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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q



|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission
file number 001-11011

THE FINOVA GROUP INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 86-0695381                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification no.)



|                                          |  |           
|----------------------------------------- |  | ----------
|4800 North Scottsdale Road Scottsdale, AZ |  | 85251-7623
|(Address of principal executive offices)  |  | (Zip code)

Registrants telephone number, including area code: 480-636-4800

N/A

(Former name, former address
and former fiscal year, if changed since last report)

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  þ                No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated
filer ̈Non-accelerated
filer  þ

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

Yes ̈No  þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check
mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court.

Yes  þ                No ̈

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of October 27, 2006, approximately 122,041,000 shares of Common Stock ($0.01 par value) were outstanding.



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##### Table of Contents

THE FINOVA GROUP INC.

TABLE OF CONTENTS



|                             |  |                                                                                       |  |         
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | --------
|                             |  |                                                                                       |  | Page No.
|PART I FINANCIAL INFORMATION |  |                                                                                      
|                             |  |                                                                                      
|Item 1.                      |  | Financial Statements                                                                  |  | 1       
|                             |  |                                                                                      
|                             |  | Condensed Consolidated Balance Sheets                                                 |  | 1       
|                             |  | Condensed Statements of Consolidated Operations                                       |  | 2       
|                             |  | Condensed Statements of Consolidated Cash Flows                                       |  | 3       
|                             |  | Condensed Statements of Consolidated Stockholders Equity                             |  | 4       
|                             |  | Notes to Interim Condensed Consolidated Financial Statements                          |  | 5       
|                             |  |                                                                                      
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12      
|                             |  |                                                                                      
|                             |  | Special Note Regarding Forward-Looking Statements                                     |  | 23      
|                             |  |                                                                                      
|Item 3.                      |  | Quantitative and Qualitative Disclosure About Market Risk                             |  | 23      
|                             |  |                                                                                      
|Item 4.                      |  | Controls and Procedures                                                               |  | 23      
|                             | 
|PART II OTHER INFORMATION    |  |                                                                                      
|                             |  |                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                     |  | 24      
|                             |  |                                                                                      
|Item 1A.                     |  | Risk Factors                                                                          |  | 24      
|                             |  |                                                                                      
|Item 6.                      |  | Exhibits                                                                              |  | 24      
|                             |  |                                                                                      
|Signatures                   |  |                                                                                       |  | 25      



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##### Table of Contents

PART I FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

THE FINOVA GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



|                                                                                           |  |                   |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------ |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                           |  | September 30,2006 |           |   | December 31,2005 |  
|                                                                                           |  | (Unaudited)       |           |   | (Audited)        |  
|ASSETS                                                                                     |  |                   |           |   |                  |   |           |  
|Cash and cash equivalents                                                                  |  | $                 | 221,639   |   |                  | $ | 212,317   |  
|Restricted cash - impermissible restricted payments                                        |  |                   | 76,542    |   |                  |   | 67,169    |  
|Financing Assets:                                                                          |  |                   |           |   |                  |   |           |  
|Loans and other financing contracts, net                                                   |  |                   | 106,330   |   |                  |   | 177,887   |  
|Direct financing leases                                                                    |  |                   | 820       |   |                  |   | 77,948    |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|Total financing assets                                                                     |  |                   | 107,150   |   |                  |   | 255,835   |  
|Reserve for credit losses                                                                  |  |                   | (11,986   | ) |                  |   | (29,032   | )
|                                                                                           |  |                   |           |   |                  |   |           |  
|Net financing assets                                                                       |  |                   | 95,164    |   |                  |   | 226,803   |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|Other Financial Assets:                                                                    |  |                   |           |   |                  |   |           |  
|Operating leases                                                                           |  |                   | 36,179    |   |                  |   | 69,784    |  
|Investments                                                                                |  |                   | 11,400    |   |                  |   | 22,490    |  
|Assets held for sale                                                                       |  |                   | 27,883    |   |                  |   |           |  
|Assets held for production of income                                                       |  |                   |           |   |                  |   | 7,572     |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|Total other financial assets                                                               |  |                   | 75,462    |   |                  |   | 99,846    |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|Total Financial Assets                                                                     |  |                   | 170,626   |   |                  |   | 326,649   |  
|Other assets                                                                               |  |                   | 4,743     |   |                  |   | 5,016     |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|                                                                                           |  | $                 | 473,550   |   |                  | $ | 611,151   |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                       |  |                   |           |   |                  |   |           |  
|Liabilities:                                                                               |  |                   |           |   |                  |   |           |  
|Senior Notes, net (principal amount due of $1.5 billion and $1.7 billion, respectively)    |  | $                 | 997,570   |   |                  | $ | 1,151,491 |  
|Interest payable                                                                           |  |                   | 42,887    |   |                  |   | 16,215    |  
|Accounts payable and accrued expenses                                                      |  |                   | 33,585    |   |                  |   | 52,655    |  
|Deferred income taxes, net                                                                 |  |                   | 2,407     |   |                  |   | 2,521     |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|Total Liabilities                                                                          |  |                   | 1,076,449 |   |                  |   | 1,222,882 |  
|                                                                                           |  |                   |           |   |                  |   |           |  
|Stockholders Equity:                                                                      |  |                   |           |   |                  |   |           |  
|Common stock, $0.01 par value, 400,000,000 shares authorized and 125,873,000 shares issued |  |                   | 1,259     |   |                  |   | 1,259     |  
|Additional capital                                                                         |  |                   | 113,140   |   |                  |   | 113,140   |  
|Accumulated deficit                                                                        |  |                   | (716,762  | ) |                  |   | (727,149  | )
|Accumulated other comprehensive income                                                     |  |                   |           |   |                  |   | 1,555     |  
|Common stock in treasury, 3,832,000 shares                                                 |  |                   | (536      | ) |                  |   | (536      | )
|                                                                                           |  |                   |           |   |                  |   |           |  
|Total Stockholders Equity                                                                 |  |                   | (602,899  | ) |                  |   | (611,731  | )
|                                                                                           |  |                   |           |   |                  |   |           |  
|                                                                                           |  | $                 | 473,550   |   |                  | $ | 611,151   |  
|                                                                                           |  |                   |           |   |                  |   |           |  

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)



|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|--------------------------------------- |  | ------------------------------- | ----------- | - | ------------------------------- | - | ----------- | ------------------------------ |  | - | ------------------------------ | - |  | - | ----------- | -
|                                        |  | Three MonthsEndedSept. 30, 2006 |             |   | Three MonthsEndedSept. 30, 2005 |   |             | Nine MonthsEndedSept. 30, 2006 |  |   | Nine MonthsEndedSept. 30, 2005 |  
|Revenues:                               |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Interest income                         |  | $                               | 582         |   |                                 | $ | 7,742       |                                |  | $ | 5,240                          |   |  | $ | 23,891      |  
|Rental income                           |  |                                 | 1,256       |   |                                 |   | 2,740       |                                |  |   | 4,142                          |   |  |   | 9,550       |  
|Operating lease income                  |  |                                 | 6,538       |   |                                 |   | 8,654       |                                |  |   | 21,358                         |   |  |   | 31,878      |  
|Fees and other income                   |  |                                 | 3,832       |   |                                 |   | 3,635       |                                |  |   | 13,267                         |   |  |   | 11,084      |  
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Total Revenues                          |  |                                 | 12,208      |   |                                 |   | 22,771      |                                |  |   | 44,007                         |   |  |   | 76,403      |  
|Interest expense                        |  |                                 | (36,823     | ) |                                 |   | (42,419     | )                              |  |   | (113,291                       | ) |  |   | (134,917    | )
|Operating lease depreciation            |  |                                 | (782        | ) |                                 |   | (2,020      | )                              |  |   | (3,963                         | ) |  |   | (6,407      | )
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Interest Margin                         |  |                                 | (25,397     | ) |                                 |   | (21,668     | )                              |  |   | (73,247                        | ) |  |   | (64,921     | )
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Other Revenues and (Expenses):          |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Provision for credit losses             |  |                                 | (7,212      | ) |                                 |   | 129         |                                |  |   | 15,217                         |   |  |   | 45,469      |  
|Net gain (loss) on financial assets     |  |                                 | 49,868      |   |                                 |   | (2,679      | )                              |  |   | 106,926                        |   |  |   | 17,902      |  
|Portfolio expenses                      |  |                                 | (5,448      | ) |                                 |   | (4,984      | )                              |  |   | (15,120                        | ) |  |   | (15,516     | )
|General and administrative expenses     |  |                                 | (7,176      | ) |                                 |   | (7,958      | )                              |  |   | (23,389                        | ) |  |   | (32,120     | )
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Total Other Revenues and (Expenses)     |  |                                 | 30,032      |   |                                 |   | (15,492     | )                              |  |   | 83,634                         |   |  |   | 15,735      |  
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Income (loss) before income taxes       |  |                                 | 4,635       |   |                                 |   | (37,160     | )                              |  |   | 10,387                         |   |  |   | (49,186     | )
|Income tax expense                      |  |                                 |            |   |                                 |   |            |                                |  |   |                               |   |  |   |            |  
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Net Income (loss)                       |  | $                               | 4,635       |   |                                 | $ | (37,160     | )                              |  | $ | 10,387                         |   |  | $ | (49,186     | )
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Basic/diluted earnings (loss) per share |  | $                               | 0.04        |   |                                 | $ | (0.30       | )                              |  | $ | 0.09                           |   |  | $ | (0.40       | )
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  
|Weighted average shares outstanding     |  |                                 | 122,041,000 |   |                                 |   | 122,041,000 |                                |  |   | 122,041,000                    |   |  |   | 122,041,000 |  
|                                        |  |                                 |             |   |                                 |   |             |                                |  |   |                                |   |  |   |             |  

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Dollars in thousands)

(Unaudited)



|                                                                                     |  |                                 |          |   |      |   |          |  
|------------------------------------------------------------------------------------ |  | ------------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                     |  | Nine Months Ended September 30, |         
|                                                                                     |  | 2006                            |          |   | 2005 |  
|Operating Activities:                                                                |  |                                 |          |   |      |   |          |  
|Net income (loss)                                                                    |  | $                               | 10,387   |   |      | $ | (49,186  | )
|Adjustments to reconcile net income (loss) to net cash used by operating activities: |  |                                 |          |   |      |   |          |  
|Reversal of provision for credit losses                                              |  |                                 | (15,217  | ) |      |   | (45,469  | )
|Net cash gain on disposal of financial assets                                        |  |                                 | (91,825  | ) |      |   | (26,170  | )
|Net non-cash (gain) charge-off on financial assets                                   |  |                                 | (15,101  | ) |      |   | 8,268    |  
|Depreciation and amortization                                                        |  |                                 | 4,726    |   |      |   | 7,021    |  
|Deferred income taxes, net                                                           |  |                                 | (114     | ) |      |   | (252     | )
|Fresh-start accretion - assets                                                       |  |                                 | (1,293   | ) |      |   | (2,135   | )
|Fresh-start discount amortization - Senior Notes                                     |  |                                 | 24,156   |   |      |   | 30,221   |  
|Change in assets and liabilities:                                                    |  |                                 |          |   |      |   |          |  
|Increase in other assets                                                             |  |                                 | (490     | ) |      |   | (1,885   | )
|Decrease in accounts payable and accrued expenses                                    |  |                                 | (7,274   | ) |      |   | (13,464  | )
|Increase in interest payable                                                         |  |                                 | 26,672   |   |      |   | 28,031   |  
|                                                                                     |  |                                 |          |   |      |   |          |  
|Net Cash Used by Operating Activities                                                |  |                                 | (65,373  | ) |      |   | (65,020  | )
|                                                                                     |  |                                 |          |   |      |   |          |  
|Investing Activities:                                                                |  |                                 |          |   |      |   |          |  
|Proceeds from disposals of leases and other owned assets                             |  |                                 | 84,320   |   |      |   | 35,851   |  
|Proceeds from sales of investments                                                   |  |                                 | 12,792   |   |      |   | 3,654    |  
|Proceeds from sales of loans and financing leases                                    |  |                                 | 109,706  |   |      |   | 27,041   |  
|Collections and prepayments from financial assets                                    |  |                                 | 105,238  |   |      |   | 218,398  |  
|Fundings under existing customer commitments                                         |  |                                 | (5,194   | ) |      |   | (11,024  | )
|Prepayment of nonrecourse debt on leveraged leases                                   |  |                                 | (25,446  | ) |      |   | (12,461  | )
|Transfer of cash previously received from the Thaxton Entities                       |  |                                 | (24,422  | ) |      |   |          |  
|Deposit of impermissible restricted payments into restricted cash account            |  |                                 | (9,373   | ) |      |   | (23,431  | )
|Recoveries of loans previously written off                                           |  |                                 | 5,151    |   |      |   | 9,846    |  
|                                                                                     |  |                                 |          |   |      |   |          |  
|Net Cash Provided by Investing Activities                                            |  |                                 | 252,772  |   |      |   | 247,874  |  
|                                                                                     |  |                                 |          |   |      |   |          |  
|Financing Activities:                                                                |  |                                 |          |   |      |   |          |  
|Principal prepayments of Senior Notes                                                |  |                                 | (178,077 | ) |      |   | (445,192 | )
|                                                                                     |  |                                 |          |   |      |   |          |  
|Net Cash Used by Financing Activities                                                |  |                                 | (178,077 | ) |      |   | (445,192 | )
|                                                                                     |  |                                 |          |   |      |   |          |  
|Increase (Decrease) in Cash and Cash Equivalents                                     |  |                                 | 9,322    |   |      |   | (262,338 | )
|Cash and Cash Equivalents, beginning of year                                         |  |                                 | 212,317  |   |      |   | 480,485  |  
|                                                                                     |  |                                 |          |   |      |   |          |  
|Cash and Cash Equivalents, end of period                                             |  | $                               | 221,639  |   |      | $ | 218,147  |  
|                                                                                     |  |                                 |          |   |      |   |          |  

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

CONDENSED STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY

(Dollars in thousands)

(Unaudited)



|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|----------------------------------------------- |  | ----------- | ----- | ----------------- | - | ------------------ |  | - | ------------------------------------------ | - |  | ---------------------- | ------- | - | ------------------------ | - | ---- | - |  | - | -------- | -
|                                                |  | CommonStock |       | AdditionalCapital |   | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | CommonStock inTreasury |         |   | TotalStockholdersEquity |  
|Balance, January 1, 2005                        |  | $           | 1,259 |                   | $ | 113,140            |  | $ | (632,702                                   | ) |  | $                      | (15,838 | ) |                          | $ | (536 | ) |  | $ | (534,677 | )
|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Comprehensive loss:                             |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Net loss                                        |  |             |       |                   |   |                    |  |   | (94,447                                    | ) |  |                        |         |   |                          |   |      |   |  |   | (94,447  | )
|Minimum pension liability adjustment            |  |             |       |                   |   |                    |  |   |                                            |   |  |                        | 16,494  |   |                          |   |      |   |  |   | 16,494   |  
|Net change in unrealized holding gains (losses) |  |             |       |                   |   |                    |  |   |                                            |   |  |                        | 787     |   |                          |   |      |   |  |   | 787      |  
|Net change in foreign currency translation      |  |             |       |                   |   |                    |  |   |                                            |   |  |                        | 112     |   |                          |   |      |   |  |   | 112      |  
|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Comprehensive loss                              |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   | (77,054  | )
|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Balance, December 31, 2005                      |  |             | 1,259 |                   |   | 113,140            |  |   | (727,149                                   | ) |  |                        | 1,555   |   |                          |   | (536 | ) |  |   | (611,731 | )
|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Comprehensive income:                           |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Net income                                      |  |             |       |                   |   |                    |  |   | 10,387                                     |   |  |                        |         |   |                          |   |      |   |  |   | 10,387   |  
|Net change in unrealized holding gains (losses) |  |             |       |                   |   |                    |  |   |                                            |   |  |                        | (2,002  | ) |                          |   |      |   |  |   | (2,002   | )
|Net change in foreign currency translation      |  |             |       |                   |   |                    |  |   |                                            |   |  |                        | 447     |   |                          |   |      |   |  |   | 447      |  
|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Comprehensive income                            |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   | 8,832    |  
|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  
|Balance, September 30, 2006                     |  | $           | 1,259 |                   | $ | 113,140            |  | $ | (716,762                                   | ) |  | $                      |        |   |                          | $ | (536 | ) |  | $ | (602,899 | )
|                                                |  |             |       |                   |   |                    |  |   |                                            |   |  |                        |         |   |                          |   |      |   |  |   |          |  

See notes to interim condensed consolidated financial statements.



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THE FINOVA GROUP INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Dollars in
thousands in tables)

(Unaudited)



|A. | Nature of Operations
|-- | --------------------

The accompanying financial statements and
notes hereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2005. Capitalized terms not defined herein are
used as defined in the Form 10-K.

The notes to the financial statements relate to The FINOVA Group Inc. and its subsidiaries (collectively
FINOVA or the Company), including FINOVA Capital Corporation and its subsidiaries (FINOVA Capital). FINOVA is a financial services holding company. Through its principal operating subsidiary, FINOVA Capital, the
Company has provided a broad range of financing and capital markets products, primarily to mid-size businesses.

The Companys business activities are
limited to maximizing the value of its portfolio through the orderly collection of its assets. These activities include collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. The
Company has sold substantial portions of its asset portfolio and will consider future sales of any asset if buyers can be found at acceptable prices; however, there can be no assurance that the Company will be successful in its efforts to sell
additional assets. The Company is currently offering to sell its remaining assets both by portfolio and individual asset. The Company is prohibited by the Indenture governing its 7.5% Senior Secured Notes (the Senior Notes) from engaging
in any new lending activities or other business, except to honor existing customer commitments and in certain instances, to restructure financing relationships to maximize value. Any funds generated in excess of cash reserves permitted by the
Companys debt agreements have been used to reduce FINOVAs obligations to its creditors.

Because substantially all of the Companys assets
(except for a few assets that could not be pledged because those assets already secured other obligations) are pledged to secure its obligations under the promissory notes of FINOVA Capital issued to FINOVA in the aggregate principal amount of the
Senior Notes (the Intercompany Notes), FINOVAs ability to obtain additional or alternate financing is severely restricted. Accordingly, FINOVA intends to rely on internally generated cash flows from the liquidation of its assets as
its only meaningful source of liquidity.

FINOVAs business continues to be operated under a Management Services Agreement with Leucadia National
Corporation (Leucadia) that expires in 2011. Pursuant to that agreement, Leucadia has designated its employees to act as Chairman of the Board (Ian M. Cumming), President (Joseph S. Steinberg) and Chief Executive Officer (Thomas E.
Mara).

Going Concern

As of September 30,
2006, the Company has a substantial negative net worth. While FINOVA continues to pay its obligations as they become due, the ability of the Company to continue as a going concern is dependent upon many factors, particularly the ability of its
borrowers to repay their obligations to FINOVA and the Companys ability to realize the value of its portfolio. Even if the Company is able to recover the book value of its assets, and there can be no assurance of the Companys ability to
do so, the Company would not be able to repay the Senior Notes in their entirety at maturity in November 2009. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of
assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Companys independent registered public accountants have qualified their report on the
Companys financial statements since 2001 due to concerns regarding the Companys ability to continue as a going concern.



|B. | Significant Accounting Policies
|-- | -------------------------------

The preparation of financial
statements in conformity with U.S. generally accepted accounting principles requires FINOVA to use estimates and assumptions that affect reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities.
Those estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the amounts reported and disclosed in the financial statements. Significant estimates include anticipated



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amounts and timing of future cash flows used in the calculation of the reserve for credit losses and measurement of impairment. Other estimates include
selection of appropriate risk adjusted discount rates used in net present value calculations, determination of fair values of certain financial assets for which there is not an active market, residual assumptions for leasing transactions and the
determination of appropriate valuation allowances against deferred tax assets. Actual results could differ from those estimated.

For a listing of the
Companys significant accounting policies, see Note B. Significant Accounting Policies in the Companys Annual Report on Form 10-K for the year ended December 31, 2005.

Consolidation of Interim Reporting

The interim condensed consolidated financial statements present the
financial position, results of operations and cash flows of FINOVA and its subsidiaries, including FINOVA Capital. These financial statements have been prepared in accordance with U.S. generally accepted accounting principles. All intercompany
balances have been eliminated in consolidation.

The interim condensed consolidated financial information is unaudited. In the opinion of management, all
adjustments consisting of normal recurring items necessary to present fairly the financial position as of September 30, 2006 and the results of operations and cash flows presented herein have been included in the condensed consolidated
financial statements. Interim results are not necessarily indicative of results of operations for a full year.



|C. | Total Financial Assets
|-- | ----------------------

Total financial assets represent the
Companys portfolio of investment activities, which primarily consist of secured financing contracts (such as loans and direct financing leases). In addition to its financing contracts, the Company has other financial assets, including assets
held for sale, owned assets (such as operating leases and assets held for the production of income) and investments. As of September 30, 2006 and December 31, 2005, the carrying amount of total financial assets (before reserves) was $182.6
million and $355.7 million, respectively.

The following table details the composition and carrying amounts of FINOVAs total financial assets at
September 30, 2006:



|                          |  |                       |  |                         |   |                          |  |                          |        |                          |   |                      |  |   |        |  |   |         |  
|------------------------- |  | --------------------- |  | ----------------------- | - | ------------------------ |  | ------------------------ | ------ | ------------------------ | - | -------------------- |  | - | ------ |  | - | ------- | -
|                          |  | RevenueAccruingAssets |  | RevenueAccruingImpaired |   | NonaccruingImpairedLoans |  | NonaccruingLeases &Other |        | OwnedAssets &Investments |   | TotalFinancialAssets | 
|Total financial assets    |  | $                     |  |                         | $ | 12,904                   |  | $                        | 94,247 |                          | $ | 27,883               |  | $ | 47,578 |  | $ | 182,612 |  
|Reserve for credit losses |  |                       |  |                         |   |                          |  |                          |        |                          |   |                      |  |   |        |  |   | (11,986 | )
|                          |  |                       |  |                         |   |                          |  |                          |        |                          |   |                      |  |   |        |  |   |         |  
|Total                     |  |                       |  |                         |   |                          |  |                          |        |                          |   |                      |  |   |        |  | $ | 170,626 |  
|                          |  |                       |  |                         |   |                          |  |                          |        |                          |   |                      |  |   |        |  |   |         |  

Since FINOVAs total financial assets are primarily concentrated in specialized industries, the Company is
subject to both general economic risk and the additional risk of economic downturns within individual sectors of the economy, particularly those impacting the aviation industry. The Company has also completed multiple financial transactions with
individual borrowers and their affiliates, resulting in a greater total exposure to those borrowers beyond the typical transaction size and increased concentration risk to economic events affecting the industries (including transportation) of those
borrowers and their affiliates.

At September 30, 2006, the carrying value of the Companys top 10 aggregate exposures to borrowers and their
affiliates totaled approximately $161.8 million and represented 94.2% of the Companys total financial assets (before reserves and excluding the severance and bonus trusts of $10.9 million), as compared to the top 10 exposures at
December 31, 2005 of $220.3 million, which represented 64.6% of total financial assets (before reserves and excluding the severance and bonus trusts of $14.4 million). The top 10 exposures at September 30, 2006, were primarily concentrated
in transportation accounts and the loan to The Thaxton Group, which is the Companys largest exposure. As of the date of this report, all of the top 10 exposures have either been liquidated, are under letters of intent to sell or are subject to
a negotiated settlement.

During the third quarter of 2006, the Company increased the carrying value of two transactions within the top 10 exposures. The
carrying value of the loan to the Thaxton Group increased $24.4 million in conjunction with the transfer of all cash received from the Thaxton Entities since commencement of the Thaxton Entities chapter 11 case (an aggregate of



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approximately $97.2 million), to a trust account to be held by Thaxton under order of the bankruptcy court. The $72.8 million balance of the transferred cash
had been held by FINOVA in a reserve account and had not been reflected in FINOVAs balance sheet. Refer to Note H. Litigation and Claims for a further discussion of the Thaxton proceedings.

Additionally, during the third quarter of 2006, FINOVA prepaid $25.4 million of nonrecourse debt associated with two leveraged leases to Northwest Airlines on Boeing 757
aircraft, which increased FINOVAs basis in those assets. The two Northwest leveraged leases were subsequently sold in the fourth quarter of 2006.

At
September 30, 2006, the Companys transportation portfolio consisted of the following aircraft:



|                                                  |  |                   |  |           |  |       |  |                                 
|------------------------------------------------- |  | ----------------- |  | --------- |  | ----- |  | --------------------------------
|Aircraft Type                                     |  | Number ofAircraft |  | Passenger |  | Cargo |  | ApproximateAverage Age(in years)
|Airbus 300                                        |  | 1                 |  |           |  | 1     |  | 23                              
|Boeing 727                                        |  | 1                 |  |           |  | 1     |  | 28                              
|Boeing 737                                        |  | 8                 |  | 8         |  |       |  | 20                              
|Boeing 757                                        |  | 2                 |  | 2         |  |       |  | 10                              
|McDonnell Douglas DC9                             |  | 4                 |  | 4         |  |       |  | 34                              
|McDonnell Douglas DC10                            |  | 7                 |  |           |  | 7     |  | 29                              
|McDonnell Douglas MD-80 Series                    |  | 9                 |  | 9         |  |       |  | 22                              
|Regional jets, corporate aircraft and turbo props |  | 16                |  | 16        |  |       |  | 16                              
|                                                  |  |                   |  |           |  |       |  |                                 
|Total                                             |  | 48                |  | 39        |  | 9     |  | 21                              
|                                                  |  |                   |  |           |  |       |  |                                 

At September 30, 2006, 20 aircraft were operated by domestic carriers, while 27 aircraft were operated by
foreign carriers. Additionally, 1 aircraft was off-lease and parked at a storage facility in the United States. The Companys transportation portfolio also includes aircraft engines and other transportation equipment. As of the date of this
report, the Company had 38 aircraft with a total carrying value of approximately $76.4 million that had either been liquidated subsequent to September 30, 2006, are under individual letters of intent to sell or are committed to a proposed bulk
asset sale. The proposed bulk asset sale includes 18 aircraft with a total carrying value of approximately $36.7 million. The proposed bulk asset sale is pursuant to a non-binding letter of intent, which is subject to inspection of the aircraft and
records. Due to the fact that the 18 aircraft in this pool are operating throughout the world, additional time will be necessary to complete the inspections. FINOVA will hopefully know if an acceptable final purchase price can be obtained for these
assets during the fourth quarter of 2006. No assurance can be given that all of the letters of intent will result in actual sales, but the Company anticipates the majority of these committed assets will be sold during the fourth quarter of 2006 for
proceeds in excess of FINOVAs carrying values at September 30, 2006. Additionally, six regional jets reflected in the table above are under leveraged leases with Northwest Airlines. The outstanding senior debt on these leveraged leases is
significantly in excess of the underlying aircraft values. As a result, these six assets have virtually no remaining value to FINOVA and previously had been fully written-off. The remaining 4 aircraft in the portfolio are currently not subject to
any proposed transaction. FINOVA continues to offer these assets for sale.

In addition to the Thaxton loan, the Companys non-aviation portfolio at
September 30, 2006 was comprised of assets with a total carrying value of approximately $15.8 million, including the Companys $10.9 million investment in two grantor trusts to secure severance and bonus obligations to its employees. These
assets are held primarily for the benefit of the employees, but are recorded as investments due to the Companys retained interest in any excess assets. Substantially all of the other non-aviation assets are committed to individual asset sales.



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|D. | Reserve For Credit Losses
|-- | -------------------------

The following table presents the
balances and changes to the reserve for credit losses:



|                                        |  |                                 |         |   |      |   |         |  
|--------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                        |  | Nine Months Ended September 30, |        
|                                        |  | 2006                            |         |   | 2005 |  
|Balance, beginning of year              |  | $                               | 29,032  |   |      | $ | 101,270 |  
|Reversal of provision for credit losses |  |                                 | (15,217 | ) |      |   | (45,469 | )
|Write-offs                              |  |                                 | (6,980  | ) |      |   | (15,238 | )
|Recoveries                              |  |                                 | 5,151   |   |      |   | 9,846   |  
|                                        |  |                                 |         |   |      |   |         |  
|Balance, end of period                  |  | $                               | 11,986  |   |      | $ | 50,409  |  
|                                        |  |                                 |         |   |      |   |         |  

For the nine months ended September 30, 2006, the Company recorded a $15.2 million net reversal of provision
for credit losses to reduce its overall reserve for credit losses. The reserve reduction was primarily due to proceeds received from prepayments and asset sales exceeding recorded carrying amounts (net of reserves), recoveries of amounts previously
written off and the Companys detailed assessment of estimated inherent losses in the portfolio. The largest events impacting the reserve during 2006 included a $14.7 million reduction in the reserve for credit losses due to the sale of the
Companys non-aviation assets for proceeds in excess of their carrying amount (net of reserves) and the recording during the third quarter of 2006 of an $8.7 million specific reserve related to the Thaxton loan. The specific reserve was
necessary to adjust the net book value of the Thaxton loan to its estimated settlement of approximately $81.2 million before interest and opt-outs. Refer to Note H. Litigation and Claims for a further discussion of the Thaxton
settlement.

A summary of the reserve for credit losses by impaired and other assets was as follows:



|                            |  |                   |        |                  |   |       
|--------------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                            |  | September 30,2006 |        | December 31,2005
|Reserves on impaired assets |  | $                 | 11,986 |                  | $ | 28,288
|Other reserves              |  |                   |        |                  |   | 744   
|                            |  |                   |        |                  |   |       
|Reserve for credit losses   |  | $                 | 11,986 |                  | $ | 29,032
|                            |  |                   |        |                  |   |       

At September 30, 2006, the total carrying amount of impaired loans and leases was $135.0 million, of which
$12.9 million were revenue accruing. The Company has established impairment reserves of $12.0 million related to $97.1 million of impaired assets. At December 31, 2005, the total carrying amount of impaired loans and leases was $241.1 million,
of which $109.1 million were revenue accruing. Impairment reserves at December 31, 2005 totaled $28.3 million related to $85.4 million of impaired assets.

During the first nine months of 2006, reserves on impaired assets decreased due primarily to write-offs and proceeds received from prepayments and asset sales exceeding recorded carrying amounts (net of reserves), partially offset by
additional reserves recorded on certain existing impaired assets.

Accounts classified as nonaccruing were $122.1 million or 66.9% of total financial
assets (before reserves) at September 30, 2006 as compared to $131.9 million or 37.1% at December 31, 2005. The decline in nonaccruing assets was primarily attributed to collections and asset sales of $47.9 million and write-offs and net
valuation adjustments of $4.0 million, partially offset by an increase following the prepayment of $25.4 million of nonrecourse debt associated with two leveraged leases with Northwest Airlines on Boeing 757 aircraft and the transfer of cash
collected ($24.4 million, excluding $72.8 million in cash previously deposited into a reserve account not reflected on FINOVAs balance sheet) from the Thaxton Entities since Thaxtons bankruptcy filing.



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|E. | Debt
|-- | ----

A summary of the Companys total debt outstanding was as
follows:



|                     |  |                   |           |   |                  |   |           |  
|-------------------- |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                     |  | September 30,2006 |           |   | December 31,2005 |  
|Senior Notes:        |  |                   |           |   |                  |   |           |  
|Principal            |  | $                 | 1,513,654 |   |                  | $ | 1,691,731 |  
|Fresh-start discount |  |                   | (516,084  | ) |                  |   | (540,240  | )
|                     |  |                   |           |   |                  |   |           |  
|Senior Notes, net    |  | $                 | 997,570   |   |                  | $ | 1,151,491 |  
|                     |  |                   |           |   |                  |   |           |  

During the third quarter of 2006, the Company made no principal prepayments on the Senior Notes. In October 2006,
FINOVA announced a $29.7 million principal prepayment that will be made during the fourth quarter of 2006. Following this prepayment, cumulative principal prepayments through November 15, 2006 will total $1.5 billion or 50% of the face amount
($2.97 billion) of the Senior Notes.

In accordance with the terms of the Indenture, the Company is required to use any excess cash as defined in the
Indenture, to make semi-annual interest and principal payments on the Senior Notes. Additionally, the Indenture permits voluntary prepayments at the Companys option, which FINOVA has previously elected to make from time to time; however, due
to the uncertainty of cash requirements associated with the potential wind-up of the Companys affairs, resolution of outstanding bankruptcy claims and matters related to Thaxton, discussed below in Note H. Litigation and Claims,
the Company anticipates maintaining a higher cash reserve to cover these potential and uncertain expenditures, which could limit its ability to make future voluntary prepayments.

The Company does not believe that it has sufficient assets to fully repay the Senior Notes, and the Indenture prohibits the Company from engaging in new business. Therefore, FINOVA intends to rely on the liquidation
of its remaining assets as its only meaningful source of liquidity.

At September 30, 2006, the Senior Notes are reflected on the Companys
balance sheet net of a remaining $516.1 million unamortized fresh-start discount. The book value of the Senior Notes is scheduled to increase over time through the partial amortization of the discount as interest expense. Discount amortization was
accelerated following each of the principal prepayments, which occurred earlier than originally anticipated when fresh-start guidelines were applied upon emergence. Discount amortization is expected to be further adjusted as principal prepayments
are made.

Stockholders should not expect any payments or distributions from FINOVA. The Indenture contemplates that as principal payments are made on the
Senior Notes, FINOVA stockholders will receive a distribution equal to 5.263% (i.e., 5%/95%) of each principal prepayment. Ninety-five percent (95%) of the remaining available cash after establishment of cash reserves as defined in the
Indenture will be used to make semi-annual prepayments of principal on the Senior Notes and five percent (5%) is identified for distributions to and/or repurchases of stock from common stockholders. However, the Indenture prohibits FINOVA from
making distributions to and/or repurchases from stockholders if the payments would render the Company insolvent, would be a fraudulent conveyance or would not be permitted to be made under applicable law. Any such distribution and/or repurchase
would be considered an impermissible restricted payment under the Indenture. Given the Companys significant negative net worth and its belief that the Senior Notes will not be fully repaid, FINOVA is required to retain impermissible restricted
payments until such time, if ever, that it is no longer restricted from making a distribution to its stockholders or until it is necessary to use the cash to satisfy its debt obligations.

In conjunction with the prepayments of Senior Notes noted above, the Company will have retained a total of $78.1 million as of November 15, 2006. Retained amounts
are being segregated and reflected as restricted cash on the balance sheet, pending their final disposition. The Company anticipates that the retained amounts will eventually be paid to the creditors, not to the stockholders. If the funds were to be
paid to the stockholders, affiliates of Berkadia (jointly owned by Leucadia and Berkshire Hathaway), which owns 50% of FINOVAs common stock, would receive half of the retained amounts. Berkadia has advised the Company that it does not believe
that stockholders are entitled to the retained amounts since FINOVA cannot fully satisfy its creditor obligations.



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As previously reported, FINOVA filed a motion in the United States Bankruptcy Court for the District of Delaware seeking
an order that (1) FINOVA no longer needs to direct funds into a restricted account, and (2) FINOVA may use the funds in the restricted account to satisfy its obligations to creditors. For a further discussion of the motion and its status,
see Note H. Litigation and Claims.



|F. | Costs Associated with Exit or Disposal Activities
|-- | -------------------------------------------------



|                           |  |                     |        |   |                          |   |       |  
|-------------------------- |  | ------------------- | ------ | - | ------------------------ | - | ----- | -
|                           |  | TerminationBenefits |        |   | ContractTerminationCosts |  
|Balance, beginning of year |  | $                   | 4,261  |   |                          | $ | 3,699 |  
|Payments                   |  |                     | (2,449 | ) |                          |   | (371  | )
|Net additions (reductions) |  |                     | 3,443  |   |                          |   | (250  | )
|                           |  |                     |        |   |                          |   |       |  
|Balance, end of period     |  | $                   | 5,255  |   |                          | $ | 3,078 |  
|                           |  |                     |        |   |                          |   |       |  

As of September 30, 2006, FINOVA had accrued a liability for termination benefits (including severance) of
$5.3 million related to 43 individuals at various levels within the Company. During the nine months ended September 30, 2006, the Company paid termination benefits of $2.4 million and recorded a net charge of $3.4 million to partially accrue
for employees notified of their pending termination.

As of September 30, 2006, the Company had a total liability for terminated leases and office
space it has ceased using of $3.1 million. The decrease since December 31, 2005 was due to the payment of scheduled lease rentals (net of sublease income) and a $250 thousand reduction in estimated lease termination costs.



|G. | Income Taxes
|-- | ------------

The Company had federal net operating loss
carryforwards of $1.3 billion as of September 30, 2006 and $1.2 billion as of December 31, 2005. No income tax expense or benefit was recorded during the nine months ended September 30, 2006 and 2005. Any pre-tax book income or loss
has been entirely offset by a decrease or increase in valuation allowances against deferred tax assets, which were previously established due to the Companys concern regarding its ability to utilize income tax benefits generated from losses in
prior periods. The Company does not expect to be able to utilize all the deferred tax assets due to uncertainty about the amount of future earnings, a variety of loss or other tax attribute carryover limitations in the various jurisdictions in which
the Company files tax returns and uncertainty regarding the timing of the reversal of deferred tax liabilities.



|H. | Litigation and Claims
|-- | ---------------------

Legal Proceedings

FINOVA is party either as plaintiff or defendant to various actions, proceedings and pending claims, including legal actions, some of which involve claims for
compensatory, punitive or other damages in significant amounts. Litigation often results from FINOVAs attempts to enforce its lending agreements against borrowers and other parties to those transactions. Litigation is subject to many
uncertainties. It is possible that some of the legal actions, proceedings or claims could be decided against FINOVA. Other than the matters described below, FINOVA believes that any resulting liability from its legal proceedings should not
materially affect FINOVAs financial position, results of operations or cash flows. The following matters could have a material adverse impact on FINOVAs financial position, results of operations or cash flows.

It is the Companys policy to accrue for loss contingencies, including litigation, only when the losses are probable and estimable. The determination of when losses
become probable and estimable is inherently subjective and requires significant judgment, which may change, including in response to factors outside the Companys control.

If any legal proceedings result in a significant adverse judgment against the Company, it is unlikely that FINOVA would be able to satisfy that liability due to its financial condition. As previously noted, due to the
Companys financial condition, it does not expect that it can satisfy all of its secured debt obligations at maturity. Attempts to collect on those judgments could lead to future reorganization proceedings of either a voluntary or involuntary
nature.



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##### Table of Contents

Litigation Related to Loans to The Thaxton Group Inc. and Related Companies

The Companys prior periodic filings with the Securities and Exchange Commission have disclosed ongoing litigation against FINOVA Capital with respect to The Thaxton
Group Inc. (TGI) and several related entities (collectively, the Thaxton Entities). The following discussion of the Thaxton litigation should be read in conjunction with those prior disclosures.

Pursuant to an order of the Thaxton Entities bankruptcy court dated September 11, 2006, the Company transferred all of the cash received from the Thaxton Entities
since commencement of the Thaxton Entities chapter 11 proceedings in October 2003, together with interest earned thereon (an aggregate of approximately $97.2 million), to a trust account to be held by Thaxton under order of the bankruptcy court. No
funds in this account will be disbursed other than in accordance with the terms of an order of the bankruptcy court.

On September 12, 2006, the
Company reached a preliminary settlement (the Settlement) to resolve all outstanding claims in the ongoing litigation between the Company, the Thaxton Entities, the holders of subordinated notes issued by the Thaxton Entities (the
Noteholders), and the Official Committee of Unsecured Creditors of the Thaxton Entities. This Settlement will settle all of the actions involving the Company and the Thaxton Entities, in particular the actions pending in the United
States District Court for the District of South Carolina, Anderson Division (the District Court), including the previously described new Thaxton action commenced in the District Court in June 2006, as well as claims in the Thaxton
Entities chapter 11 proceedings (collectively, the Thaxton Litigation).

Under the principal terms of the Settlement, which was approved by the
Companys Board of Directors on September 11, 2006, on the effective date of the Thaxton Entities plan of reorganization, the Company will receive all amounts it transferred into the trust on September 11, 2006  i.e. all amounts
paid by the Thaxton Entities to the Company since commencement of the Thaxton Entities chapter 11 proceedings in October 2003 (together with interest earned thereon), minus $16 million, plus interest actually earned thereon from August 16,
2006, which will be retained by the Thaxton Entities. In addition, the Company will receive complete releases from all Thaxton parties for all matters related to the Thaxton Entities. The Settlement also requires that the summary judgment order of
the District Court be vacated. The Settlement will be structured as a class action, and the Company will have the right to reject the Settlement if (i) more than $6 million principal amount of Thaxton subordinated notes opt out of the
Settlement, and/or (ii) any of the current individual plaintiffs in the Gregory action opt out of the Settlement.

Consummation of the Settlement is
subject to (i) final documentation, (ii) approval by the District Court, the Thaxton Entities bankruptcy court and the bankruptcy court in the Companys chapter 11 proceeding, (iii) notice to the class of the Settlement and
(iv) final court approval of the Settlement after hearings on the fairness of the Settlement. It is anticipated that consummation of the Settlement will not be implemented prior to early 2007.

Motion Regarding Distributions to Stockholders

As discussed
more fully in the Notes to the Consolidated Financial Statements, Note E. Debt, the Indenture contemplates that as principal payments are made on the Senior Notes, FINOVA stockholders will receive a distribution equal to 5.263% of each
principal prepayment. The Indenture prohibits distribution of those amounts due to FINOVAs financial condition. Those amounts are held in a restricted account, and will total $78.1 million as of November 15, 2006. Because FINOVA will not
be able to repay the Senior Notes in full, on April 1, 2005, it filed a motion in the United States Bankruptcy Court for the District of Delaware seeking an order (1) to cease directing funds into a restricted account and (2) to allow
FINOVA to use the funds in the restricted account to satisfy its obligations to creditors.

On February 1, 2006, the Bankruptcy Court issued its order
approving FINOVAs April 1, 2005 motion to the extent that FINOVA will be forever insolvent. The Bankruptcy Court did not find that FINOVA is presently or will be forever insolvent. As a result, FINOVA will continue to direct funds into a
restricted account until such time that FINOVA is deemed to be forever insolvent and the funds will then be distributed to FINOVAs creditors. On February 10, 2006, the Equity Committee filed a Notice of Appeal of the Bankruptcy Court
order to the United States District Court for the District of Delaware. On April 13, 2006, the Delaware District Court issued its order denying the appeal of the Equity Committee on the grounds that the February 1, 2006 order of the
Bankruptcy Court was not a final appealable order.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following section should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2005 and the Special Note Regarding Forward-Looking Statements included
herein. Capitalized terms not defined herein are used as defined in the Form 10-K. The following discussion relates to The FINOVA Group Inc. and its subsidiaries (collectively FINOVA or the Company), including its principal
operating subsidiary, FINOVA Capital Corporation and its subsidiaries (FINOVA Capital).

OVERVIEW

During 2006, the Company has continued to make significant progress in the orderly collection and liquidation of its portfolio. The Company reduced the size of the
portfolio since year-end 2005 by nearly 49%, resulting in total financial assets before reserves of just under $183 million at September 30, 2006.

As
of September 30, 2006, the Company has repaid 49% of the face amount of the Senior Notes and owes approximately $1.5 billion of principal to the Senior Note holders, while only $474 million of total assets remained, including cash reserves and
restricted cash. The Company would have to liquidate its remaining financial assets by more than seven times their aggregate carrying value, which is significantly more than past experience would indicate can be achieved, to generate sufficient
funds to fully repay the Senior Notes. The Company does not believe there is any chance of this occurring. Although FINOVA will not be able to repay the full amount due under the Senior Notes, the Company will continue to seek to maximize the value
of its remaining assets for the benefit of the Note holders.

Looking Ahead / Company Direction. The Company has successfully liquidated over 97% of
its portfolio, which was approximately $7.6 billion when it emerged from bankruptcy in August 2001. At September 30, 2006, the carrying value of FINOVAs portfolio (before reserve for credit losses) had declined to less than $183 million
of financial assets, and it is becoming increasingly more difficult to offset the incremental costs of collecting those assets in an orderly fashion.

During the first quarter of 2006, to maximize the value of its assets, the Company began altering it course of action by offering its remaining portfolios for bulk sale. The first step in this process focused on the non-aviation assets
(other than the loan to The Thaxton Group), which were substantially liquidated during the second quarter of 2006. Following this liquidation, the remaining portfolio was primarily comprised of aviation assets and the loan to The Thaxton Group. On
September 12, 2006, the Company reached a settlement to resolve all outstanding claims in the ongoing litigation between the Company, the Thaxton Entities, the holders of subordinated notes issued by the Thaxton Entities, and the Official
Committee of Unsecured Creditors of the Thaxton Entities. Refer to Note H. Litigation and Claims for a further discussion of the Thaxton settlement.

Throughout the third quarter of 2006, the Company continued to market its transportation portfolio by individual asset and for bulk sale. The portfolio has received a high level of interest and activity. The Company believes its individual
sales efforts to date have generated substantially more cash than what would have been received in a bulk portfolio sale. However, the size of the transportation portfolio has been rapidly declining and many of the more attractive assets in this
portfolio have already been sold or are under letters of intent to sell during 2006. Additionally, the Company was becoming increasingly concerned with world events that could adversely impact the price of oil and the potential value FINOVA could
receive for its remaining aircraft. As a result of this and the incremental costs of collection mentioned earlier, the Company began offering the remaining aviation assets not committed to individual sales for bulk sale in order to maximize the
value of the remaining aviation assets. The Company solicited interest from over 50 prospective buyers that specialize in aviation assets and through a bid process has narrowed the pool to one buyer.

As of the date of this report, the Company had 38 aircraft with a total carrying value of approximately $76.4 million that had either been liquidated subsequent to
September 30, 2006, are under individual letters of intent to sell or are committed to a proposed bulk asset sale. The proposed bulk asset sale includes 18 aircraft with a total carrying value of approximately $36.7 million. The proposed bulk
asset sale is pursuant to a non-binding letter of intent, which is subject to inspection of the aircraft and records. Due to the fact that the 18 aircraft in this pool are operating throughout the world, additional time will be necessary to complete
the inspections. FINOVA will hopefully know if an acceptable final purchase price can be obtained for these assets during the fourth quarter of 2006. No assurance can be given that all of the letters of intent will result in actual sales, but the
Company anticipates that the majority of these committed assets will be sold during the fourth quarter of 2006 for proceeds in excess of FINOVAs carrying values at September 30, 2006.



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The Company anticipates that when all or substantially all of its assets have been liquidated, the affairs of FINOVA will
need to be wound-up. The Company continues to analyze potential alternative methods of wind-up and would like to commit to a final plan of liquidation during 2006 or early 2007; however, this will be contingent on obtaining acceptable prices for its
remaining assets. Additionally, in considering its alternative wind-up methods, the Company intends to take into consideration the restricted cash related to impermissible restricted payments to stockholders, matters related to Thaxton and other
outstanding bankruptcy claims. A final plan of liquidation may or may not be in conjunction with bankruptcy or state law liquidation proceedings. The Company anticipates that in connection with its wind-up, it will seek an order from the bankruptcy
court with respect to FINOVAs solvency. The Company cannot predict with certainty the timing or nature of that final wind-up at this point in time, but is working towards accomplishing that end in a prudent manner to maximize the return on the
remaining assets.

The Company will continue to retain sufficient cash to fund its expenses, including the costs associated with the potential wind-up of
the Companys affairs, resolution of outstanding bankruptcy claims and matters related to Thaxton. As a result, the Company anticipates maintaining a higher cash reserve to cover these potential and uncertain expenditures, which could limit its
ability to make future voluntary principal prepayments.

No Stockholder Payments / Bankruptcy Court Motion.While the Indenture governing the Senior
Notes contemplated that FINOVA would make payments to its stockholders as the Senior Notes were repaid, the Company has not made those payments. Those stockholder distributions are prohibited due to the Companys present financial condition.
Stockholders should not expect any payments or return on their common stock. Those funds are currently being held in a segregated account pending their final disposition. However, the Company anticipates that those funds will eventually be paid to
its creditors, not to the stockholders. If the funds were to be paid to the stockholders, affiliates of Berkadia (which are owned by Berkshire Hathaway and Leucadia), as owner of 50% of FINOVAs stock, would receive half of those
payments.

As discussed in Note H. Litigation and Claims, FINOVA filed a motion in the United States Bankruptcy Court for the District of
Delaware (the court in which the FINOVA reorganization proceedings have taken place), seeking an order that (1) FINOVA no longer needs to direct funds into the restricted account, and (2) FINOVA may use the funds in the restricted account
to satisfy its obligations to creditors. The Bankruptcy Court subsequently issued an order approving FINOVAs motion to the extent that FINOVA will be forever insolvent, which the Company believes is clearly the case. Representatives of
FINOVAs shareholders appealed the Bankruptcy Courts ruling, and in April 2006, the appeal was denied on the grounds that the Bankruptcy Courts order was not a final appealable order.

No Restructuring Plan Contemplated.On numerous occasions, FINOVA has been asked whether there is some plan to save the Company and its net operating loss
carryforwards (NOL). As FINOVA has noted for some time, the Board remains willing to consider legitimate proposals presented by Note holders or others, but is not formulating a restructuring plan intended to enable FINOVA to emerge as a
healthy company.

Many obstacles exist to creation of a viable restructuring plan. A restructuring presumes a sensible business plan emerging from that
process. In light of FINOVAs dwindling asset base, the composition of its remaining assets and the competitive environment, the Company believes it would be difficult, if not futile, in these circumstances to develop a business model that can
produce returns to the creditors and/or new investors greater than that expected from the present course. Absent that, or a substantial new investment in FINOVA, the Company believes it would be difficult to obtain the requisite approval to
restructure the present debt obligations. The task becomes more difficult as the portfolio continues to shrink. FINOVA cautions investors to carefully evaluate applicable tax regulations, which restrict the ability to transfer or use NOLs in a
variety of circumstances. FINOVAs financial statements do not anticipate using the NOLs for those and other reasons.

HIGH INVESTMENT RISK OF
SECURITIES. As previously stated, FINOVA believes that it will be unable to fully repay its Senior Notes and that it is unlikely that it will be able to make any distributions to its stockholders, absent a court order. Consequently, investing in the
Senior Notes and common stock involves a high level of risk.

CRITICAL ACCOUNTING POLICIES

The Companys consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial
statements requires FINOVA to use estimates and assumptions that affect reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. These estimates are subject to known and unknown risks, uncertainties
and other factors that could materially impact the amounts reported and



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disclosed in the financial statements. The Company believes the following to be among the most critical judgment areas in the application of its accounting
policies.

Significant Use of Estimates

Several
of the Companys accounting policies pertain to the ongoing determination of impairment reserves on financing assets and the carrying amount valuation of other financial assets. Determination of impairment reserves and carrying amounts rely, to
a great extent, on the estimation and timing of future cash flows. FINOVAs cash flow estimates assume that its assets are collected in an orderly fashion over time.

FINOVAs process of determining impairment reserves and carrying amounts includes a periodic assessment of the assets in its portfolio on a transaction-by-transaction basis. Cash flow estimates are based on
current information and numerous assumptions concerning general economic conditions and trends, specific market segments, the financial condition of the Companys customers and FINOVAs collateral. In addition, assumptions are sometimes
necessary concerning the customers ability to obtain full refinancing of balloon obligations or residuals at maturity. As a result, the Companys cash flow estimates assume FINOVA incurs refinancing discounts for certain transactions.

Changes in facts and assumptions have resulted in, and may in the future result in, significant positive or negative changes to estimated cash flows and
therefore, impairment reserves and carrying amounts.

Impairment of financing assets (subsequent to implementation of fresh-start reporting) is recorded
through the Companys reserve for credit losses, and accounting rules permit the reserve for credit losses to be increased or decreased as the facts and assumptions change. However, certain financing assets were previously marked down for
impairments that existed at the time fresh-start reporting was implemented. These marked-down values became the Companys cost basis in those assets, and accounting rules do not permit the carrying value of these assets to be increased above
that fresh-start cost basis if subsequent facts and assumptions result in a projected increase in value. Recoveries of amounts in excess of the fresh-start cost basis are recorded through operations when collected.

Impairment of other financial assets is marked down directly against the assets carrying amount. Accounting rules permit further markdown if changes in facts and
assumptions result in additional impairment; however, most of these assets (except certain investments and assets held for sale, which may be marked up for subsequent events) may not be marked up if subsequent facts and assumptions result in a
projected increase in value. Recoveries of previous markdowns are recorded through operations when collected.

Because of these accounting restrictions,
FINOVA is not permitted to fully reflect some estimated improvements in the portfolio until they are actually realized.

The carrying amounts and reserve
for credit losses recorded on FINOVAs financial statements reflect the Companys expectation of collecting less than the full contractual amounts owed by some of its customers and recovering less than its original investment in certain
owned assets. The Company continues to pursue collection of the full contractual amounts and original investments, where appropriate, in an effort to maximize the value of its asset portfolio.

Reserve for Credit Losses. The reserve for credit losses represents FINOVAs estimate of losses inherent in the portfolio and includes reserves on impaired
assets and on assets that are not impaired. Impairment reserves are created if the carrying amount of an asset exceeds its estimated recovery, which is measured by estimating the present value of expected future cash flows (discounted at contractual
rates), market value or the fair value of collateral. These methodologies include the use of significant estimates and assumptions regarding future customer performance (which are inherently dependent upon assumptions about general economic
conditions and those affecting the customers business), amount and timing of future cash flows and collateral value. Reserves on assets that are not impaired are based upon assumptions including general economic conditions, overall portfolio
performance, including loss experience, delinquencies and other inherent portfolio characteristics. Actual results have in the past and could in the future, differ from these estimates, resulting in an increase or reversal of reserves. As of
September 30, 2006 and December 31, 2005, the reserve for credit losses totaled $12.0 million and $29.0 million, respectively.

Owned
Assets. Assets held for the production of income and operating leases are carried at amortized cost with impairment adjustments, if any, recorded as permanent markdowns through operations. An owned asset is considered impaired if



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anticipated undiscounted cash flows are less than the carrying amount of the asset. Once the asset has been deemed impaired, accounting rules allow for
several acceptable methods for measuring the amount of the impairment. FINOVAs typical method of measuring impairment is based on the comparison of the carrying amount of those assets to the present value of estimated future cash flows, using
risk adjusted discount rates. These estimates include assumptions regarding lessee performance, the amount and timing of future cash flows, selection of risk-adjusted discount rates for net present value calculations and residual value assumptions
for leases. If future portfolio assessments indicate additional impairment, additional markdowns may be necessary. Recoveries of previous markdowns are recorded through operations when collected. As of September 30, 2006 and December 31,
2005, owned assets totaled $36.2 million and $77.4 million, or 19.8% and 21.7% of total financial assets (before reserves), respectively.

Assets Held
for Sale. Assets held for sale are comprised of assets previously classified as financing transactions and other financial assets that management does not have the intent and/or the expected ability to hold to maturity. These assets are revalued
quarterly and are carried at the lower of cost or market less anticipated selling expenses, with adjustment to estimated market value, if any, recorded as a gain or loss on financial assets. Market value is often determined by the estimation of
anticipated future cash flows discounted at risk adjusted market rates to determine net present value. Valuation of assets held for sale includes estimates regarding market conditions and ultimate sales prices. Actual sales prices could differ from
estimates, impacting results from operations. As of September 30, 2006, assets held for sale totaled $27.9 million or 15.3% of total financial assets (before reserves), while as of December 31, 2005, there were no assets held for sale
considered to be of value to the Company.

Nonaccruing Assets. Accounts are generally classified as nonaccruing and recognition of income is
suspended when a customer becomes 90 days past due on the payment of principal or interest, or earlier, if in the opinion of management, full recovery of contractual income and principal becomes doubtful. The decision to classify accounts as
nonaccruing on the basis of criteria other than delinquency, is based on certain assumptions and estimates including current and future general economic conditions, industry specific economic conditions, customer financial performance, the ability
of customers to obtain full refinancing of balloons or residuals due to FINOVA at maturity and FINOVAs ability or willingness to provide such refinancing. In certain instances, accounts may be returned to accruing status if sustained
contractual performance is demonstrated. Changes in borrower performance, assumptions or estimates could result in a material change in nonaccruing account classification and income recognition. As of September 30, 2006 and December 31,
2005, $122.1 million and $131.9 million, or 66.9% and 37.1% of total financial assets (before reserves), were classified as nonaccruing, respectively.

RESULTS OF OPERATIONS

As a result of the Companys continued asset liquidation and shrinking operations, the consolidated financial
statements are not necessarily comparable from period to period. Trends during any given period may not be indicative of future trends; however, the following discussion of results may provide useful information regarding the current status of the
Company.



|                                    |  |                                  |         |   |                                 |   |         |        |  |   |        |   |  |      |         |   |        |   |         |   |  |   |         |  
|----------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ------ |  | - | ------ | - |  | ---- | ------- | - | ------ | - | ------- | - |  | - | ------- | -
|                                    |  | Three Months Ended September 30, |         |   | Nine Months Ended September 30, |  
|                                    |  | 2006                             |         |   | 2005                            |   |         | Change |  |   | 2006   |   |  | 2005 |         |   | Change |  
|                                    |  | (Dollars in thousands)           |         |   | (Dollars in thousands)          |  
|Interest margin                     |  | $                                | (25,397 | ) |                                 | $ | (21,668 | )      |  | $ | (3,729 | ) |  | $    | (73,247 | ) |        | $ | (64,921 | ) |  | $ | (8,326  | )
|Provision for credit losses         |  |                                  | (7,212  | ) |                                 |   | 129     |        |  |   | (7,341 | ) |  |      | 15,217  |   |        |   | 45,469  |   |  |   | (30,252 | )
|Net gain (loss) on financial assets |  |                                  | 49,868  |   |                                 |   | (2,679  | )      |  |   | 52,547 |   |  |      | 106,926 |   |        |   | 17,902  |   |  |   | 89,024  |  
|Portfolio expenses                  |  |                                  | (5,448  | ) |                                 |   | (4,984  | )      |  |   | (464   | ) |  |      | (15,120 | ) |        |   | (15,516 | ) |  |   | 396     |  
|General and administrative expenses |  |                                  | (7,176  | ) |                                 |   | (7,958  | )      |  |   | 782    |   |  |      | (23,389 | ) |        |   | (32,120 | ) |  |   | 8,731   |  
|                                    |  |                                  |         |   |                                 |   |         |        |  |   |        |   |  |      |         |   |        |   |         |   |  |   |         |  
|Net income (loss)                   |  | $                                | 4,635   |   |                                 | $ | (37,160 | )      |  | $ | 41,795 |   |  | $    | 10,387  |   |        | $ | (49,186 | ) |  | $ | 59,573  |  
|                                    |  |                                  |         |   |                                 |   |         |        |  |   |        |   |  |      |         |   |        |   |         |   |  |   |         |  

Nine Months Ended September 30, 2006 and 2005

Net Income (Loss). In general, the increase in net income was primarily attributable to the nine months ended September 30, 2006 containing a higher level of
asset realization in excess of recorded carrying amounts and a lower level of operating expenses. Asset realization in excess of recorded carrying amounts is primarily reflected in the financial statements as reversals of excess reserve for credit
losses, net gains from sales of financial assets and the recognition of suspended income upon the payoff of assets.



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The Company continues to experience better than anticipated realization and performance of its asset portfolio. Many of
the Companys more desirable and marketable assets have been liquidated and the remaining portfolio is becoming more concentrated in non-performing assets and used aircraft, both of which have been work intensive and difficult to liquidate at
acceptable prices. However, during 2006, the aircraft-financing market continued to display a high level of activity and in certain instances improved aircraft values. As a result, the Companys transportation portfolio continued to generate
cash in excess of recorded carrying amounts and surpassed the results for the first nine months of 2005. Additionally, results for 2006 were enhanced by the sale of substantially all of the Companys non-aviation assets (other than The Thaxton
Group loan) for proceeds of approximately $20 million in excess of their December 31, 2005 carrying values.

The Company has seen an increase in
demand for certain types of aircraft; however, this demand may decline due to continued uncertainty in the airline industry and airline bankruptcy filings. Additionally, the Company is becoming increasingly concerned with world events that could
adversely impact the price of oil and the potential value FINOVA could receive for its remaining aircraft. FINOVAs ability to realize the recorded values of its aircraft portfolio will depend upon future aircraft lease rates and values, both
of which are greatly impacted by the instability of the airline industry.

Opportunities for recoveries in excess of recorded values continue to exist and
are expected to occur; however, the Company remains concerned about the fragile nature of the airline industry.

Interest Margin. The Company
continues to post a negative interest margin, which was significantly impacted by a lower level of earning assets ($12.9 million and $158.1 million at September 30, 2006 and 2005, respectively) than the principal amount of outstanding debt
($1.5 billion and $1.7 billion at September 30, 2006 and 2005, respectively) and the Companys high aggregate cost of funds (aggregate effective rate of 13.9% and 13.4% for the nine months ended September 30, 2006 and 2005,
respectively).

Partially offsetting the negative interest margin was the recognition of previously suspended and deferred income ($2.1 million and $15.0
million for the nine months ended September 30, 2006 and 2005, respectively), which was generated from payoffs of certain assets in excess of their carrying amounts and the return to earning status of certain assets following demonstration of
sustained performance. The Company believes that further instances where it will recognize suspended and deferred income may occur; however, any income recognition in future periods is not expected to reach 2005 levels.

Reversal of Provision for Credit Losses. The Company recorded reversals of provision for credit losses to reduce its overall reserve for credit losses. The
reserve reductions were primarily due to recoveries ($5.2 million and $9.8 million for the nine months ended September 30, 2006 and 2005, respectively) of amounts previously written off, proceeds received from prepayments and asset sales
exceeding recorded carrying amounts (net of reserves), improved collection experience and the Companys detailed assessment of estimated inherent losses in its portfolio. Additionally, the Company recorded a $14.7 million reversal of provision
for credit losses in 2006 to reduce its reserves due to the sale of the Companys non-aviation assets for proceeds in excess of their carrying amount (net of reserves), which was partially offset by the recording during the third quarter of
2006 of an $8.7 million specific reserve related to the Thaxton loan. The specific reserve was necessary to adjust the net book value of the Thaxton loan to its estimated settlement of approximately $81.2 million before interest and opt-outs. Refer
to Note H. Litigation and Claims for a further discussion of the Thaxton settlement.

Amounts collected from the portfolio have often exceeded
anticipated cash flows, resulting in a partial reversal of previously established reserves. The Company does not expect a significant reversal of provision for credit losses in future periods. The Company has already seen a significant decline in
realized recoveries of amounts previously written off and expects that declining trend to continue.

The measurement of credit impairment and asset
valuation is dependent upon the significant use of estimates and management discretion when predicting expected cash flows. These estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the
amounts reported and disclosed herein. See Item 1A. Risk Factors, Critical Accounting Policies and Special Note Regarding Forward-Looking Statements for a discussion of these and additional factors impacting
the use of estimates.

Net Gain on Financial Assets. Gains are sporadic in nature and not necessarily comparable from one period to the next;
however, the increase over the prior year was primarily attributable to an increase in the overall realization during 2006 from the Companys transportation portfolio.



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The net gain during 2006 was primarily attributable to sales of owned assets and financing contracts in excess of
carrying amounts, the most significant of which included $86.6 million of net gains realized from sales of aircraft, engines, aircraft related notes and claims, and the forfeiture by aircraft operators of security deposits and maintenance reserves,
$4.5 million of net gains realized from the previously announced sale of the Companys non-aviation assets (in addition to the reversal of reserves noted above), $9.9 million of net gains realized from the sale and valuation of private and
public investments and a $3.6 million gain from the valuation markup of two Boeing 757 leveraged leases with Northwest Airlines, which are classified as assets held for sale. In conjunction with Northwest Airlines bankruptcy filing in late
2005, the Company previously fully wrote off the remaining book value of these leveraged leases because at the time, the senior outstanding debt exceeded the underlying aircraft values. During the third quarter of 2006, FINOVA entered into an
agreement for FINOVA to pay off the remaining senior debt balance ($25.4 million) on these leveraged leases and sell the aircraft to a third party. The Company subsequently completed the sale of these aircraft in the fourth quarter of 2006,
realizing the valuation gain noted above.

The net gain during 2005 was primarily attributable to $27.1 million of net gains realized from sales of
aircraft and parts, and the forfeiture by aircraft operators of security deposits and maintenance reserves, $4.0 million of net gains realized from the sale and valuation of private and public investments and $5.3 million of net gains from the
valuation and sale of the Companys last two real estate leveraged leases. Partially offsetting this gain activity were $18.4 million of net valuation markdowns to leveraged leases in the transportation portfolio.

The Company entered into a number of transactions to sell assets over the last couple of years and expects assets sales to continue. As of the date of this report, the
Company had 38 aircraft with a total carrying value of approximately $76.4 million that had either been liquidated subsequent to September 30, 2006, are under individual letters of intent to sell or are committed to a proposed bulk asset sale.
No assurance can be given that the letters of intent will result in actual sales, but the Company anticipates the majority of these committed assets will be sold during the fourth quarter of 2006 for proceeds in excess of FINOVAs carrying
value at September 30, 2006.

FINOVA will continue to consider future sales of the remaining portfolio or individual assets, if buyers can be found at
acceptable prices; however, there can be no assurance that FINOVA will be successful in its efforts to sell additional assets or that realization will reach prior period levels. In evaluating offers, FINOVA will generally compare offers against
FINOVAs internal net present value of estimated future cash flows projected to be collected from those assets less the net present value of FINOVAs operating costs to collect those assets.

Portfolio Expense. Portfolio expenses include all costs relating to the maintenance and collection of both performing and non-performing financial transactions.
In addition, within the transportation portfolio, portfolio costs include storage, maintenance and costs for potential return to service of aircraft.

The
transportation portfolio continues to incur a significant portion of the Companys portfolio costs ($4.6 million and $9.2 million during the nine months ended September 30, 2006 and 2005, respectively). Portfolio costs within the
transportation portfolio will fluctuate with the timing and number of maintenance reinvestment projects. The Company expects to continue to invest in aircraft maintenance as long as there is commercial justification for such expenditures.

During the nine months ended September 30, 2006 and 2005, the Company incurred $3.7 million and $3.3 million, respectively, of legal costs associated
with the matters related to Thaxton. The Company anticipates that the related Thaxton costs will continue at a comparable pace through the consummation of the settlement, which is not anticipated to be completed until early 2007. Refer to Note H.
Litigation and Claims for a further discussion of this matter.

Additionally, the Company experienced increased costs associated with the
liquidation of a repossessed property and had a higher level of costs associated with the final liquidation and sale of certain assets.

General and
Administrative Expenses. The decrease in general and administrative expenses was primarily due to $6.5 million of cost savings resulting from staffing and office occupancy reductions (43 employees at September 30, 2006 compared to 66 at
September 30, 2005) and lower severance accruals ($2.5 million). The dollar level of general and administrative expenses has continued to decrease as portfolio and staffing levels decreased; however, general and administrative expenses as a
percentage of assets or revenues has increased over time as a result of certain fixed costs, the costs of being a public company and further costs associated with wind-up of the Companys affairs.



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Income Tax Expense. No income tax expense or benefit was recorded during the nine months ended September 30,
2006 and 2005. Any pre-tax book income or loss has been entirely offset by a decrease or increase in valuation allowances against deferred tax assets, which were previously established due to the Companys concern regarding its ability to
utilize income tax benefits generated from losses in prior periods. The Company had federal net operating loss carryforwards of $1.3 billion and $1.2 billion as of September 30, 2006 and December 31, 2005, respectively.

Three Months Ended September 30, 2006 and 2005

Net
Income (Loss). In general, the increase in net income was primarily attributable to the three months ended September 30, 2006 containing a significantly higher level of asset realization in excess of recorded carrying amounts. Asset
realization in excess of recorded carrying amounts is primarily reflected in the financial statements as reversals of excess reserve for credit losses, net gains from sales of financial assets and the recognition of suspended income upon the payoff
of assets.

The Company continues to experience better than anticipated realization and performance of its asset portfolio. Many of the Companys more
desirable and marketable assets have been liquidated and the remaining portfolio is becoming more concentrated in non-performing assets and used aircraft, both of which have been work intensive and difficult to liquidate at acceptable prices.
However, during third quarter of 2006, the aircraft-financing market continued to display a high level of activity and in certain instances improved aircraft values. As a result, the Companys transportation portfolio continued to generate cash
in excess of recorded carrying amounts and surpassed the results for the comparable period in 2005.

Opportunities for recoveries in excess of recorded
values continue to exist and are expected to occur; however, the Company remains concerned about the fragile nature of the airline industry.

Interest
Margin. The Company continues to post a negative interest margin, which was significantly impacted by a lower level of earning assets ($12.9 million and $158.1 million at September 30, 2006 and 2005, respectively) than the principal amount
of outstanding debt ($1.5 billion and $1.7 billion at September 30, 2006 and 2005, respectively) and the Companys high aggregate cost of funds (aggregate effective rate of 14.4% and 13.6% for the three months ended September 30, 2006
and 2005, respectively).

Partially offsetting the negative interest margin was the recognition of previously suspended and deferred income ($0.6 million
and $5.4 million for the three months ended September 30, 2006 and 2005, respectively), which was generated from payoffs of certain assets in excess of their carrying amounts and the return to earning status of certain assets following
demonstration of sustained performance. The Company believes that further instances where it will recognize suspended and deferred income may occur; however, any income recognition in future periods is not expected to reach 2005 levels.

Provision for Credit Losses. During the third quarter of 2006, the Company recorded a net provision for credit losses of $7.2 million. The provision was
necessary to establish an $8.7 million specific reserve related to the Thaxton loan, which adjusts the net book value of the loan to its estimated settlement. Refer to Note H. Litigation and Claims for a further discussion of the Thaxton
settlement. For the three months ended September 30, 2005, the Company recorded a reversal of provision for credit losses to reduce its overall reserve for credit losses. The reserve reduction was primarily due to recoveries ($3.6 million for
the three months ended September 30, 2005) of amounts previously written off, proceeds received from prepayments and asset sales exceeding recorded carrying amounts (net of reserves), improved collection experience and the Companys
detailed assessment of estimated inherent losses in its portfolio, partially offset by a slight increase in specific reserves on certain assets.

The
measurement of credit impairment and asset valuation is dependent upon the significant use of estimates and management discretion when predicting expected cash flows. These estimates are subject to known and unknown risks, uncertainties and other
factors that could materially impact the amounts reported and disclosed herein. See Item 1A. Risk Factors, Critical Accounting Policies and Special Note Regarding Forward-Looking Statements for a discussion
of these and additional factors impacting the use of estimates.

Net Gain (Loss) on Financial Assets. Gains are sporadic in nature and not
necessarily comparable from one period to the next; however, the increase over the prior year was primarily attributable to an increase in the overall realization during 2006 from the Companys transportation portfolio.



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The net gain during the third quarter of 2006 was primarily attributable to sales of owned assets and financing contracts
in excess of carrying amounts, the most significant of which included $42.8 million of net gains realized from sales of aircraft, engines, aircraft related notes and claims, and the forfeiture by aircraft operators of security deposits and
maintenance reserves and $6.5 million of net gains realized primarily from the sale of one private investment.

The net loss during the third quarter of
2005 was primarily attributable to $10.4 million of net valuation markdowns to the transportation leveraged lease portfolio, partially offset by $6.1 million of net gains realized from sales of aircraft and parts, and the forfeiture by aircraft
operators of security deposits and maintenance reserves and $1.2 million of net gains realized from the sale and valuation of private and public investments.

Portfolio Expense. Portfolio expenses include all costs relating to the maintenance and collection of both performing and non-performing financial transactions. In addition, within the transportation portfolio, portfolio costs
include storage, maintenance and costs for potential return to service of aircraft.

The transportation portfolio continues to incur a significant portion
of the Companys portfolio costs ($1.5 million and $2.2 million during the three months ended September 30, 2006 and 2005, respectively). Portfolio costs within the transportation portfolio will fluctuate with the timing and number of
maintenance reinvestment projects. The Company expects to continue to invest in aircraft maintenance as long as there is commercial justification for such expenditures.

During the three months ended September 30, 2006 and 2005, the Company incurred $2.4 million and $1.8 million, respectively, of legal costs associated with matters related to Thaxton. The Company anticipates that
the related Thaxton costs will continue at a comparable pace through the consummation of the settlement, which is not anticipated to be completed until early 2007. Refer to Note H. Litigation and Claims for a further discussion of this
matter.

Additionally, the Company experienced increased costs associated with the liquidation of a repossessed property and had a higher level of costs
associated with the final liquidation and sale of certain assets.

General and Administrative Expenses. The decrease in general and administrative
expenses was primarily due to $1.3 million of cost savings resulting from staffing and office occupancy reductions (43 employees at September 30, 2006 compared to 66 at September 30, 2005), partially offset by incremental costs associated
with the evaluation of wind-up alternatives for the Company. The dollar level of general and administrative expenses has continued to decrease as portfolio and staffing levels decreased; however, general and administrative expenses as a percentage
of assets or revenues has increased over time as a result of certain fixed costs, the costs of being a public company and further costs associated with wind-up of the Companys affairs.

Income Tax Expense. No income tax expense or benefit was recorded during the three months ended September 30, 2006 and 2005. Any pre-tax book income or loss
has been entirely offset by a decrease or increase in valuation allowances against deferred tax assets, which were previously established due to the Companys concern regarding its ability to utilize income tax benefits generated from losses in
prior periods. The Company had federal net operating loss carryforwards of $1.3 billion and $1.2 billion as of September 30, 2006 and December 31, 2005, respectively.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Because substantially all of the Companys assets (except
for a few assets that could not be pledged because those assets already secured other obligations) are pledged to secure its obligations under the Intercompany Notes securing the Senior Notes, FINOVAs ability to obtain additional or alternate
financing is severely restricted. Berkadia has no obligation to lend additional sums to or to further invest in the Company. Accordingly, FINOVA intends to rely on internally generated cash flows from the liquidation of its assets as its only
meaningful source of liquidity.

The terms of the Indenture prohibit the Company from using available funds (after certain permitted uses) for any purpose
other than to satisfy its obligations to creditors and to make limited payments to stockholders in certain circumstances. Under the terms of the Indenture, the Company is permitted to establish a cash reserve in an amount not to exceed certain
defined criteria. Due to the Companys limited sources of liquidity, the estimation of cash reserves is critical to the overall liquidity of the Company. Cash reserve estimations are subject to known and unknown risks, uncertainties and other
factors that could materially impact the amounts determined. Failure to adequately estimate a cash reserve in one period could result in



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insufficient liquidity to meet obligations in that period, or in a subsequent period, if actual cash requirements exceed the cash reserve estimates.
Generally speaking, cash reserves typically equal anticipated cash flows to cover operating costs (which includes legal costs and professional services), tax payments, fundings under existing customer commitments, interest payments and any other
necessary cash flows expected to occur during the next six month period. The Company has the discretion to, and has from time to time, adjusted its cash reserve methodology.

In accordance with the terms of the Indenture, the Company is required to use any excess cash, as defined in the Indenture, to make semi-annual interest and principal payments on the Senior Notes. Additionally, the
Indenture permits voluntary prepayments at the Companys option, which FINOVA has previously elected to make from time to time; however, due to the uncertainty of cash requirements associated with the potential wind-up of the Companys
affairs, resolution of outstanding bankruptcy claims and matters related to Thaxton, discussed in Note H. Litigation and Claims, the Company anticipates maintaining a higher cash reserve to cover these potential and uncertain
expenditures, which could limit its ability to make future voluntary prepayments.

During the third quarter of 2006, the Company made no principal
prepayments on the Senior Notes. In October 2006, FINOVA announced a $29.7 million principal prepayment that will be made during the fourth quarter of 2006. Following this prepayment, cumulative principal prepayments through November 15, 2006
will total $1.5 billion or 50% of the face amount ($2.97 billion) of the Senior Notes.

The Company does not believe that it has sufficient assets to fully
repay the Senior Notes, and the Indenture prohibits the Company from engaging in new business. Therefore, FINOVA intends to rely on the liquidation of its remaining assets as its only meaningful source of liquidity. The Senior Notes have a first
priority security interest in substantially all of FINOVAs remaining assets.

Stockholders should not expect any payments or distributions from
FINOVA. The Indenture contemplates that as principal payments are made on the Senior Notes, FINOVA stockholders will receive a distribution equal to 5.263% of each principal prepayment. However, the Indenture prohibits FINOVA from making
distributions to and/or repurchases from stockholders if the payments would render the Company insolvent, would be a fraudulent conveyance or would not be permitted to be made under applicable law. Any such distribution and/or repurchase would be
considered an impermissible restricted payment under the Indenture. Given the Companys significant negative net worth and its belief that the Senior Notes will not be fully repaid, FINOVA is required to retain impermissible restricted payments
until such time, if ever, that it is no longer restricted from making a distribution to its stockholders or until it is necessary to use the cash to satisfy its debt obligations.

In conjunction with the prepayments of Senior Notes noted above, the Company will have retained a total of $78.1 million as of November 15, 2006. Retained amounts are segregated and reflected as restricted cash
on the balance sheet, pending their final disposition. The Company anticipates that the retained amounts will eventually be paid to the creditors, not to the stockholders. If the funds were to be paid to the stockholders, affiliates of Berkadia
(jointly owned by Berkshire Hathaway and Leucadia), which own 50% of FINOVAs common stock, would receive half of the retained amounts. Berkadia has advised the Company that it does not believe that stockholders are entitled to the retained
amounts since FINOVA cannot fully satisfy its creditor obligations.

In April 2005, FINOVA filed a motion in the United States Bankruptcy Court for the
District of Delaware seeking an order that (1) FINOVA no longer needs to direct funds into a restricted account, and (2) FINOVA may use the funds in the restricted account to satisfy its obligations to creditors. For a further discussion
of the motion and its status, see Note H. Litigation and Claims.

The Company has a negative net worth of $602.9 million as of
September 30, 2006 ($1.1 billion if the Senior Notes are considered at their principal amount due). Based on the Companys current financial condition (including having only $170.6 million of net financial assets), it is highly unlikely
there will be funds available to fully repay the outstanding principal on the Senior Notes at maturity or make any 5% distribution to common stockholders, absent a court order. As a result, there would not be a return to the Companys
stockholders. Consequently, investing in the Senior Notes and common stock involves a high level of risk.



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Obligations and Commitments

For a detailed listing of FINOVAs significant contractual obligations and contingent commitments, refer to the Companys Annual Report on Form 10-K for the year ended December 31, 2005. There have not
been any material changes during the nine months ended September 30, 2006, except for the Senior Note prepayments discussed throughout this document.

Collection of the Portfolio

As noted previously, the Companys current business activities are limited to maximizing the value
of its portfolio through the orderly collection of its assets. These activities include collection efforts pursuant to underlying contractual terms, negotiation of prepayments and sales of assets or collateral. The Company has sold substantial
portions of its asset portfolio and will consider future sales of any asset if buyers can be found at acceptable prices. The Company is offering to sell its remaining assets both by portfolio and individual asset. Due to restrictions contained in
the Indenture as well as its general inability to access capital in the public and private markets, the Companys only viable source of cash flow is from the collection of its portfolio.

The following table presents the activity in total financial assets, net of the reserve for credit losses for the nine months ended September 30, 2006:



|                                                               |  |   |          |  
|-------------------------------------------------------------- |  | - | -------- | -
|(Dollars in thousands)                                         |  |   |         
|Total financial assets at December 31, 2005                    |  | $ | 326,649  |  
|Cash activity:                                                 |  |   |          |  
|Fundings under existing customer commitments                   |  |   | 5,194    |  
|Prepayment of nonrecourse debt on leveraged leases             |  |   | 25,446   |  
|Transfer of cash previously received from the Thaxton Entities |  |   | 24,422   |  
|Collections and proceeds from financial assets                 |  |   | (225,382 | )
|                                                               |  |   |          |  
|Net cash flows                                                 |  |   | (170,320 | )
|                                                               |  |   |          |  
|Non-cash activity:                                             |  |   |          |  
|Reversal of provision for credit losses                        |  |   | 15,217   |  
|Net gain on financial assets                                   |  |   | 3,305    |  
|Other non-cash activity                                        |  |   | (4,225   | )
|                                                               |  |   |          |  
|Net non-cash activity                                          |  |   | 14,297   |  
|                                                               |  |   |          |  
|Total financial assets at September 30, 2006                   |  | $ | 170,626  |  
|                                                               |  |   |          |  

Total financial assets, net of the reserve for credit losses, declined to $170.6 million at September 30,
2006, down from $326.6 million at December 31, 2005. During 2006, net cash flows from the portfolio totaled $170.3 million, while non-cash activity resulted in a $14.3 million increase in net financial assets. Components of net cash flows
included $110.3 million of collections from financial assets (including recoveries) and $115.0 million from the sale of assets (excluding cash gains), offset by $5.2 million of fundings under existing customer commitments, a $25.4 million prepayment
of nonrecourse debt associated with two leveraged leases, which were subsequently sold in the fourth quarter of 2006 and the transfer of $24.4 million of cash collected from the Thaxton Entities since Thaxtons bankruptcy filing. Collections
from financial assets include prepayments (customer payments in advance of scheduled due dates). Non-cash activity included a $15.2 million reversal of reserves and a $3.3 million net increase related to the valuation of assets, partially offset by
other non-cash activity of $4.2 million.

The $156.0 million decline in the carrying value of the Companys portfolio was primarily attributable to
asset sales, prepayments, scheduled amortization and write-offs ($7.0 million). During 2006, the Company completed numerous asset sales with a total carrying amount of $115.0 million, while prepayment activity represented $64.3 million of carrying
amount. The remaining portfolio as of September 30, 2006 is primarily comprised of aviation assets and the loan to The Thaxton Group. Refer to Note H. Litigation and Claims for a further discussion of the Thaxton litigation.

The majority of the aviation assets are older vintage aircraft, often of class and configuration with limited demand in the aircraft market. While a
market for many of these aircraft may never fully return, the Company believes it has maximized the value of the transportation assets by waiting for opportune moments to sell individual assets. During 2006, the Company continued to



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market its transportation portfolio by individual asset and for bulk sale. The portfolio has received a high level of interest and activity. The Company
believes its individual sales efforts to date have generated substantially more cash than what would have been received in a bulk portfolio sale. However, the size of the transportation portfolio has been rapidly declining and many of the more
attractive assets in this portfolio have already been sold or are under letters of intent to sell during 2006. Additionally, the Company was becoming increasingly concerned with world events that could adversely impact the price of oil and the
potential value FINOVA could receive for its remaining aircraft. As a result of this and the incremental costs of collection mentioned earlier, the Company began offering the remaining aviation assets not committed to individual sales for bulk sale
in order to maximize the value of the remaining aviation assets. The Company solicited interest from over 50 prospective buyers that specialize in aviation assets and through a bid process has narrowed the pool to one buyer.

As of the date of this report, the Company had 38 aircraft with a total carrying value of approximately $76.4 million that had either been liquidated subsequent to
September 30, 2006, are under individual letters of intent to sell or are committed to a proposed bulk asset sale. The proposed bulk asset sale includes 18 aircraft with a total carrying value of approximately $36.7 million. The proposed bulk
asset sale is pursuant to a non-binding letter of intent, which is subject to inspection of the aircraft and records. Due to the fact that the 18 aircraft in this pool are operating throughout the world, additional time will be necessary to complete
the inspections. FINOVA will hopefully know if an acceptable final purchase price can be obtained for these assets during the fourth quarter of 2006. No assurance can be given that all of the letters of intent will result in actual sales, but the
Company anticipates that the majority of these committed assets will be sold during the fourth quarter of 2006 for proceeds in excess of FINOVAs carrying values at September 30, 2006.

In addition to the Thaxton loan, the Companys non-aviation portfolio at September 30, 2006 was comprised of assets with a total carrying value of
approximately $15.8 million, including the Companys $10.9 million investment in two grantor trusts to secure severance and bonus obligations to its employees. These assets are held primarily for the benefit of the employees, but are recorded
as investments due to the Companys retained interest in any excess assets. Substantially all of the other non-aviation assets are committed to individual asset sales.

The Company anticipates that when all or substantially all of its assets have been liquidated, the affairs of FINOVA will need to be wound-up. The Company continues to analyze potential alternative methods of wind-up
and would like to commit to a final plan of liquidation during 2006 or early 2007; however, this will be contingent on obtaining acceptable prices for its remaining assets. Additionally, in considering its alternative wind-up methods, the Company
intends to take into consideration the restricted cash related to impermissible restricted payments to stockholders, matters related to Thaxton and other outstanding bankruptcy claims. A final plan of liquidation may or may not be in conjunction
with bankruptcy or state law liquidation proceedings. The Company anticipates that in connection with its wind up, it will seek an order from the bankruptcy court with respect to FINOVAs solvency. The Company cannot predict with certainty the
timing or nature of that final wind-up at this point in time, but is working towards accomplishing that end in a prudent manner to maximize the return on the remaining assets.

The Company will continue to retain sufficient cash to fund its expenses, including the costs associated with the potential wind-up of the Companys affairs, resolution of outstanding bankruptcy claims and
matters related to Thaxton. As a result, the Company anticipates maintaining a higher cash reserve to cover these potential and uncertain expenditures, which could limit its ability to make future voluntary principal prepayments.

FINOVAs reserve for credit losses decreased to $12.0 million at September 30, 2006 from $29.0 million at December 31, 2005. At September 30, 2006,
the total carrying amount of impaired loans and leases was $135.0 million, of which $12.9 million were revenue accruing. The Company has established impairment reserves of $12.0 million related to $97.1 million of impaired assets. At
December 31, 2005, the total carrying amount of impaired loans and leases was $241.1 million, of which $109.1 million were revenue accruing. Impairment reserves at December 31, 2005 totaled $28.3 million related to $85.4 million of
impaired assets.

Reserves on impaired assets decreased due primarily to write-offs and proceeds received from prepayments and asset sales exceeding
recorded carrying amounts (net of reserves), partially offset by additional reserves recorded on certain existing impaired assets.

Accounts classified as
nonaccruing were $122.1 million or 66.9% of total financial assets (before reserves) at September 30, 2006 as compared to $131.9 million or 37.1% at December 31, 2005. The decline in nonaccruing assets was primarily attributed to
collections and asset sales of $47.9 million and write-offs and net valuation adjustments of $4.0 million, partially offset by an increase following the prepayment of $25.4 million of nonrecourse debt associated with two leveraged leases with



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Northwest Airlines on Boeing 757 aircraft and the transfer of cash collected ($24.4 million, excluding $72.8 million in cash previously deposited into a
reserve account not reflected on FINOVAs balance sheet) from the Thaxton Entities since Thaxtons bankruptcy filing.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report are forward-looking, in that
they do not discuss historical fact, but instead reflect future expectations, projections, intentions, or other items. Forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include assumptions, estimates and valuations implicit in the financial statements and related notes, as well as matters discussed throughout this report including but not limited to projections of revenues,
income or loss, plans for the continued liquidation of the Companys assets, and assumptions related to the foregoing. They are also made in documents incorporated in this report by reference, or in which this report may be incorporated.

Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in this report,
the words estimate, expects, anticipates, believes, plans, intends and similar expressions are intended to identify forward-looking statements that involve known and unknown
risks and uncertainties. The risks, uncertainties and other factors that could cause FINOVAs actual results or performance to differ materially from those contemplated by the forward-looking statements include, but are not limited to, the
following: whether we will be successful in implementing our business strategy; the impact of general economic conditions and the performance of our borrowers; our ability to retain our employees; the instability and uncertainty in the airline
industry, which could adversely affect the value of our aircraft portfolio, lease rates and demand; the increasing difficulty in offsetting costs of collecting the remaining portfolio in view of our decreasing asset pool; our reliance on third
parties for information that may not be accurate; our increasing exposure to concentrations of credit risk; and current and future legal and administrative claims and proceedings against us that may result in increased costs and diversion of
managements attention. For additional information, see Part I, Item 1A. Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2005.

Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date of this report. FINOVA does not intend to update
forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. FINOVA cannot predict the risk from reliance on forward-looking statements in light of the many factors that could
affect their accuracy.



|Item 3. | Quantitative and Qualitative Disclosure About Market Risk
|------- | ---------------------------------------------------------

There
were no material changes from the information provided in the Companys Annual Report on Form 10-K for the year ended December 31, 2005.



|Item 4. | Controls and Procedures
|------- | -----------------------



|(a) | The Companys management evaluated, with the participation of the Companys principal executive and principal financial officer, the effectiveness of the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of September 30, 2006. Based on their evaluation, the Companys
principal executive and principal financial officer concluded that the Companys disclosure controls and procedures were effective as of September 30, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | There has been no change in the Companys internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during
the Companys fiscal quarter ended September 30, 2006, that has materially affected or is reasonably likely to materially affect, the Companys internal control over financial reporting.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules issued thereunder, the Company is scheduled to include in its Annual
Report on Form 10-K for the year ending December 31, 2007 a report on managements assessment of the effectiveness of the Companys internal controls over financial reporting. The Companys independent registered public
accountants will also be required to attest to and report on managements assessment.

The process of complying with these requirements
includes a comprehensive evaluation and documentation of the Companys internal controls over financial reporting. In this regard, management is prepared to dedicate internal



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resources and adopt a detailed plan to (i) document the Companys internal controls over financial reporting, (ii) assess the adequacy of the
Companys internal controls over financial reporting, (iii) take steps to improve control processes where appropriate and (iv) validate through testing that controls are functioning as documented. There can be no assurance that
deficiencies or weaknesses in the design or operation of internal controls over financial reporting will not be found and, if found, that the Company will have sufficient time to remediate any such deficiencies or weaknesses and perform testing
procedures before the end of 2007.

The Company believes that any system of internal accounting controls, no matter how well designed and
operated, can provide only reasonable (and not absolute) assurance that all of its objectives will be met, including the detection of fraud. Furthermore, no evaluation of internal accounting controls can provide absolute assurance that all control
issues and instances of fraud, if any, have been detected.

The Company continues to reduce its workforce, consolidate its operations and
outsource certain functions. Accordingly, responsibility for administration, management and review of many of the Companys assets has transitioned among FINOVAs remaining personnel. Management has supervised these transitions and has
implemented procedures it believes provide effective disclosure and internal controls over financial reporting. The Company is assessing the efficacy of these procedures and will continue to do so in subsequent periods. FINOVA recognizes that a
substantial unanticipated reduction in employees could increase internal control risk.

PART II OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

See Part I, Item 1, Note H.
Litigation and Claims for a discussion of certain legal proceedings.



|Item 1A. | Risk Factors
|-------- | ------------

There were no material changes from the information
provided in the Companys Annual Report on Form 10-K for the year ended December 31, 2005.



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                                            
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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THE FINOVA GROUP INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |  |  |                       |  |                     |  |                                                                                                           
|---------------------- |  |  |  | --------------------- |  | ------------------- |  | ----------------------------------------------------------------------------------------------------------
|                       |  |  |  | THE FINOVA GROUP INC.
|                       |  | 
|                       |  |  |  | (Registrant)         
|                       |  |  | 
|Date: October 30, 2006 |  |  |  | By:                   |  | /s/ Richard A. Ross
|                       |  |  |  |                       |  |                     |  | Richard A. Ross, Senior Vice President  Chief
Financial Officer & Treasurer (principal financial officer)



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EXHIBIT INDEX



|              |  |                                                                                                                                            
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                
|              | 
|31.1          |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|              | 
|31.2          |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                        
|              | 
|32.1          |  | Certification of Chief Executive Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|              | 
|32.2          |  | Certification of Chief Financial Officer pursuant to 18. U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.