CIT Reports Fourth Quarter 2010 Net Income of $75 Million, $0.37 Per Diluted Share; Full-Year 2010 Net Income of $517 Million, $2.58 Per Diluted Share

NEW YORK—(BUSINESS WIRE)—CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies, today reported net income for the quarter ended December 31, 2010 of $75 million, $0.37 per diluted share. Net income for the full year was $517 million, $2.58 per diluted share.

“I am pleased with the significant progress we have made this past year,” said John A. Thain, Chairman and Chief Executive Officer. “We’ve completed the build out of our senior management team, eliminated more than $7 billion of high-cost debt, sold more than $5 billion of assets, and funded more than $4.5 billion in new business. We will continue to serve the small business and middle market sectors, the engines of economic growth in the U.S., as we remain focused on increasing the value of our franchise.”

As announced on February 2, 2011, CIT will restate the financial results of the first three quarters of 2010 in conjunction with filing its Form 10-K. Information regarding the restatements is provided in the “2010 Quarterly Restatements” section and tables that follow. All comparisons to prior 2010 quarters are to this restated information.

Summary of Fourth Quarter Financial Results

Fourth quarter results reflect broad-based increases in new business volume, further progress reducing our funding costs and continued stabilization in credit trends. Net income declined sequentially reflecting a decrease in interest income, lower gains on asset sales and higher operating expenses, which included a $32 million pre-tax restructuring charge. Earnings also reflect a decline in net finance revenue, attributable in part to lower average earning assets, higher credit costs, and increased debt prepayment fees of $49 million, partially offset by favorable income tax settlements. Pre-tax income includes benefits from fresh start accounting (FSA) related items that totaled $289 million, up $9 million sequentially.

Total assets declined $2.5 billion during the quarter to $51.0 billion at December 31, 2010, as contraction from the sale of non-core assets, prepayments and portfolio run-off exceeded new business activity. Significant asset sales included certain energy-related assets in Corporate Finance, several aircraft in Transportation Finance, and the private student loan portfolio in the Consumer segment. Assets held for sale at December 31, 2010 include vendor receivables, government-guaranteed student loans and corporate loans. New funded business volume increased to $1.5 billion from $1.1 billion last quarter, reflecting increased corporate lending and aircraft deliveries.

Net finance revenue1 declined from the third quarter as the impact of lower average earning assets (down $2.5 billion) exceeded the slightly higher FSA accretion. Net operating lease revenues were down slightly from the third quarter as the benefit of higher equipment asset balances was offset by the impact of lower lease rates on renewals. As a percentage of average earning assets, net finance revenue was 3.04%, down from 3.44% in the third quarter, and included a 2.94% benefit from FSA. Excluding FSA and the effect of prepayment penalties on high-cost debt in both quarters, margin was 0.56%, down 39 basis points from the third quarter, as our changing portfolio mix more than offset the benefits of paying down high-cost debt. Asset yields declined due to the impact from the third quarter sale of higher yielding consumer receivables in Vendor Finance as well as compressed operating lease margins.

Other income (excluding operating lease rentals) was down from the third quarter as lower gains on asset sales offset higher recoveries on receivables charged-off prior to the adoption of FSA.

Operating expenses for the December 2010 quarter included $32 million of restructuring charges related primarily to the consolidation of office space in the New York region. Absent these charges, operating expenses declined from the prior quarter, primarily due to lower compensation costs.

The current quarter includes an income tax benefit as favorable settlements of prior year international tax positions were partially offset by taxes on international operations and valuation allowances related to U.S. losses.

Credit

Non-accrual loans decreased over $400 million from the third quarter to $1.6 billion, due primarily to repayments and asset dispositions in Corporate Finance and Transportation Finance. Reported net charge-offs were $180 million, up from $101 million in the third quarter. This increase includes the acceleration of charge-offs based on delinquency status in selected small-ticket portfolios in Vendor Finance and Corporate Finance as well as charge-offs on loans moved to held for sale. These amounts do not reflect $69 million of recoveries of pre-FSA charge-offs recorded in other income.

Management also evaluates credit performance using credit metrics that exclude the impact of FSA. On this basis, gross charge-offs were $306 million for the fourth quarter, up $72 million from the third quarter. Non-accrual loans of $2.0 billion decreased from $2.6 billion at the end of the third quarter. New inflows to non-accrual loans continued to decline.

Allowance for Loan Losses

The allowance for loan losses decreased to $416 million. Specific reserves increased largely due to pre-emergence loans, including energy exposures. Non-specific reserves declined as a result of the acceleration of charge-offs based upon delinquency status, portfolio contraction, and charge-offs on assets moved to held for sale, partially offset by reserve build for new volume. In aggregate, the provision rose $17 million from the third quarter.

Capital and Funding

Total cash at December 31, 2010 was $11.2 billion and consisted of $6.3 billion at the bank holding company, $1.3 billion at CIT Bank, $1.0 billion at operating subsidiaries and $2.6 billion in other restricted cash.

We redeemed $1.4 billion of 10.25% Series B Notes during the fourth quarter and the remaining balance of Series B notes (approximately $750 million) on January 4, 2011. We also redeemed $500 million of the 7% Series A notes due in 2013 on January 31, 2011.

Tier 1 and Total Capital ratios at year-end were 19.1% and 20.0%, respectively, up from 18.4% and 19.3% at September 30, 2010. Risk-weighted assets totaled $44.1 billion, down from $45.3 billion due to lower asset levels and partially offset by the Company’s commitment to purchase 38 new Boeing aircraft. Book value per share at December 31, 2010 was $44.48.

Segment Highlights

Corporate Finance

Corporate Finance pre-tax earnings were $55 million, down from $139 million in the third quarter, as an increase in credit costs and lower gains on asset sales offset higher recoveries on loans charged-off prior to the adoption of FSA. Financing and leasing assets declined to $8.8 billion, largely due to sales of certain domestic energy-related assets and non-U.S. loans, partially offset by higher new business activity. Committed new volume more than doubled and funded loan volume increased 57% from the third quarter. Most of the U.S. volume was originated by CIT Bank. Non-accrual loans declined $276 million to $1.2 billion at December 31, 2010 on sales, repayments and charge-offs. The increase in provision for credit losses was largely concentrated in the small business lending and energy portfolios. Operating expenses declined from the third quarter on lower compensation costs, reflecting, in part, a 5% reduction in headcount.

Transportation Finance

Transportation Finance pre-tax earnings were $10 million, down from $19 million in the third quarter, as lower gains on asset sales offset a lower provision for credit losses. Rail fleet utilization, including commitments, increased slightly to above 94%, but that benefit was offset by lower renewal rates. Rental income in commercial aerospace was impacted by the redeployment of aircraft, including eight aircraft returned from a bankrupt carrier, as well as renewal rate pressure. Non-accrual loans declined, primarily due to a repayment by a business air customer. In the fourth quarter we placed six new aircraft and we have lease commitments for all aircraft to be delivered in 2011. We recently announced an order for 38 new Boeing aircraft that are scheduled for delivery between 2014 and 2017.

Trade Finance

Trade Finance pre-tax earnings were $5 million, reflecting lower credit costs, interest expense and operating expenses. Factoring volume was $7 billion, unchanged from the third quarter and reflected a net benefit from new accounts. Net interest revenue improved due to repayments of certain non-accrual accounts, which also reduced the non-accrual loan balance. Other income rose due to higher recoveries on accounts charged-off prior to the adoption of FSA. Net charge-offs were essentially flat with the third quarter and reserves on specific non-accrual accounts decreased in the fourth quarter.

Vendor Finance

Vendor Finance pre-tax earnings were $49 million, down from $89 million in the third quarter, reflecting lower gains on asset sales and a decline in asset yields. The reduced portfolio yields reflect the sales and run-off of higher-yielding consumer receivables, which had a higher risk profile. We funded $584 million of new business volume, an increase of 8%, with double-digit yields that were consistent with new business yields in the third quarter. Total financing and leasing assets declined $0.3 billion to $5.4 billion as the business continues to streamline its portfolio mix. Provision for credit losses decreased due to portfolio contraction, including transfers to held for sale. Non-accrual loans rose, while delinquencies declined from the third quarter.

Consumer Finance

Consumer Finance pre-tax earnings were $1 million, improved from a pre-tax loss of $14 million in the third quarter as asset margins improved due to accelerated FSA accretion. We completed the sale of the private student loan portfolio, which resulted in a slight loss that was recorded in other income. In January we announced that we will outsource the servicing of the remaining government-guaranteed student loan portfolio and completed the sale of approximately $250 million of government-guaranteed loans.

CIT Bank

CIT Bank continues to actively originate new loans. Committed loan volume was the highest for the year at $675 million, of which $370 million was funded, representing a 64% increase over the third quarter. Total assets declined from September 30, 2010, as cash was used to repay a borrowing facility, and loans remained flat at $5.2 billion. Total deposits declined modestly to $4.5 billion, due to reduced funding requirements. The bank established a $250 million conduit facility, which is currently undrawn and creates back-up liquidity. The Total Capital ratio at the Bank was 58.1% and the Tier 1 Leverage ratio was 24.4%.

Full Year 2010 Results

CIT’s 2010 results reflect the Company’s progress with respect to its strategic priorities including hiring key personnel, optimizing the portfolio, reducing the cost of capital and improving its operations as a bank holding company. Full year 2010 net income was $517 million, $2.58 per diluted share and included a significant contribution from FSA. Operating results reflect lower asset levels, increasing new business volumes, lower funding costs and re-establishment of the allowance for loan losses. Total finance and leasing assets declined to $37 billion, including the sale of over $5 billion of consumer or non-core commercial assets. Proceeds from asset sales, portfolio run-off and new financings enabled the repayment of $6 billion of high cost debt during 2010 and the Company’s capital ratios increased significantly as a result of the strong earnings and strategic portfolio reductions. Full-year FSA net accretion added $1.5 billion to pre-tax income; well above initial forecasts largely due to accelerated asset repayments. The effective tax rate of 32% for the full year primarily reflects taxes on income from certain international operations and valuation allowances recorded against U.S. losses.

Reported net charge-offs were $465 million for the year, or 1.53% of average finance receivables. These amounts do not reflect $278 million of recoveries of pre-FSA charge-offs that were recorded in other income. Reported non-accrual loans were $1.6 billion, up $42 million from December 31, 2009. Excluding the impact of FSA, net charge-offs for the year were $982 million, or 2.91% of pre-FSA average finance receivables and exclude recoveries of $278 million in other income. On a pre-FSA basis, non-accrual loans declined from $2.8 billion at December 31, 2009 to $2.0 billion. New inflows to non-accrual loans for the past two quarters remained considerably below the quarterly rate for the first half of the year.

2011 Commentary

The Company expects 2011 results to reflect significantly reduced FSA benefits as expectations for asset repayments slow and voluntary Series A debt redemptions result in both prepayment fees and FSA-related costs since the debt is carried at a discount. The Company remains focused on increasing new business volume and utilizing cost efficient funding sources, such as deposits and conduit facilities, to improve pre-FSA net finance margins. The Company remains committed to reducing operating expenses but will continue to invest in infrastructure and controls.

2010 Quarterly Restatements

The Company recently announced it will restate its financial statements for each of the first three quarters of 2010. This restatement is to correct for errors that relate primarily to the application of FSA. These restated amounts will include previous revisions to the quarters ended March 31, 2010 and June 30, 2010 that were included in the September 30, 2010 Form 10-Q. The effect of the restatement from the revised results that were included in the Company’s September 30, 2010 Form 10-Q was a $24 million increase in net income for the nine months ended September 30, 2010, resulting in net income of $442 million for that period. Net income increased for the quarters ended March 31, 2010 and June 30, 2010, by $29 million and $10 million, respectively and decreased for the quarter ended September 30, 2010 by $15 million. The December 31, 2009 balance sheet was revised for immaterial items. The combined impact of these changes is an increase of $0.10 per share to the previously reported book value and a slight change to the previously reported tangible book value, both as of September 30, 2010.

Tables reflecting the previously reported balances, required corrections and restated amounts impacting the income statements and balance sheets, along with descriptions of significant corrections are included in the accompanying financial tables.

See attached tables for financial statements and supplemental financial information.

Conference Call and Web cast

Chairman and Chief Executive Officer John A. Thain and Chief Financial Officer Scott T. Parker will discuss these results on a conference call and audio Web cast today, February 15, 2011, at 8:00 a.m. (EST). Interested parties may access the conference call live by dialing 866-831-6272 for U.S. and Canadian callers or 617-213-8859 for international callers and reference access code “CIT Group” or access the audio web cast at the following website: http://ir.cit.com. An audio replay of the call will be available until 11:59 p.m. (EST) on March 1, 2011, by dialing 888-286-8010 for U.S. and Canadian callers or 617-801-6888 for international callers with the access code 90041701, or at the following website: http://ir.cit.com.

Individuals interested in receiving future updates on CIT via e-mail can register at http://newsalerts.cit.com.

About CIT

Founded in 1908, CIT (NYSE: CIT) is a bank holding company with more than $35 billion in finance and leasing assets. It provides financing and leasing capital to its more than one million small business and middle market clients and their customers across more than 30 industries. CIT maintains leadership positions in small business and middle market lending, factoring, retail finance, aerospace, equipment and rail leasing, and global vendor finance. www.cit.com