132.6		17.8		14.4		0.8		4,777.8
Rail
Pass		—		0.8		—		0.1		3.1		56.7		—		—		60.7
Total Rail		—		0.8		—		0.1		3.1		56.7		—		—		60.7
Commercial Banking
Pass		7,574.7		5,593.9		4,021.9		1,640.9		770.8		1,310.9		3,371.9		61.9		24,346.9
Special Mention		176.7		607.3		379.6		276.3		136.6		166.5		313.3		2.8		2,059.1
Classified-accrual		117.0		426.9		245.5		269.7		196.4		259.8		314.2		5.6		1,835.1
Classified-non-accrual		8.5		75.3		71.2		35.8		25.1		89.7		89.8		—		395.4
Total Commercial Banking		7,876.9		6,703.4		4,718.2		2,222.7		1,128.9		1,826.9		4,089.2		70.3		28,636.5
Consumer Banking - Consumer and Community Banking (2)
Pass		507.6		157.1		104.5		62.3		50.0		67.3		0.1		—		948.9
Special Mention		—		13.1		4.3		2.8		2.6		0.9		—		—		23.7
Classified-accrual		21.0		19.3		17.0		11.0		13.8		17.6		0.3		—		100.0
Classified-non-accrual		—		11.8		3.0		3.2		1.0		0.8		—		—		19.8
Total Consumer Banking		528.6		201.3		128.8		79.3		67.4		86.6		0.4		—		1,092.4
Commercial Loans
Pass		8,082.3		5,751.0		4,126.4		1,703.2		820.8		1,378.2		3,372.0		61.9		25,295.8
Special Mention		176.7		620.4		383.9		279.1		139.2		167.4		313.3		2.8		2,082.8
Classified-accrual		138.0		446.2		262.5		280.7		210.2		277.4		314.5		5.6		1,935.1
Classified-non-accrual		8.5		87.1		74.2		39.0		26.1		90.5		89.8		—		415.2
Total Commercial Loans	$	8,405.5	$	6,904.7	$	4,847.0	$	2,302.0	$	1,196.3	$	1,913.5	$	4,089.6	$	70.3	$	29,728.9

⁽¹⁾ Amortized cost excludes accrued interest receivable of $39.9 million and $48.6 million at September 30, 2021 and December 31, 2020, respectively, which was included in other assets. 

⁽²⁾ Primarily SBA loans.

13

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table provides a summary of the consumer loan LTV distribution for primarily single-family residential (“SFR”) mortgage loans. The average LTV was 53% and 58% for the total consumer loans included below at September 30, 2021 and December 31, 2020, respectively.

Consumer Loans LTV Distribution⁽¹⁾ (dollars in millions)

	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
LTV Range	2021		2020		2019		2018		2017		2016 & Prior		Revolving Loans		to Term Loans		Total
September 30, 2021
Legacy Consumer Mortgages
Greater than 125%	$	—	$	—	$	—	$	—	$	—	$	16.1	$	—	$	0.1	$	16.2
101% – 125%		—		—		—		—		—		22.6		—		0.3		22.9
80% – 100%		—		—		—		—		—		64.5		—		1.1		65.6
Less than 80%		—		—		—		—		—		1,051.1		—		25.5		1,076.6
Government-guaranteed (2)		—		—		—		—		—		19.4		—		—		19.4
No LTV available (3)		—		—		—		—		—		0.1		—		1.2		1.3
Total Legacy Consumer Mortgages		—		—		—		—		—		1,173.8		—		28.2		1,202.0
Consumer and Community Banking
Greater than 125%		—		—		—		—		—		—		—		—		—
101% – 125%		—		—		—		—		—		—		—		—		—
80% – 100%		11.5		—		0.9		0.8		—		0.8		—		—		14.0
Less than 80%		1,247.4		946.0		453.6		226.8		287.7		757.0		25.4		—		3,943.9
Government-guaranteed (2)		—		10.0		22.5		10.3		46.6		13.0		—		—		102.4
No LTV available (3)		—		0.1		0.1		0.1		0.1		1.0		1.3		—		2.7
No LTV required (4)		0.8		2.2		1.0		0.8		0.7		13.0		2.2		—		20.7
Total Consumer and Community Banking		1,259.7		958.3		478.1		238.8		335.1		784.8		28.9		—		4,083.7
Total Consumer Loans	$	1,259.7	$	958.3	$	478.1	$	238.8	$	335.1	$	1,958.6	$	28.9	$	28.2	$	5,285.7

	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
LTV Range	2020		2019		2018		2017		2016		2015 & Prior		Revolving Loans		to Term Loans		Total
December 31, 2020
Legacy Consumer Mortgages
Greater than 125%	$	—	$	—	$	—	$	—	$	—	$	37.5	$	—	$	0.4	$	37.9
101% – 125%		—		—		—		—		—		60.5		—		1.1		61.6
80% – 100%		—		—		—		—		—		189.2		—		3.4		192.6
Less than 80%		—		—		—		—		—		1,344.3		—		34.7		1,379.0
Government-guaranteed (2)		—		—		—		—		—		20.8		—		—		20.8
No LTV available (3)		—		—		—		—		—		0.1		—		1.7		1.8
Total Legacy Consumer Mortgages		—		—		—		—		—		1,652.4		—		41.3		1,693.7
Consumer and Community Banking
Greater than 125%		—		—		—		—		—		—		—		—		—
101% – 125%		—		—		—		—		—		—		—		—		—
80% – 100%		21.3		17.1		3.5		—		—		1.7		2.4		—		46.0
Less than 80%		1,328.4		1,022.7		445.8		507.2		380.1		778.8		41.5		—		4,504.5
Government-guaranteed (2)		12.0		33.7		15.7		68.2		9.5		7.8		—		—		146.9
No LTV available (3)		—		—		0.2		0.2		0.2		0.7		1.3		—		2.6
No LTV required (4)		2.0		1.0		1.0		0.6		1.0		13.4		3.0		—		22.0
Total Consumer and Community Banking		1,363.7		1,074.5		466.2		576.2		390.8		802.4		48.2		—		4,722.0
Total Consumer Loans	$	1,363.7	$	1,074.5	$	466.2	$	576.2	$	390.8	$	2,454.8	$	48.2	$	41.3	$	6,415.7

⁽¹⁾ Amortized cost excludes accrued interest receivable of $13.8 million and $19.0 million at September 30, 2021 and December 31, 2020, respectively, which was included in other assets.

⁽²⁾ Represents loans with principal repayments insured by the FHA and U.S. Department of Veterans Affairs (“VA”).

⁽³⁾ Represents primarily junior lien loans for which LTV is not available.

⁽⁴⁾ Represents overdrafts, personal lines of credit, unsecured loans and third-party guaranteed loans with servicer recourse option for which LTV is not required.

The following table provides a summary of the most current FICO score distribution for consumer loans by origination year and

14

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

revolving loans. The average FICO score was 764 and 755 for the total consumer loans included below at September 30, 2021 and December 31, 2020, respectively.

FICO Score Distribution⁽¹⁾ (dollars in millions)

	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
Current FICO	2021		2020		2019		2018		2017		2016 & Prior		Revolving Loans		to Term Loans		Total
September 30, 2021
Legacy Consumer Mortgages
Greater than or equal to 730	$	—	$	—	$	—	$	—	$	—	$	607.6	$	—	$	13.2	$	620.8
Greater than or equal to 660 and less than 730		—		—		—		—		—		347.5		—		8.1		355.6
Less than 660		—		—		—		—		—		173.4		—		6.2		179.6
Government-guaranteed (2)		—		—		—		—		—		19.4		—		—		19.4
No FICO score available (3)		—		—		—		—		—		25.9		—		0.7		26.6
FICO score not required (4)		—		—		—		—		—		—		—		—		—
Total Legacy Consumer Mortgages		—		—		—		—		—		1,173.8		—		28.2		1,202.0
Consumer and Community Banking
Greater than or equal to 730		1,068.6		810.8		392.2		188.1		260.4		614.0		19.3		—		3,353.4
Greater than or equal to 660 and less than 730		182.2		122.8		58.9		33.0		22.4		101.2		6.2		—		526.7
Less than 660		8.1		12.3		3.7		5.6		4.8		30.4		2.8		—		67.7
Government-guaranteed (2)		—		10.0		22.5		10.3		46.6		13.0		—		—		102.4
No FICO score available (3)		—		0.2		—		1.0		0.2		13.6		0.2		—		15.2
FICO score not required (4)		0.8		2.2		0.8		0.8		0.7		12.6		0.4		—		18.3
Total Consumer and Community Banking		1,259.7		958.3		478.1		238.8		335.1		784.8		28.9		—		4,083.7
Total Consumer Loans	$	1,259.7	$	958.3	$	478.1	$	238.8	$	335.1	$	1,958.6	$	28.9	$	28.2	$	5,285.7

	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
Current FICO	2020		2019		2018		2017		2016		2015 & Prior		Revolving Loans		to Term Loans		Total
December 31, 2020
Legacy Consumer Mortgages
Greater than or equal to 730	$	—	$	—	$	—	$	—	$	—	$	729.1	$	—	$	17.9	$	747.0
Greater than or equal to 660 and less than 730		—		—		—		—		—		499.3		—		13.0		512.3
Less than 660		—		—		—		—		—		369.4		—		9.4		378.8
Government-guaranteed (2)		—		—		—		—		—		20.8		—		—		20.8
No FICO score available (3)		—		—		—		—		—		33.8		—		1.0		34.8
Total Legacy Consumer Mortgages		—		—		—		—		—		1,652.4		—		41.3		1,693.7
Consumer and Community Banking
Greater than or equal to 730		1,152.3		923.7		372.3		453.5		339.7		596.7		34.2		—		3,872.4
Greater than or equal to 660 and less than 730		186.3		104.7		68.7		46.3		34.5		125.6		10.0		—		576.1
Less than 660		11.0		11.2		8.4		7.3		5.5		40.8		3.1		—		87.3
Government-guaranteed (2)		12.0		33.7		15.7		68.2		9.5		7.8		—		—		146.9
No FICO score available (3)		0.1		0.5		0.1		0.3		0.6		18.2		0.2		—		20.0
FICO score not required (4)		2.0		0.7		1.0		0.6		1.0		13.3		0.7		—		19.3
Total Consumer and Community Banking		1,363.7		1,074.5		466.2		576.2		390.8		802.4		48.2		—		4,722.0
Total Consumer Loans	$	1,363.7	$	1,074.5	$	466.2	$	576.2	$	390.8	$	2,454.8	$	48.2	$	41.3	$	6,415.7

⁽¹⁾ Amortized cost excludes accrued interest receivable. See footnote 1 to the LTV table above.

⁽²⁾ Represents loans with principal repayments insured by the FHA and VA.

⁽³⁾ Represents loans with no FICO score available due to borrower bankruptcy or limited credit history.

⁽⁴⁾ FICO sores not required for these overdrafts, personal lines of credit or third-party guaranteed loans with servicer recourse option.

15

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

Past Due and Non-accrual Loans

Additional information on reporting of past due and non-accrual loans is provided in the discussion of the CARES Act and Interagency Statement in Note 1 – Business and Summary of Significant Accounting Policies. Related to loan modifications made in response to the COVID-19 pandemic, the loan maintains the borrower’s delinquency status that existed prior to entering the payment deferral period and is frozen for the duration of the payment deferral period as no contractual payments are due.

The table that follows presents portfolio delinquency status, regardless of accrual or non-accrual classification:

Loans - Delinquency Status (dollars in millions)

	Past Due						Total
	30-59		60-89		90 or more		Past Due		Current		Total
September 30, 2021
Commercial Banking
Commercial Finance	$	37.2	$	8.9	$	29.8	$	75.9	$	16,023.3	$	16,099.2
Real Estate Finance		0.2		10.6		9.2		20.0		6,410.8		6,430.8
Business Capital		58.5		26.4		17.3		102.2		4,521.2		4,623.4
Rail		—		—		—		—		63.7		63.7
Total Commercial Banking		95.9		45.9		56.3		198.1		27,019.0		27,217.1
Consumer Banking
Legacy Consumer Mortgage		24.1		4.7		25.2		54.0		1,148.1		1,202.1
Consumer and Community Banking		42.7		26.7		20.2		89.6		4,952.2		5,041.8
Total Consumer Banking		66.8		31.4		45.4		143.6		6,100.3		6,243.9
Total	$	162.7	$	77.3	$	101.7	$	341.7	$	33,119.3	$	33,461.0
December 31, 2020
Commercial Banking
Commercial Finance	$	59.9	$	2.8	$	122.0	$	184.7	$	16,059.2	$	16,243.9
Real Estate Finance		71.7		38.3		82.4		192.4		7,361.7		7,554.1
Business Capital		113.6		40.2		16.6		170.4		4,607.4		4,777.8
Rail		—		—		—		—		60.7		60.7
Total Commercial Banking		245.2		81.3		221.0		547.5		28,089.0		28,636.5
Consumer Banking
Legacy Consumer Mortgage		61.0		17.6		79.7		158.3		1,535.5		1,693.8
Consumer and Community Banking		173.1		10.6		34.0		217.7		5,596.6		5,814.3
Total Consumer Banking		234.1		28.2		113.7		376.0		7,132.1		7,508.1
Total	$	479.3	$	109.5	$	334.7	$	923.5	$	35,221.1	$	36,144.6

16

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table sets forth non-accrual loans, assets received in satisfaction of loans (OREO and repossessed assets) and loans 90 days or more past due and still accruing. Loans that are 90 days or more past due and are guaranteed by government agencies are not placed on non-accrual status. See Note 1 – Business and Summary of Significant Accounting Policies in the 2020 Form 10-K for additional information.

Loans on Non-Accrual Status (dollars in millions) ⁽¹⁾

	September 30, 2021				December 31, 2020
	Non-Accrual Loans		With No Allowance Recorded(2)		Non-Accrual Loans		With No Allowance Recorded(2)
Commercial Banking
Commercial Finance(3)	$	225.3	$	13.4	$	239.4	$	8.0
Business Capital	40.8			3.1		72.8		1.5
Real Estate Finance	63.4			2.6		83.2		16.0
Total Commercial Banking		329.5		19.1		395.4		25.5
Consumer Banking
Consumer and Community Banking		52.1		29.5		53.4		38.2
Legacy Consumer Mortgages		23.3		5.9		139.3		30.0
Total Consumer Banking		75.4		35.4		192.7		68.2
Total	$	404.9	$	54.5	$	588.1	$	93.7
Repossessed assets and OREO(4)		10.5				7.9
Total non-performing assets	$	415.4			$	596.0
Commercial loans past due 90 days or more accruing	$	14.7			$	92.5
Consumer loans past due 90 days or more accruing(5)		13.2				11.3
Total accruing loans past due 90 days or more	$	27.9			$	103.8

⁽¹⁾ Accrued interest that was reversed when the loan went to non-accrual status was $0.5 million and $1.1 million for the quarters ended September 30, 2021 and 2020, respectively, and $2.8 million and $6.0 million for the nine months ended September 30, 2021 and 2020, respectively.

⁽²⁾ Includes loans that have been charged-off to their net realizable value and loans where the collateral or enterprise value exceeds the expected pay off value.

⁽³⁾ Factored receivables within our Commercial Finance division do not accrue interest and therefore are not considered within non-accrual loan balances; however factored receivables are considered for credit provisioning purposes.

⁽⁴⁾ Balances consist mostly of single-family residential OREO.

⁽⁵⁾ Consists of loans guaranteed by government agencies.

Payments received on non-accrual loans are generally applied first against outstanding principal, though in certain instances where the remaining recorded investment is deemed fully collectible, interest income is recognized on a cash basis. Interest recorded on non-accrual loans was $0.5 million and $6.9 million for the quarters ended September 30, 2021 and 2020, respectively, and $1.9 million and $8.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Loans are in the process of foreclosure when repayment is expected to be provided substantially through the sale of the underlying real estate and the borrower is experiencing financial difficulty. The table below summarizes the residential mortgage loans in the process of foreclosure. Consistent with the government agency guidance, CIT suspended residential property foreclosures and evictions through July 31, 2021 related to single family homeowners due to the COVID-19 pandemic.

Loans in Process of Foreclosure (dollars in millions)

	September 30,		December 31,
	2021		2020
Loans in process of foreclosure	$	11.8	$	22.9

Troubled Debt Restructuring

The Company periodically modifies the terms of loans in response to borrowers’ difficulties. Modifications that include a financial concession to the borrower are accounted for as TDRs. A restructuring of a debt constitutes a TDR for purposes of ASC 310-40 when CIT, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. A concession may be either by agreement between CIT and the debtor or imposed by law or a court of law. See Note 1 – Business and Summary of Significant Accounting Policies in the Company's 2020 Form 10-K for discussion of policies on TDRs.

The CARES Act and Interagency Statement offer some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. See Note 1 – Business and Summary of Significant Accounting Policies for details. Any loan modification that meets these practical expedients would not automatically be considered a TDR because the borrower is presumed not to be experiencing financial difficulty at the time of the loan modification.

Modified loans that meet the definition of a TDR are subject to the Company's individually reviewed loans policy.

17

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents recorded investment of TDRs, excluding those within a trial modification period of $0.1 million at September 30, 2021 and $4.5 million at December 31, 2020:

TDRs (dollars in millions)

	September 30, 2021						December 31, 2020
	Recorded Investment			% Total TDR			Recorded Investment			% Total TDR
Commercial Banking	$	96.1			74	%	$	109.8			82	%
Consumer Banking		33.4			26	%		24.6			18	%
Total	$	129.5			100	%	$	134.4			100	%
Percent non-accrual		51	%					73	%

Modifications that are TDRs (dollars in millions)

	Quarters Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Recorded investment related to modifications qualifying as TDRs that occurred during the periods	$	31.3	$	10.0	$	48.8	$	62.4
Recorded investment at the time of default of TDRs that experienced a payment default (payment default is one missed payment) during the periods and for which the payment default occurred within one year of the modification	$	2.9	$	13.6	12.9		19.9

There were $9.3 million and $28.3 million of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs as of September 30, 2021 and December 31, 2020, respectively.

Modifications qualifying as TDRs based upon recorded investment at September 30, 2021, were comprised of payment deferrals (55%) and covenant relief and/or other (45%). At December 31, 2020, TDR recorded investment was comprised of payment deferrals (40%) and covenant relief and/or other (60%). The financial impact of the various modification strategies that the Company employs in response to borrower difficulties is presented below. The overall nature of modification programs were comparable in the prior periods.

▪ Payment deferrals result in lower net present value of cash flows, if not accompanied by additional interest or fees, and increased provision for credit losses to the extent applicable. The financial impact of these modifications was not significant given the moderate length of deferral periods.

▪ Interest rate reductions result in lower amounts of interest being charged to the customer but are a relatively small part of the Company’s restructuring programs. The weighted average change in interest rates for all TDRs occurring during the quarters ended September 30, 2021 and 2020 were not significant.

▪ Debt forgiveness, or the reduction in amount owed by borrower, results in incremental provision for credit losses, in the form of higher charge-offs. While these types of modifications have the greatest individual impact on the allowance, the amounts of principal forgiveness for TDRs occurring during quarters ended September 30, 2021 and 2020 was not significant, as debt forgiveness is a relatively small component of the Company’s modification programs.

The other elements of the Company’s modification programs that are not TDRs do not have a significant impact on financial results given their relative size or do not have a direct financial impact, as in the case of covenant changes.

18

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 — ALLOWANCE FOR CREDIT LOSSES

The ACL and the allowance for off-balance sheet credit exposures are reported on the Condensed Consolidated Balance Sheets in the allowance for credit losses and in other liabilities, respectively. Provision for credit losses related to the loan portfolio and the off-balance sheet credit exposures are reported in the Consolidated Statements of Operations as provision for credit losses.

Allowance for Credit Losses and Recorded Investment in Loans (dollars in millions)

	Quarter Ended September 30, 2021									Quarter Ended September 30, 2020
	Commercial Banking			Consumer Banking			Total			Commercial Banking			Consumer Banking			Total
Balance - beginning of period	$	743.4		$	107.2		$	850.6		$	1,020.1		$	182.6		$	1,202.7
Provision for credit losses(1)		(49.3	)		(17.8	)		(67.1	)		87.9			(24.6	)		63.3
Other(2)		11.7			0.2			11.9			7.1			(0.9	)		6.2
Gross charge-offs		(15.3	)		(1.1	)		(16.4	)		(77.2	)		(1.0	)		(78.2	)
Recoveries		10.7			0.7			11.4			11.4			0.8			12.2
Balance - end of period	$	701.2		$	89.2		$	790.4		$	1,049.3		$	156.9		$	1,206.2
	Nine Months Ended September 30, 2021									Nine Months Ended September 30, 2020
Balance - beginning of period	$	933.7		$	130.1		$	1,063.8		$	460.4		$	22.2		$	482.6
CECL adoption(3)		-			-			-			74.7			148.9			223.6
Provision for credit losses(1)		(220.6	)		(36.1	)		(256.7	)		811.5			(10.7	)		800.8
Initial ACL recognized on PCD assets(4)		-			-			-			18.8			1.4			20.2
Other(2)		28.2			(0.5	)		27.7			(28.6	)		(3.0	)		(31.6	)
Gross charge-offs(4)		(86.2	)		(6.5	)		(92.7	)		(331.0	)		(3.7	)		(334.7	)
Recoveries		46.1			2.2			48.3			43.5			1.8			45.3
Balance - end of period	$	701.2		$	89.2		$	790.4		$	1,049.3		$	156.9		$	1,206.2
	September 30, 2021									December 31, 2020
	Commercial Banking			Consumer Banking			Total			Commercial Banking			Consumer Banking			Total
Allowance Balance
Loans individually evaluated for impairment	$	68.2		$	4.1		$	72.3		$	100.8		$	5.5		$	106.3
Loans collectively evaluated for impairment		633.0			85.1			718.1			832.9			124.6			957.5
Allowance for credit losses	$	701.2		$	89.2		$	790.4		$	933.7		$	130.1		$	1,063.8
Allowance for off-balance sheet credit exposures	$	48.6		$	1.5		$	50.1		$	76.8		$	1.5		$	78.3
Loans
Loans individually evaluated for impairment	$	289.1		$	53.1		$	342.2		$	346.3		$	86.4		$	432.7
Loans collectively evaluated for impairment		26,928.0			6,190.8			33,118.8			28,290.2			7,421.7			35,711.9
Ending balance	$	27,217.1		$	6,243.9		$	33,461.0		$	28,636.5		$	7,508.1		$	36,144.6
Percent of loans to total loans		81.3	%		18.7	%		100.0	%		79.2	%		20.8	%		100.0	%

⁽¹⁾ Included in the provision for credit losses was $(11.7) million and $(6.4) million for the quarters ended September 30, 2021 and 2020, respectively, and $(28.2) million and $29.9 million for the nine months ended September 30, 2021 and 2020, respectively, related to off-balance sheet credit exposures, which is not part of the ACL and is offset in the “Other” line.

⁽²⁾ “Other” primarily includes provision changes related to off balance sheet credit exposures, which represents credit cost related to unfunded financing commitments, deferred purchase agreements (“DPA’s”), and letters of credit. The allowance related to this exposure is included in other liabilities.

⁽³⁾ CECL adoption was before the MOB Acquisition.

⁽⁴⁾ In connection with the MOB Acquisition, the initial ACL recognized on PCD assets was $58.8 million, of which $38.6 million was charged-off for loans that had been written-off prior to acquisition (whether full or partial) or which met CIT’s charge-off policy at the time of acquisition. After considering loans that were immediately charged-off upon acquisition, the net impact was $20.2 million of additional PCD reserves on January 1, 2020.

The ACL was $790.4 million as of September 30, 2021, compared to $1,063.8 million at December 31, 2020. The lower ACL balance drove a benefit for credit losses of $(67.1) million and $(256.7) million for the quarter and nine months ended September 30, 2021, respectively, compared to a provision of $63.3 million and $800.8 million for the quarter and nine months ended September 30, 2020, respectively. The allowance for off-balance sheet credit exposures decreased from $78.3 million at December 31, 2020 to $50.1 million at September 30, 2021.

Changes in the ACL and allowance for off-balance sheet credit exposures compared to the prior year periods reflect lower loan balances and off-balance sheet credit exposures, as well as an improvement in the macroeconomic scenario forecasts and credit loss trends. The year-ago ACL and provision reflected the estimated impact of the COVID-19 pandemic on the economy and market environment across our portfolio, along with the adoption of the CECL standard and the impact of the MOB Acquisition on January 1, 2020.

19

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 5 — LEASES

Lessee

CIT leases primarily include office space and bank branches, and substantially all of our lease liabilities relate to United States real estate leases under operating lease arrangements. Our lessee finance leases are not significant. Our real estate leases have remaining lease terms of up to 15 years. Our lease terms may include options to extend or terminate the lease. The options are considered in the accounting when it is determined that it is reasonably certain the option will be exercised.  

The following tables present supplemental balance sheet and cash flow information related to operating leases. Right of use (“ROU”) assets are included in other assets and lease liabilities are included in other liabilities.

Supplemental Lease Balance Sheet Information (dollars in millions)

	September 30,		December 31,
	2021		2020
ROU assets	$	252.7	$	198.8
Lease liabilities		288.4		249.9

Supplemental Cash Flow Information (dollars in millions)

	Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities	$	37.4	$	42.6
ROU assets obtained in exchange for new lease liabilities		68.9		16.4

A 15-year lease commenced in April 2021 for office space in Morristown, NJ, which is primarily occupied by corporate functional staff.  At September 30, 2021, ROU assets and lease liabilities for the lease are $71.9 and $61.7 million, respectively.

Lessor

The Company leases equipment to commercial end-users under operating lease and finance lease arrangements. The majority of operating lease equipment is long-lived rail equipment which is typically leased several times over the equipment’s life. We also lease technology and office equipment and large and small ticket industrial, medical, and transportation equipment under both operating leases and finance leases.  

Our Rail operating leases typically do not include purchase options. Many of our finance leases, and other equipment operating leases, offer the lessee the option to purchase the equipment at fair market value or for a nominal fixed purchase option, and many of the leases that do not have a nominal purchase option include renewal provisions resulting in some leases continuing beyond initial contractual term. Our leases typically do not include early termination options; and continued rent payments are due if leased equipment is not returned at the end of the lease.

The table that follows presents lease income related to the Company’s operating and finance leases:

Lease Income (dollars in millions)

	Quarters Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Lease income – Operating leases	$	173.9	$	191.4	$	530.5	$	578.2
Variable lease income – Operating leases (1)		12.3		9.9		38.6		33.8
Rental income on operating leases		186.2		201.3		569.1		612.0
Interest income - Sales type and direct financing leases		39.5		44.3		125.9		127.5
Variable lease income included in Other non-interest income (2)		10.4		9.9		31.7		31.7
Leveraged lease income		3.7		3.1		10.5		8.3
Total lease income	$	239.8	$	258.6	$	737.2	$	779.5

⁽¹⁾     Primarily includes per diem railcar operating lease rental income earned on a time or mileage usage basis.

⁽²⁾     Includes revenue related to insurance coverage on Business Capital leased equipment of $6.8 million and $5.9 million for the quarters ended September 30, 2021 and 2020, respectively, and $20.1 million and $18.3 million for the nine months ended September 30, 2021 and 2020, respectively, as well as revenue related to leased equipment property tax reimbursements due from customers of $3.5 million and $4.0 million for the quarters ended September 30, 2021 and 2020, respectively, and $11.5 million and $13.4 million for the nine months ended September 30, 2021 and 2020.

20

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 6 — INVESTMENT SECURITIES

Investment securities include debt and equity securities. See Note 1 — Business and Summary of Significant Accounting Policies in the Company’s 2020 Form 10-K for information on accounting for investment securities. The following table presents carrying value of investment securities.

Carrying Value of Investment Securities (dollars in millions)

	September 30,		December 31,
	2021		2020
Available-for-sale securities
Debt securities	$	5,561.1	$	6,673.5
Non-marketable securities(1)		214.1		215.5
Total investment securities	$	5,775.2	$	6,889.0

⁽¹⁾ Non-marketable securities include restricted stock of the FRB and FHLB carried at cost of $164.8 million and $181.7 million at September 30, 2021 and December 31, 2020, respectively. The remaining non-marketable securities without readily determinable fair values measured under the measurement exception totaled $49.3 million and $33.8 million at September 30, 2021 and December 31, 2020, respectively.

Accrued interest receivable on debt securities totaled $7.6 million and $13.7 million as of September 30, 2021 and December 31, 2020, respectively, and were included in other assets.

The Company had $4.4 billion and $3.8 billion of interest-bearing cash at banks at September 30, 2021 and December 31, 2020, respectively, which are cash and cash equivalents and presented separately on the Consolidated Balance Sheet.

The following table presents interest and dividends on investments and interest-bearing cash.

Interest and Dividend Income (dollars in millions)

	Quarters Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Interest income - debt securities(1)	$	15.0	$	24.0	$	50.9	$	90.1
Interest income - interest-bearing cash		2.0		2.1		4.8		9.5
Dividends - equity securities		0.9		1.4		3.7		3.6
Total interest and dividends	$	17.9	$	27.5	$	59.4	$	103.2

⁽¹⁾ Includes interest income on securities purchased under agreement to resell and insignificant amounts of non-taxable interest income.

The following table presents proceeds from sales of debt securities AFS and realized gains (losses) included in earnings at the time of sales. The nine months ended September 30, 2021 included the impact of management’s strategic decision to monetize gains on certain AFS securities (primarily mortgage-backed securities (“MBS”) previously included in accumulated other comprehensive income (“AOCI”). See Changes in Accumulated Other Comprehensive Income (Loss) by Component table in Note 11 – Stockholders’ Equity.

Realized Gains (Losses) and Proceeds from Sales of Debt Securities AFS (dollars in millions)

	Quarters Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021			2020
Proceeds from sales of debt securities AFS	$	271.4	$	314.2		$	2,891.2		$	2,776.1
Gross realized gains	$	5.5	$	8.4		$	113.8		$	30.5
Gross realized losses		—		(0.2	)		(0.5	)		(1.9	)
Net realized gains on sales of debt securities AFS	$	5.5	$	8.2		$	113.3		$	28.6

21

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents amortized cost and fair value of securities AFS.

Amortized Cost and Fair Value (dollars in millions)

	Amortized Cost(1)		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2021
Debt securities AFS
Mortgage-backed securities
U.S. government/sponsored agency – Residential	$	1,596.6	$	0.5	$	(21.6	)	$	1,575.5
U.S. government/sponsored agency – Commercial		1,742.2		0		(28.6	)		1,713.6
U.S. government/sponsored agency obligations		1,509.9		0		(22.8	)		1,487.1
U.S. Treasury securities		506.3		0		(17.8	)		488.5
Supranational securities		309.9		0		(13.5	)		296.4
Total debt securities AFS	$	5,664.9	$	0.5	$	(104.3	)	$	5,561.1
December 31, 2020
Debt securities AFS
Mortgage-backed securities
U.S. government/sponsored agency – Residential	$	2,503.4	$	76.5	$	(0.1	)	$	2,579.8
U.S. government/sponsored agency – Commercial		1,725.0		56.3		(0.5	)		1,780.8
U.S. government/sponsored agency obligations		1,474.2		0.5		(3.9	)		1,470.8
U.S. Treasury securities		505.9		0		(3.2	)		502.7
Supranational securities		330.2		0.2		(2.9	)		327.5
Agency asset-backed securities		1.5		0.1		0			1.6
Corporate bonds - foreign		10.3		0		0			10.3
Total debt securities AFS	$	6,550.5	$	133.6	$	(10.6	)	$	6,673.5

⁽¹⁾ The amortized cost is net of the ACL. There was no ACL relating to debt securities as of September 30, 2021 and December 31, 2020.

The following table presents the debt securities AFS by contractual maturity dates.

Maturities - Debt Securities AFS (dollars in millions)

	September 30, 2021
	Amortized Cost		Fair Value		Weighted Average Yield
Mortgage-backed securities — U.S. government/sponsored agency – Residential
After 5 through 10 years	$	0.1	$	0.1		5.21	%
After 10 years		1,596.5		1,575.4		1.68	%
Total		1,596.6		1,575.5		1.68	%
Mortgage-backed securities — U.S. government/sponsored agency – Commercial
After 5 through 10 years		31.2		30.1		1.12	%
After 10 years		1,711.0		1,683.5		1.45	%
Total		1,742.2		1,713.6		1.45	%
U.S. government/sponsored agency obligations
After 1 through 5 years		532.5		528.0		0.66	%
After 5 through 10 years		977.4		959.1		1.13	%
Total		1,509.9		1,487.1		0.96	%
U.S. Treasury securities
1 year or less		13.0		13.1		0.23	%
After 1 through 5 years		99.9		98.1		0.27	%
After 5 through 10 years		393.4		377.3		0.50	%
Total		506.3		488.5		0.45	%
Supranational securities
1 year or less		—		—		0.00	%
After 1 through 5 years		56.9		56.2		0.47	%
After 5 through 10 years		253.0		240.2		0.85	%
Total		309.9		296.4		0.78	%
Total debt securities AFS	$	5,664.9	$	5,561.1		1.26	%

At September 30, 2021 and

22

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

December 31, 2020, certain securities AFS were in unrealized loss positions. The following table summarizes by investment category the gross unrealized losses, respective fair value and length of time that those securities have been in a continuous unrealized loss position for which an ACL has not been recorded.

Gross Unrealized Loss (dollars in millions)

	September 30, 2021
	Less than 12 months					12 months or greater
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
Debt securities AFS
Mortgage-backed securities
U.S. government/sponsored agency - Residential	$	1,511.3	$	(21.6	)	$	0	$	0
U.S. government/sponsored agency - Commercial		1,594.1		(26.9	)		42.2		(1.7	)
U.S. government/sponsored agency obligations		1,324.7		(21.7	)		87.4		(1.1	)
U.S. Treasury securities		434.1		(15.7	)		47.8		(2.1	)
Supranational securities		187.5		(8.0	)		108.8		(5.5	)
Total debt securities AFS	$	5,051.7	$	(93.9	)	$	286.2	$	(10.4	)

	December 31, 2020
	Less than 12 months					12 months or greater
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
Debt securities AFS
Mortgage-backed securities
U.S. government/sponsored agency - Residential	$	39.3	$	(0.1	)	$	0	$	0
U.S. government/sponsored agency - Commercial		267.3		(0.5	)		0		0
U.S. government/sponsored agency obligations		628.5		(3.9	)		0		0
U.S. Treasury securities		489.9		(3.2	)		0		0
Supranational securities		245.4		(2.9	)		0		0
Total debt securities AFS	$	1,670.4	$	(10.6	)	$	0	$	0

Impairment of Investment Securities

There were 0 impairment losses on debt securities AFS for the quarter ended September 30, 2021. There was a $0.4 million impairment loss on debt securities AFS for the nine months ended September 30, 2021. There were 0 impairment losses recognized for the quarter and nine months ended September 30, 2020.

There were insignificant adjustments for non-marketable securities without readily determinable fair values for the quarter and nine months ended September 30, 2021, and no adjustments for the quarter and nine months ended September 30, 2020.

There was no ACL relating to investment securities as of September 30, 2021 and December 31, 2020, primarily due to the high proportion of U.S. government guaranteed securities in the portfolio.

There were insignificant unrealized gains and losses on non-marketable securities as of September 30, 2021 and December 31, 2020.

Pledged Securities

Securities with a carrying value of $136.2 million and $1,926.2 million were pledged as of September 30, 2021 and December 31, 2020, respectively, to secure FHLB financing availability and mortgage programs, public funds in CIT Bank, derivative contracts, and for other purposes as required or permitted by law.

NOTE 7 — VARIABLE INTEREST ENTITIES

Variable Interest Entities (“VIE”)

Described below are the results of the Company’s assessment of its variable interests in order to determine its current status with regard to being the VIE primary beneficiary (“PB”). See Note 1 — Business and Summary of Significant Accounting Policies in the 2020 Form 10-K for additional information on accounting for VIEs.

Consolidated VIEs

At September 30, 2021 and December 31, 2020, there were 0 consolidated VIEs.

Unconsolidated VIEs

Unconsolidated VIEs include agency and non-agency securitization structures, limited partnership interests and joint ventures where the Company’s involvement is limited to an investor interest and the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance or obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. 

23

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

The table below presents potential losses that would be incurred under hypothetical circumstances, such that the value of its interests and any associated collateral declines to zero and assuming no recovery or offset from any economic hedges. The Company believes the possibility is remote under this hypothetical scenario; accordingly, this disclosure is not an indication of expected loss.

Unconsolidated VIEs Carrying Value (dollars in millions)

	September 30, 2021				December 31, 2020
	Securities		Other Investments		Securities		Other Investments
Agency securities	$	3,289.1	$	—	$	4,362.2	$	—
Tax credit equity investments		—		366.6		—		311.5
Equity investments		—		146.6		—		111.9
Total assets	$	3,289.1	$	513.2	$	4,362.2	$	423.4
Commitments to tax credit investments(1)	$	—	$	195.7	$	—	$	168.3
Total liabilities	$	—	$	195.7	$	—	$	168.3
Maximum loss exposure	$	3,289.1	$	513.2	$	4,362.2	$	423.4

⁽¹⁾ Represents commitments to invest in affordable housing investments, and other investments qualifying for community reinvestment tax credits. These commitments are payable on demand and are recorded in other liabilities.

NOTE 8 — BORROWINGS

The following table presents the carrying value of outstanding borrowings.

Borrowings (dollars in millions)

	September 30, 2021						December 31, 2020
	CIT Group Inc.		Subsidiaries		Total		Total
Unsecured borrowings:
Senior	$	3,427.0	$	313.3	$	3,740.3	$	4,236.3
Subordinated notes		495.3		—		495.3		494.9
Secured borrowings:
FHLB advances		—		—		—		1,100.0
Other secured and structured financings		—		12.0		12.0		6.1
Total borrowings	$	3,922.3	$	325.3	$	4,247.6	$	5,837.3

Unsecured Borrowings

Revolving Credit Facility

The Revolving Credit Facility had a total commitment amount of $300 million at September 30, 2021 and December 31, 2020, consisting of a $200 million revolving loan tranche and a $100 million revolving loan tranche that could also be utilized for issuance of letters of credit. At September 30, 2021, the Revolving Credit Facility had a Tier 1 capital ratio requirement of 8.5%, and applicable margin charged under the facility of 1.75% for loans indexed to LIBOR and 0.75% for loans related to other indexes, as defined in the credit agreement.

At September 30, 2021, the Revolving Credit Facility was unsecured and guaranteed by 3 of the Company’s domestic operating subsidiaries. In addition, the applicable required minimum guarantor asset coverage ratio could range from 1.0:1.0 to 1.5:1.0 based on CIT’s credit ratings and was 1.25:1.00 at September 30, 2021.

The facility matured on November 1, 2021 and was not renewed.  

Senior Unsecured Notes

On February 9, 2021, the Company redeemed all of the aggregate principal amount ($500 million) of outstanding 4.125% Senior Notes due March 2021 at par. There were no other significant changes from December 31, 2020. See Note 10 – Borrowings in the 2020 Form 10-K.

Subordinated Unsecured Notes

The principal amounts and maturity dates of the subordinated unsecured notes remained unchanged from December 31, 2020. See Note 10 – Borrowings in the 2020 Form 10-K.      

24

CIT Group Inc. and Subsidiaries – Notes to Condensed Consolidated Financial Statements (Unaudited)

Secured Borrowings

At September 30, 2021, the Company had pledged $11.9 billion of assets to several financing facilities (including collateral for the FRB discount window that is currently not drawn) which included $11.9 billion of loans and $28 million of cash. Under the FHLB Facility, CIT Bank, N.A. may at any time grant a security interest in, sell, convey or otherwise dispose of any of the assets used for collateral, provided that CIT Bank, N.A. is in compliance with the collateral maintenance requirement immediately following such disposition and all other requirements of the facility at the time of such disposition.

FHLB Advances

The following table presents the FHLB balances as of September 30, 2021 and December 31, 2020.

FHLB Balances (dollars in millions)

	September 30,		December 31,
	2021		2020
Total borrowing capacity	$	5,391.4	$	7,175.3
Less:
Advances