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Fair Value (Tables)
 9 Months Ended
Sep. 30, 2017
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the Company’s assets and liabilities measured at estimated fair value on a recurring basis.
Assets and Liabilities Measured at Fair Value on a Recurring Basis (dollars in millions)
 
 
 
 
 
 
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
September 30, 2017
 

 
 

 
 

 
 

Assets
 

 
 

 
 

 
 

Debt Securities AFS
$
4,973.6

 
$
398.6

 
$
4,164.0

 
$
411.0

Securities carried at fair value with changes recorded in net income
247.7

 
—

 
—

 
247.7

Equity Securities AFS
34.7

 
0.2

 
34.5

 
—

Derivative assets at fair value — non-qualifying hedges(1)
70.4

 
—

 
70.3

 
0.1

Derivative assets at fair value — qualifying hedges
1.1

 
—

 
1.1

 
—

Total
$
5,327.5

 
$
398.8

 
$
4,269.9

 
$
658.8

Liabilities
 

 
 

 
 

 
 

Derivative liabilities at fair value — non-qualifying hedges(1)
$
(72.8
)
 
$
—

 
$
(59.0
)
 
$
(13.8
)
Derivative liabilities at fair value — qualifying hedges
(7.2
)
 
—

 
(7.2
)
 
—

Consideration holdback liability
(46.0
)
 
—

 
—

 
(46.0
)
FDIC True-up Liability
(64.6
)
 
—

 
—

 
(64.6
)
Total
$
(190.6
)
 
$
—

 
$
(66.2
)
 
$
(124.4
)
December 31, 2016
 

 
 

 
 

 
 

Assets
 

 
   
 
   
 
   
Debt Securities AFS
$
3,674.1

 
$
200.1

 
$
2,988.5

 
$
485.5

Securities carried at fair value with changes recorded in net income
283.5

 
—

 
—

 
283.5

Equity Securities AFS(2)
34.1

 
0.3

 
33.8

 
—

Derivative assets at fair value — non-qualifying hedges(1)
94.7

 
—

 
94.7

 
—

Derivative assets at fair value — qualifying hedges
16.9

 
—

 
16.9

 
—

Total
$
4,103.3

 
$
200.4

 
$
3,133.9

 
$
769.0

Liabilities
 

 
 

 
 

 
 

Derivative liabilities at fair value — non-qualifying hedges(1)
$
(68.8
)
 
$
—

 
$
(57.3
)
 
$
(11.5
)
Consideration holdback liability
(47.2
)
 
—

 
—

 
(47.2
)
FDIC True-up Liability
(61.9
)
 
—

 
—

 
(61.9
)
Total
$
(177.9
)
 
$
—

 
$
(57.3
)
 
$
(120.6
)
(1) 
Derivative fair values include accrued interest
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques
The following tables summarize information about significant unobservable inputs related to the Company’s categories of Level 3 financial assets and liabilities measured on a recurring basis as of September 30, 2017 and December 31, 2016.
Quantitative Information about Level 3 Fair Value Measurements — Recurring (dollars in millions)
 
 
 
 
 
 
 
 
 
 
Financial Instrument
Estimated Fair Value
 
Valuation
Technique(s)
 
Significant
Unobservable
Inputs
 
Range of
Inputs
 
Weighted
Average
September 30, 2017
 
 
 
 
 
 
 
 
 
Assets
 
 
   
 
   
 
   
 
   
Securities — AFS
$
411.0

 
Discounted cash flow
 
Discount Rate
 
0.0% - 41.1%
 
4.4%
 
 
 
 
 
Prepayment Rate
 
2.3% - 22.6%
 
8.9%
 
 
 
 
 
Default Rate
 
0.0% - 6.6%
 
3.6%
 
 
 
 
 
Loss Severity
 
0.6% - 70.6%
 
37.6%
Securities carried at fair value with changes recorded in net income
247.7

 
Discounted cash flow
 
Discount Rate
 
0.8% - 45.1%
 
4.2%
 
 
 
 
 
Prepayment Rate
 
9.3% - 19.4%
 
12.3%
 
 
 
 
 
Default Rate
 
2.7% - 9.6%
 
4.7%
 
 
 
 
 
Loss Severity
 
14.3% - 43.2%
 
26.7%
Derivative assets — non qualifying
0.1

 
Internal valuation model
 
Borrower Rate
 
2.8% - 4.7%
 
3.7%
Total Assets
$
658.8

 
   
 
   
 
   
 
   
Liabilities
 
 
 
 
 
 
 
 
 
FDIC True-up liability
$
(64.6
)
 
Discounted cash flow
 
Discount Rate
 
2.6%
 
2.6%
Consideration holdback liability
(46.0
)
 
Discounted cash flow
 
Payment Probability
 
 0% - 100%
 
40.0%
 
 

 
 
 
 
 
 
 
 
Derivative liabilities — non-qualifying
(13.8
)
 
Market Comparables(1)
 
 
 
 
 
 
Total Liabilities
$
(124.4
)
 
   
 
   
 
   
 
   
December 31, 2016
 
 
 
 
 
 
 
 
 
Assets
 
 
   
 
   
 
   
 
   
Securities — AFS
$
485.5

 
Discounted cash flow
 
Discount Rate
 
0.0% – 96.4%
 
5.5%
 
 
 
 
 
Prepayment Rate
 
3.2% – 21.2%
 
8.8%
 
 
 
 
 
Default Rate
 
0.0% – 9.0%
 
3.9%
 
 
 
 
 
Loss Severity
 
1.0% – 79.8%
 
36.3%
Securities carried at fair value with changes recorded in net income
283.5

 
Discounted cash flow
 
Discount Rate
 
0.0% – 34.6%
 
5.6%
 
 
 
 
 
Prepayment Rate
 
6.1% – 16.2%
 
11.9%
 
 
 
 
 
Default Rate
 
1.9% – 8.1%
 
4.6%
 
 
 
 
 
Loss Severity
 
22.2% – 44.7%
 
25.8%
Total Assets
$
769.0

 
 
 
 
 
 
 
 
Liabilities
 
 
   
 
   
 
   
 
   
FDIC True-up liability
$
(61.9
)
 
Discounted cash flow
 
Discount Rate
 
3.2%
 
3.2%
Consideration holdback liability
(47.2
)
 
Discounted cash flow
 
Payment Probability
 
0% – 100%
 
40.9%
 
 

 
 
 
Discount Rate
 
1.3% – 4.0%
 
2.1%
Derivative liabilities — non-qualifying
(11.5
)
 
Market Comparables(1)
 
 
 
   
 
   
Total Liabilities
$
(120.6
)
 
 
 
 
 
 
 
 
(1) 
The valuation of these derivatives is primarily related to the GSI facilities which is based on several factors using a discounted cash flow methodology, including a) funding costs for similar financings based on current market conditions; b) forecasted usage of long-dated facilities through the final maturity date in 2028; and c) forecasted amortization, due to principal payments on the underlying ABS, which impacts the amount of the unutilized portion.
Changes in Estimated Fair Value for Financial Assets and Liabilities Measured on Recurring Basis
The following table summarizes the changes in estimated fair value for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
Changes in Estimated Fair Value of Level 3 Financial Assets and Liabilities Measured on a Recurring Basis (dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities-
AFS
 
Securities
carried at
fair value
with
changes
recorded in
net income
 
FDIC
Receivable
 
Derivative
assets-
non-
qualifying(1)
 
Derivative
liabilities-
non-
qualifying(2)
 
FDIC
True-up
Liability
 
Consideration
holdback
Liability
December 31, 2016
$
485.5

 
$
283.5

 
$
0.6

 
$
—

 
$
(11.5
)
 
$
(61.9
)
 
$
(47.2
)
Included in earnings
(1.4
)
 
15.0

 
0.9

 
0.1

 
(2.3
)
 
(2.7
)
 
—

Included in comprehensive income
15.8

 
—

 
—

 
—

 
—

 
—

 
—

Impairment
(0.3
)
 
—

 
—

 
—

 
—

 
—

 
—

Settlements
(88.6
)
 
(50.8
)
 
(1.1
)
 
—

 
—

 
—

 
1.2

Balance as of September 30, 2017
$
411.0

 
$
247.7

 
$
0.4

 
$
0.1

 
$
(13.8
)
 
$
(64.6
)
 
$
(46.0
)
December 31, 2015
$
567.1

 
$
339.7

 
$
54.8

 
$
—

 
$
(55.5
)
 
$
(56.9
)
 
$
(60.8
)
Included in earnings
(4.6
)
 
11.6

 
4.8

 
0.4

 
7.2

 
(4.4
)
 
(0.5
)
Included in comprehensive income
22.1

 
—

 
—

 
—

 
—

 
—

 
—

Impairment
(2.2
)
 
—

 
—

 
—

 
—

 
—

 
—

Settlements
(72.0
)
 
(50.0
)
 
(10.3
)
 
—

 
—

 
—

 
14.3

Balance as of September 30, 2016
$
510.4

 
$
301.3

 
$
49.3

 
$
0.4

 
$
(48.3
)
 
$
(61.3
)
 
$
(47.0
)
(1) 
Valuation of Interest Rate Lock Commitments
(2) 
Valuation of the derivatives related to the TRS Transactions and written options on certain CIT Bank CDs.
Carrying Value of Assets Measured at Fair Value on a Non-Recurring Basis
The following table presents assets measured at estimated fair value on a non-recurring basis for which a non-recurring change in fair value has been recorded in the current year:

Carrying Value of Assets Measured at Fair Value on a Non-recurring Basis (dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Level at Reporting Date
 
 
 
Total
Carrying
Value
 
Level 1
 
Level 2
 
Level 3
 
Total Gains
(Losses)
Assets
 

 
 

 
 

 
 

 
 

September 30, 2017
 

 
   
 
   
 
   
 
   
Assets held for sale
$
141.7

 
$
—

 
$
—

 
$
141.7

 
$
(14.3
)
Other real estate owned
27.3

 
—

 
—

 
27.3

 
(6.3
)
Impaired loans
98.3

 
—

 
—

 
98.3

 
(20.5
)
Total
$
267.3

 
$
—

 
$
—

 
$
267.3

 
$
(41.1
)
December 31, 2016
 

 
 

 
 

 
 

 
 

Goodwill
$
51.8

 
$
—

 
$
—

 
$
51.8

 
$
(354.2
)
Assets held for sale
201.6

 
—

 
—

 
201.6

 
(14.7
)
Other real estate owned
22.5

 
—

 
—

 
22.5

 
(3.2
)
Impaired loans
151.9

 
—

 
—

 
151.9

 
(26.8
)
Total
$
427.8

 
$
—

 
$
—

 
$
427.8

 
$
(398.9
)
Carrying and Estimated Fair Values of Financial Instruments
The carrying values and estimated fair values of financial instruments presented below exclude leases and certain other assets and liabilities, which are not required for disclosure.
Financial Instruments (dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated Fair Value
 
 
 
Carrying
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
September 30, 2017
 

 
 

 
 

 
 

 
 

Financial Assets
 

 
 

 
 

 
 

 
 

Cash and interest bearing deposits
$
3,112.3

 
$
3,112.3

 
$
—

 
$
—

 
$
3,112.3

Derivative assets at fair value — non-qualifying hedges
70.4

 
—

 
70.3

 
0.1

 
70.4

Derivative assets at fair value — qualifying hedges
1.1

 
—

 
1.1

 
—

 
1.1

Assets held for sale (excluding leases)
946.2

 
—

 
3.5

 
983.2

 
986.7

Loans (excluding leases)
25,759.3

 
—

 
459.9

 
25,718.7

 
26,178.6

Investment securities(1)
5,744.8

 
398.8

 
4,343.7

 
1,007.1

 
5,749.6

Indemnification assets(2)
142.9

 
—

 
—

 
102.8

 
102.8

Other assets subject to fair value disclosure and unsecured counterparty receivables(3)
553.1

 
—

 
—

 
553.1

 
553.1

Financial Liabilities
 

 
 

 
 

 
 

 
 

Deposits(4)
(29,618.2
)
 
—

 
—

 
(29,728.8
)
 
(29,728.8
)
Derivative liabilities at fair value — non-qualifying hedges
(72.8
)
 
—

 
(59.0
)
 
(13.8
)
 
(72.8
)
Derivative liabilities at fair value — qualifying hedges
(7.2
)
 
—

 
(7.2
)
 
—

 
(7.2
)
Borrowings(4)
(8,567.5
)
 
—

 
(7,800.0
)
 
(1,049.5
)
 
(8,849.5
)
Credit balances of factoring clients
(1,698.5
)
 
—

 
—

 
(1,698.5
)
 
(1,698.5
)
Other liabilities subject to fair value disclosure(5)
(695.2
)
 
—

 
—

 
(695.2
)
 
(695.2
)
December 31, 2016
 

 
   
 
   
 
   
 
   
Financial Assets
 

 
 

 
 

 
 

 
 

Cash and interest bearing deposits
$
6,430.6

 
$
6,430.6

 
$
—

 
$
—

 
$
6,430.6

Derivative assets at fair value — non-qualifying hedges
94.7

 
—

 
94.7

 
—

 
94.7

Derivative assets at fair value — qualifying hedges
16.9

 
—

 
16.9

 
—

 
16.9

Assets held for sale (excluding leases)
428.4

 
—

 
175.0

 
264.6

 
439.6

Loans (excluding leases)
26,683.0

 
—

 
390.3

 
26,456.4

 
26,846.7

Investment securities(1)
4,491.1

 
200.4

 
3,199.6

 
1,094.2

 
4,494.2

Indemnification assets(2)
233.4

 
—

 
—

 
201.0

 
201.0

Other assets subject to fair value disclosure and unsecured counterparty receivables(3)
712.2

 
—

 
—

 
712.2

 
712.2

Financial Liabilities
 

 
   
 
   
 
   
 
   
Deposits(4)
(32,323.2
)
 
—

 
—

 
(32,490.9
)
 
(32,490.9
)
Derivative liabilities at fair value — non-qualifying hedges
(68.8
)
 
—

 
(57.3
)
 
(11.5
)
 
(68.8
)
Borrowings(4)
(15,097.8
)
 
—

 
(14,457.8
)
 
(1,104.9
)
 
(15,562.7
)
Credit balances of factoring clients
(1,292.0
)
 
—

 
—

 
(1,292.0
)
 
(1,292.0
)
Other liabilities subject to fair value disclosure(5)
(1,003.6
)
 
—

 
—

 
(1,003.6
)
 
(1,003.6
)
(1) 
Level 3 estimated fair value at September 30, 2017, includes debt securities AFS ($411.0 million), securities carried at fair value with changes recorded in net income ($247.7 million), non-marketable investments ($277.5 million), and debt securities HTM ($70.9 million). Level 3 estimated fair value at December 31, 2016 included debt securities AFS ($485.5 million), debt securities carried at fair value with changes recorded in net income ($283.5 million), non-marketable investments ($256.4 million), and debt securities HTM ($68.8 million).
(2) 
The indemnification assets included in the above table do not include Agency claims indemnification ($28.9 million and $108.0 million at September 30, 2017 and December 31, 2016, respectively), as they are not considered financial instruments.
(3) 
Other assets subject to fair value disclosure primarily include accrued interest receivable and miscellaneous receivables. These assets have carrying values that approximate fair value generally due to the short-term nature and are classified as Level 3. The unsecured counterparty receivables primarily consist of amounts owed to CIT from GSI for debt discount, return of collateral posted to GSI and settlements resulting from market value changes to asset-backed securities underlying the TRS.
(4) 
Deposits and borrowings include accrued interest, which is included in “Other liabilities” in the Balance Sheet.
(5) 
Other liabilities subject to fair value disclosure include accounts payable, accrued liabilities, customer security and maintenance deposits and miscellaneous liabilities. The fair value of these approximate carrying value and are classified as level 3.