NOTE 2 — LOANS

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

Finance Receivables (dollars in millions)


	June 30, 2011			December 31, 2010
	Domestic	Foreign	Total	Domestic	Foreign	Total
Corporate Finance	$ 5,630.1	$ 1,793.8	$ 7,423.9	$ 6,482.4	$ 1,999.8	$ 8,482.2
Transportation Finance	1,024.7	331.6	1,356.3	1,098.8	290.1	1,388.9
Trade Finance	2,387.2	151.2	2,538.4	2,207.7	179.7	2,387.4
Vendor Finance	2,359.1	1,581.3	3,940.4	2,582.9	1,583.2	4,166.1
Consumer	7,009.4	16.3	7,025.7	8,058.8	17.1	8,075.9
Total	$ 18,410.5	$ 3,874.2	$ 22,284.7	$ 20,430.6	$ 4,069.9	$ 24,500.5

The following table presents selected information related to components of the net investment in finance leases, which are included in total finance receivables:

Components of Net Investment in Finance Leases

(dollars in millions)

	June 30, 2011	December 31, 2010
Unearned income	$ (1,228.8)	$ (1,356.3)
Net unamortized deferred fees and costs	26.6	16.0
Total finance leases	4,227.7	4,522.1

Certain of the following tables present credit-related information at the "class" level in accordance with ASU 2010-20, Disclosures about the Credit Quality of Finance Receivables and the Allowance for Credit Losses. A class is generally a disaggregation of a portfolio segment. In determining the classes, CIT considered the finance receivable characteristics and methods it applies in monitoring and assessing credit risk and performance.

Credit Quality Information

The following table summarizes finance receivables by the risk ratings that bank regulatory agencies utilize to classify credit exposure and which are consistent with indicators the Company monitors. Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information affecting the borrowers' ability to fulfill their obligations. Loans rated as substandard, doubtful and loss are considered classified loans. Classified loans plus special mention loans are considered criticized loans.

The definitions of these ratings are as follows:

·Pass – finance receivables in this category do not meet the criteria for classification in one of the categories below.

·Special mention – a special mention asset exhibits potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects.

·Substandard – a substandard asset is inadequately protected by the current sound worth and paying capacity of the borrower, and is characterized by the distinct possibility that some loss will be sustained if the deficiencies are not corrected.

·Doubtful – a doubtful asset has weaknesses that make collection or liquidation in full unlikely on the basis of current facts, conditions, and values.

·Loss – a loss asset is considered uncollectible and of little or no value.

Substantially all of the commercial Doubtful accounts were on non-accrual status at June 30, 2011 and December 31, 2010, and approximately twenty percent and one-third, respectively, of the Substandard accounts were on non-accrual status as of those dates.

Finance Receivables⁽¹⁾ – By Classification (dollars in millions)

June 30, 2011	Corporate Finance - Other	Corporate Finance- SBL	Transportation Finance	Trade Finance	Vendor Finance US	Vendor Finance International	Total Commercial	Total Consumer	Totals⁽¹⁾
Grade:
Pass	$4,313.2	$ 271.4	$ 727.4	$ 2,102.6	$ 2,034.5	$1,677.5	$11,126.6	$ 6,940.9	$18,067.5
Special mention	1,315.6	241.4	269.1	251.2	129.0	122.7	2,329.0	385.6	2,714.6
Substandard	981.8	175.6	357.9	157.3	142.9	82.9	1,898.4	397.4	2,295.8
Doubtful	347.7	153.4	2.7	27.3	47.7	55.9	634.7	1.1	635.8
Total⁽¹⁾	$6,958.3	$ 841.8	$ 1,357.1	$ 2,538.4	$ 2,354.1	$1,939.0	$15,988.7	$ 7,725.0	$23,713.7
Non-accrual loans	$ 627.4	$ 177.0	$ 56.0	$ 73.4	$ 66.8	$ 60.4	$ 1,061.0	$ 0.8	$ 1,061.8


December 31, 2010			Corporate	Corporate			Vendor	Vendor
			Finance —	Finance —	Transportation	Trade	Finance	Finance	Total	Total
			Other	SBL	Finance	Finance	US	International	Commercial	Consumer	Totals⁽¹⁾
Grade:
Pass			$4,843.4	$ 360.9	$ 652.3	$ 1,977.9	$ 2,198.5	$1,867.9	$ 11,900.9	$ 7,348.4	$19,249.3
Special mention			1,275.6	161.0	540.8	244.3	142.5	193.1	2,557.3	358.2	2,915.5
Substandard			1,205.1	211.8	192.4	123.0	180.7	135.4	2,048.4	614.4	2,662.8
Doubtful			460.0	183.6	3.4	42.2	55.4	60.8	805.4	1.6	807.0
Total⁽¹⁾			$7,784.1	$ 917.3	$ 1,388.9	$ 2,387.4	$ 2,577.1	$2,257.2	$ 17,312.0	$ 8,322.6	$25,634.6
Non-accrual loans			$1,025.4	$ 214.4	$ 63.2	$ 164.4	$ 80.2	$ 67.7	$ 1,615.3	$ 0.7	$ 1,616.0
	(1)	Balances include $1,428.9 million and $1,134.1 million of loans in Assets Held for Sale at June 30, 2011 and December 31, 2010, respectively, which are measured at the lower of cost or fair value. ASU 2010-20 does not require inclusion of these finance receivables in the disclosures above. However, until they are disposed of, the Company manages the credit risk and collections of finance receivables held for sale consistently with its finance receivables held for investment, so that Company data are tracked and used for management purposes on an aggregated basis, as presented above. Other than finance receivables, Assets Held for Sale total on the balance sheet also include operating lease equipment held for sale, which are not included in the above table.

Past Due and Non-accrual Loans

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

Finance Receivables⁽¹⁾ – Delinquency Status (dollars in millions)


				Greater			Total
		30–59 Days	60–89 Days	Than	Total Past		Finance
At June 30, 2011		Past Due	Past Due	90 Days	Due	Current	Receivables⁽¹⁾
Commercial
	Corporate Finance - Other	$ 2.9	$ 12.7	$ 93.8	$ 109.4	$ 6,848.9	$ 6,958.3
	Corporate Finance – SBL	11.0	8.0	35.0	54.0	787.8	841.8
	Transportation Finance	5.2	3.7	1.2	10.1	1,347.0	1,357.1
	Trade Finance	37.3	1.2	2.9	41.4	2,497.0	2,538.4
	Vendor Finance - US	38.5	18.3	14.5	71.3	2,282.8	2,354.1
	Vendor Finance - International	15.9	6.8	10.1	32.8	1,906.2	1,939.0
Consumer		257.0	128.3	399.9	785.2	6,939.8	7,725.0
Total		$ 367.8	$ 179.0	$ 557.4	$ 1,104.2	$ 22,609.5	$ 23,713.7


At December 31, 2010	30—59 Days	60—89 Days	Greater Than	Total Past	Current	Total Finance
	Past Due	Past Due	90 Days	Due		Receivables⁽¹⁾
Commercial
Corporate Finance – Other	$ 43.2	$ 33.7	$ 149.2	$ 226.1	$ 7,558.0	$ 7,784.1
Corporate Finance – SBL	21.8	8.6	73.0	103.4	813.9	917.3
Transportation Finance	9.0	1.8	0.6	11.4	1,377.5	1,388.9
Trade Finance	35.0	1.8	1.3	38.1	2,349.3	2,387.4
Vendor Finance – US	59.4	23.2	20.3	102.9	2,474.2	2,577.1
Vendor Finance – International	20.2	11.5	10.6	42.3	2,214.9	2,257.2
Consumer	351.4	175.9	434.1	961.4	7,361.2	8,322.6
Total	$ 540.0	$ 256.5	$ 689.1	$ 1,485.6	$ 24,149.0	$ 25,634.6

(1)

Balances include $1,428.9 million and $1,134.1 million of loans in Assets Held for Sale at June 30, 2011 and December 30, 2010, respectively. Other than finance receivables, Assets Held for Sale total on the balance sheet also include operating lease equipment held for sale, which are not included in the above table.

The following table sets forth non-accrual loans and assets received in satisfaction of loans (repossessed assets). Non-accrual loans include loans greater than $500,000 that are individually evaluated and determined to be impaired, as well as loans less than $500,000 that are delinquent (generally for more than 90 days).

Finance Receivables on Non-accrual Status (dollars in millions)


		June 30, 2011			December 31, 2010
		Held for Investment	Held for Sale	Total	Held for Investment	Held for Sale	Total
Commercial
	Corporate Finance - Other	$ 352.0	$ 275.4	$ 627.4	$ 969.3	$ 56.1	$ 1,025.4
	Corporate Finance - SBL	160.3	16.7	177.0	214.4	0	214.4
	Transportation Finance	56.0	0	56.0	63.2	0	63.2
	Trade Finance	73.4	0	73.4	164.4	0	164.4
	Vendor Finance - US	66.8	0	66.8	80.2	0	80.2
	Vendor Finance - International	28.2	32.2	60.4	40.4	27.3	67.7
Consumer		0.2	0.6	0.8	0.4	0.3	0.7
Total non-accrual loans		$ 736.9	$ 324.9	$ 1,061.8	$1,532.3	$83.7	$1,616.0
Repossessed assets				15.2			21.1
Total non-performing assets				$ 1,077.0			$ 1,637.1
Government guaranteed accruing loans past due 90 days or more				$ 399.0			$ 433.6
Other accruing loans past due 90 days or more				5.6			1.7
Total accruing loans past due 90 days or more				$ 404.6			$ 435.3

Payments received on non-accrual financing receivables are generally applied against outstanding principal.

Impaired Loans

The Company's policy is to review for impairment finance receivables greater than $500,000 that are on non-accrual status. Consumer loans and small-ticket loan and lease receivables that have not been modified in a troubled debt restructuring, as well as short-term factoring receivables, are included (if appropriate) in the reported non-accrual balances above, but are excluded from the impaired finance receivables disclosure below as charge-offs are typically determined and recorded for such loans when they are more than 120 – 150 days past due.

The following table contains information about impaired finance receivables and the related allowance for credit losses, exclusive of finance receivables that were identified as impaired at the Convenience Date for which the Company is applying the income recognition and disclosure guidance in ASC 310-30 (Loans and Debt Securities Acquired with Deteriorated Credit Quality), which are disclosed further below in this note.

Impaired Loans

At or for the Six Months Ended June 30, 2011 (dollars in millions)

			Unpaid		Average
		Recorded	Principal	Related	Recorded
		Investment	Balance	Allowance	Investment
With no related allowance recorded:
Commercial
	Corporate Finance - Other	$ 78.5	$ 182.6	0	$ 184.7
	Corporate Finance - SBL	42.7	56.8	0	42.1
	Transportation Finance	7.7	9.6	0	9.1
	Trade Finance	53.6	70.9	0	89.8
	Vendor Finance - US	16.7	30.1	0	20.0
	Vendor Finance - International	12.3	31.6	0	14.5
With an allowance recorded:
Commercial
	Corporate Finance - Other	103.5	118.7	35.1	122.7
	Corporate Finance - SBL	47.4	51.3	11.7	49.2
	Transportation Finance	49.0	54.6	12.0	52.9
	Trade Finance	19.7	22.9	6.2	22.0

Total Commercial Impaired Loans ⁽¹⁾		431.1	629.1	65.0	607.0
Total Loans Impaired at Convenience date ⁽²⁾		311.7	983.5	13.3	555.4
Total		$742.8	$ 1,612.6	$78.3	$1,162.4

(1)Interest income recorded while the loans were impaired was not material for the quarter and six months ended June 30, 2011.

(2) Details of finance receivables that were identified as impaired at the Convenience date are presented under Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Impaired Loans for the six months ended June 30, 2010 (dollars in millions)
Average Recorded Investment $402.3


At December 31, 2010⁽¹⁾		Recorded Investment⁽¹⁾		Unpaid Principal Balance⁽¹⁾		Related Allowance

With no related allowance recorded:
Commercial
Corporate Finance – Other		$	235.3	$	377.5	$	0
Corporate Finance – SBL			50.7		72.2		0
Transportation Finance			11.0		12.8		0
Trade Finance			131.5		150.0		0
Vendor Finance - US			26.5		51.5		0
Vendor Finance - International			15.7		38.6		0
With an allowance recorded:
Commercial
Corporate Finance – Other			148.8		161.8		43.3
Corporate Finance – SBL			51.9		54.5		12.7
Transportation Finance			56.4		57.6		10.0
Trade Finance			27.1		31.1		5.3

Total Commercial		$	754.9	$	1,007.6	$	71.3

(1)	December 31, 2010 balances were conformed to current presentation and adjusted to exclude $81.2 million of recorded net investment and $161.1 million of unpaid principal related to loans classified in Assets Held for Sale.

Impairment occurs when, based on current information and events, it is probable that CIT will be unable to collect all amounts due according to contractual terms of the agreement. The Company has established review and monitoring procedures designed to identify, as early as possible, customers that are experiencing financial difficulty. We capture and analyze credit risk based on our internal probability of obligor default (PD) and loss given default (LGD) ratings. A PD rating is determined by evaluating borrower credit-worthiness, including analyzing credit history, financial condition, cash flow adequacy, financial performance and management quality. An LGD rating is predicated on transaction structure, collateral valuation and related guarantees or recourse. Further, related considerations in determining probability of collection include the following:

·Instances where the primary source of payment is no longer sufficient to repay the loan in accordance with terms of the loan document;

·Lack of current financial data related to the borrower or guarantor;

·Delinquency status of the loan;

·Borrowers experiencing problems, such as operating losses, marginal working capital, inadequate cash flow or business interruptions;

·Loans secured by collateral that is not readily marketable or that is susceptible to deterioration in realizable value; and

·Loans to borrowers in industries or countries experiencing economic instability.

Impairment is measured as the shortfall between estimated value and recorded investment in the finance receivable. A specific allowance is recorded for the shortfall. In instances where the estimated value exceeds the recorded investment, no specific allowance is recorded. The estimated value is determined using fair value of collateral and other cash flows if the finance receivable is collateralized, or the present value of expected future cash flows discounted at the contract's effective interest rate. In instances when the Company measures impairment based on the present value of expected future cash flows, the change in present value is reported as bad-debt expense.

The following summarizes key elements of the Company's policy regarding the determination of collateral fair value in the measurement of impairment:

·"Orderly liquidation value" is the basis for collateral valuation;

·Appraisals are updated annually or more often as market conditions warrant; or

·Appraisal values are discounted in the determination of impairment if the:

·appraisal does not reflect current market conditions; or

·collateral consists of inventory, accounts receivable, or other forms of collateral, which may become difficult to locate, collect or subject to pilferage in a liquidation.

The Company periodically modifies the terms of finance receivables in response to borrowers' difficulties. Modifications that include a financial concession to the borrower are accounted for as troubled debt restructurings (TDRs). The net investment of TDRs at June 30, 2011 and December 31, 2010 was $354.1 million and $461.7 million, of which 92% and 95% were on non-accrual. Corporate Finance receivables accounted for 75% and 73% of the total TDRs. At June 30, 2011 and December 31, 2010, there were $39.5 million and $19.6 million, respectively, of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs.

Loans and Debt Securities Acquired with Deteriorated Credit Quality

For purposes of this presentation, finance receivables that were identified as impaired at the Convenience Date are presented separately below. The Company is applying the income recognition and disclosure guidance in ASC 310-30 (Loans and Debt Securities Acquired with Deteriorated Credit Quality) to loans considered impaired under FSA at the time of emergence. The Company has no other loans reported under this guidance.


(dollars in millions)	June 30, 2011			December 31, 2010
	Carrying Amount	Outstanding balance ⁽¹⁾	Related Allowance	Carrying Amount	Outstanding balance ⁽¹⁾	Related Allowance
Commercial	$ 310.4	$ 974.2	$ 13.3	$ 795.6	$ 1,914.6	$ 54.9
Consumer	1.3	9.3	-	1.5	14.3	-
Totals	$ 311.7	$ 983.5	$ 13.3	$ 797.1	$ 1,928.9	$ 54.9


(dollars in millions)	Quarter ended June 30, 2011		Quarter ended June 30, 2010
	Provision for Credit Losses	Net Charge-offs	Provision for Credit Losses	Net Charge-offs
Commercial	$ 1.1	$ 11.3	$ 32.3	$ 6.3
Consumer	0.4	0.4	0.2	0.2
Totals	$ 1.5	$ 11.7	$ 32.5	$ 6.5


(dollars in millions)	Six months ended June 30, 2011		Six months ended June 30, 2010
	Provision for Credit Losses	Net Charge-offs	Provision for Credit Losses	Net Charge-offs
Commercial	$ 71.5	$ 113.1	$ 85.8	$ 54.1
Consumer	1.2	1.2	1.9	1.9
Totals	$ 72.7	$ 114.3	$ 87.7	$ 56.0

(1)

Represents the sum of contractual principal, interest and fees earned at the reporting date, calculated as pre-FSA net investment plus inception to date of charge-offs.

The following table presents the changes to the accretable discount related to all loans accounted for under ASC 310-30 (loans acquired with deteriorated credit quality).

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

	Quarter ended	Six months ended
	June 30, 2011	June 30, 2011

Accretable discount, beginning of the period	$ 167.5	$ 207.2
Accretion	(13.2)	(25.5)
Disposals/transfers ⁽¹⁾	(18.9)	(46.3)
Accretable discount, end of period	$ 135.4	$ 135.4
⁽¹⁾Amounts include transfers of non-accretable to accretable discounts, which were not material for the quarter and six months ended June 30, 2011.