CIT Reports Third Quarter Results; Continued Progress on Liquidity Initiatives

Business Wire, Oct 16, 2008

The quarter also included the following noteworthy items:

* Goodwill and intangible asset impairment charges ($455.1 million pretax, $363.6 million after tax) related to the Vendor Finance segment triggered by diminished earnings expectations for the segment, coupled with the prolonged period that our stock has traded below book value. We are in process of restructuring and refocusing this unit in order to return the business to acceptable profitability. The charges represent the entire goodwill and the majority of the intangible assets attributable to the segment.

* A work force reduction and facility closing charge ($28.4 million pretax, $18.4 million after tax), reflecting the elimination of approximately 165 employees in conjunction with streamlining operations across the Company. Employee headcount for continuing operations totaled approximately 5,245 at September 30, 2008, down from 5,425 at June 30, 2008, and 6,545 a year ago.

* A loss ($18.0 million pretax, $10.4 million after tax) on the $600 million money market fund investment that is currently in an orderly liquidation under supervision of the SEC and whose net asset value has fallen to below $1.00.

Net Finance Revenue

* Net finance revenue as a percentage of average earning assets was 2.20%, down 14 basis points from last quarter, on increased funding and liquidity costs, lower lease margins and higher non-accrual loans.

* Operating lease net revenue was 6.60% of average operating leases, down from 6.73% last quarter due to lower margins in the rail business.

Other Income

* Other Income continues to be impacted by reduced market activity and includes the previously discussed money market fund investment loss. The prior quarter includes $9.2 million of losses from asset sales and $20 million in impairment charges on retained interests.

* Fees and other income were up slightly from the prior quarter.

* Factoring commissions rose from last quarter due to the seasonal increase in factoring volume.

* Gains on receivable sales and syndication fees were down from last quarter consistent with the constrained market conditions in the commercial loan market.

* Commercial loan sales and syndication volume were down from last quarter, which included receivables sold for liquidity purposes. There were no off-balance sheet securitization transactions in the current quarter.

* Equipment gains, primarily reflecting aircraft sales, were down from last quarter.

Credit Quality - Commercial

* Net charge-offs as a percentage of average finance receivables were 0.95% for the commercial businesses, up from 0.56% last quarter as charge-offs in all segments, with the exception of Transportation Finance, increased. The sequential quarter increase primarily reflects a $12 million charge-off on a commercial real estate loan on which we foreclosed, and $13 million of charge-offs related to previously-acquired receivables in Vendor Finance. The commercial charge-off ratio was 0.71% for the nine months ended September 30, 2008.

* 60 day owned delinquencies for the commercial businesses were 1.96% of finance receivables, down from 2.43% last quarter, primarily due to an energy loan that was brought current in the third quarter and a foreclosure of property underlying a previously-delinquent commercial real estate loan that was transferred to other assets.