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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

Commission file number 1-9924

Citigroup Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
  52-1568099
(I.R.S. Employer Identification No.)

399 Park Avenue, New York, NY
(Address of principal executive offices)

 

10043
(Zip code)

(212) 559-1000
(Registrant's telephone number, including area code)

        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 ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller
reporting company)
  Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No  ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Common stock outstanding as of October 31, 2010: 29,050,168,996

Available on the web at www.citigroup.com


Table of Contents

1


CITIGROUP INC.

THIRD QUARTER 2010—FORM 10-Q

OVERVIEW

    3  

CITIGROUP SEGMENTS AND REGIONS

   
4
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
5
 

EXECUTIVE SUMMARY

   
5
 

Overview of Results

   
5
 

SUMMARY OF SELECTED FINANCIAL DATA

   
7
 

SEGMENT, BUSINESS AND PRODUCT—INCOME (LOSS) AND REVENUES

   
9
 
   

Citigroup Income (Loss)

   
9
 
   

Citigroup Revenues

   
10
 

CITICORP

   
11
 
 

Regional Consumer Banking

   
12
 
     

North America Regional Consumer Banking

   
13
 
     

EMEA Regional Consumer Banking

   
15
 
     

Latin America Regional Consumer Banking

   
17
 
     

Asia Regional Consumer Banking

   
19
 
 

Institutional Clients Group

   
21
 
     

Securities and Banking

   
22
 
     

Transaction Services

   
24
 

CITI HOLDINGS

   
25
 
 

Brokerage and Asset Management

   
26
 
 

Local Consumer Lending

   
27
 
 

Special Asset Pool

   
29
 

CORPORATE/OTHER

   
32
 

SEGMENT BALANCE SHEET

   
33
 

CAPITAL RESOURCES AND LIQUIDITY

   
34
 
   

Capital Resources

   
34
 
   

Funding and Liquidity

   
40
 

OFF-BALANCE-SHEET ARRANGEMENTS

   
44
 

MANAGING GLOBAL RISK

   
45
 
   

Credit Risk

   
45
 
       

Loan and Credit Overview

   
45
 
       

Loans Outstanding

   
46
 
       

Details of Credit Loss Experience

   
47
 
       

Impaired Loans, Non-Accrual Loans and Assets, and Renegotiated Loans

   
48
 
       

Non-Accrual Loans and Assets

   
49
 
       

U.S. Consumer Mortgage Lending

   
52
 
       

Consumer Loan Details

   
62
 
         

Consumer Loan Delinquency Amounts and Ratios

   
62
 
         

Consumer Loan Net Credit Losses and Ratios

   
63
 
         

Consumer Loan Modification Programs

   
64
 
       

Consumer Mortgage Representations and Warranties

   
69
 
       

S&B Representations and Warranties

   
72
 
       

Corporate Credit Portfolio

   
73
 
   

Market Risk

   
76
 
       

Average Rates—Interest Revenue, Interest Expense, and Net Interest Margin

   
78
 
       

Average Balances and Interest Rates—Assets

   
79
 
       

Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue

   
80
 
       

Analysis of Changes in Interest Revenue

   
83
 
       

Analysis of Changes in Interest Expense and Net Interest Revenue

   
84
 
       

Analysis of Changes in Interest Revenue, Interest Expense and Net Interest Revenue

   
85
 

CROSS BORDER RISK AND SOVEREIGN EXPOSURE

   
86
 

DERIVATIVES

   
87
 

INCOME TAXES

   
89
 

RECLASSIFICATION OF HELD-TO-MATURITY (HTM) SECURITIES TO AVAILABLE-FOR-SALE (AFS)

   
90
 

EXPOSURE TO COMMERCIAL REAL ESTATE

   
91
 

CONTRACTUAL OBLIGATIONS

   
92
 

CONTROLS AND PROCEDURES

   
92
 

FORWARD-LOOKING STATEMENTS

   
93
 

TABLE OF CONTENTS FOR FINANCIAL STATEMENTS AND NOTES

   
94
 

CONSOLIDATED FINANCIAL STATEMENTS

   
96
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   
105
 

OTHER INFORMATION

   
204
 
   

Item 1. Legal Proceedings

   
204
 
   

Item 1A. Risk Factors

   
206
 
   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

   
207
 
   

Item 6. Exhibits

   
208
 
   

Signatures

   
209
 
   

Exhibit Index

   
210
 

2


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OVERVIEW

Introduction

        Citigroup's history dates back to the founding of Citibank in 1812. Citigroup's original corporate predecessor was incorporated in 1988 under the laws of the State of Delaware. Following a series of transactions over a number of years, Citigroup Inc. was formed in 1998 upon the merger of Citicorp and Travelers Group Inc.

        Citigroup is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisidictions.

        Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of Citi's Regional Consumer Banking businesses and Institutional Clients Group; and Citi Holdings, consisting of Citi's Brokerage and Asset Management and Local Consumer Lending businesses, and a Special Asset Pool. There is also a third segment, Corporate/Other. For a further description of the business segments and the products and services they provide, see "Citigroup Segments" below, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 to the Consolidated Financial Statements.

        Throughout this report, "Citigroup" and "Citi" refer to Citigroup Inc. and its consolidated subsidiaries.

        This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup's Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Annual Report on Form 10-K), Citigroup's updated 2009 historical financial statements and notes filed on Form 8-K with the Securities and Exchange Commission (SEC) on June 25, 2010 and Citigroup's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010. Additional information about Citigroup is available on the company's Web site at www.citigroup.com. Citigroup's recent annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as its other filings with the SEC are available free of charge through the company's Web site by clicking on the "Investors" page and selecting "All SEC Filings." The SEC's Web site also contains periodic and current reports, proxy and information statements, and other information regarding Citi at www.sec.gov.

        Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation.

        Within this Form 10-Q, please refer to the tables of contents on pages 2 and 94 for page references to Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.

Impact of Adoption of SFAS 166/167

        Effective January 1, 2010, Citigroup adopted Accounting Standards Codification (ASC) 860, Transfers and Servicing, formerly SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166), and ASC 810, Consolidations, formerly SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). Among other requirements, the adoption of these standards includes the requirement that Citi consolidate certain of its credit card securitization trusts and eliminate sale accounting for transfers of credit card receivables to those trusts. As a result, reported and managed-basis presentations are comparable for periods beginning January 1, 2010. For comparison purposes, prior period revenues, net credit losses, provisions for credit losses and for benefits and claims and loans are presented on a managed basis in this Form 10-Q. Managed presentations were applicable only to Citi's North American branded and retail partner credit card operations in North America Regional Consumer Banking and Citi Holdings—Local Consumer Lending and any aggregations in which they are included. See "Capital Resources and Liquidity" and Note 1 to the Consolidated Financial Statements for an additional discussion of the adoption of SFAS 166/167 and its impact on Citigroup.

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As described above, Citigroup is managed pursuant to the following segments:

GRAPHIC

        The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.

GRAPHIC


(1)
Asia includes Japan, Latin America includes Mexico, and North America comprises the U.S., Canada and Puerto Rico.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIRD QUARTER 2010 EXECUTIVE SUMMARY

Overview of Results

        During the third quarter of 2010, Citigroup continued its focus on (i) strengthening and investing in its core assets and businesses in Citicorp, (ii) building and maintaining its financial strength, including maintaining its capital, liquidity and continued expense discipline, and (iii) winding down Citi Holdings as quickly as practicable in an economically rational manner.

        For the quarter, Citigroup reported net income of $2.2 billion, or $0.07 per diluted share. Results for the quarter included a $435 million (after tax) loss related to the announced sale of The Student Loan Corporation (SLC), which is reflected in discontinued operations for the third quarter of 2010. Revenues of $20.7 billion decreased 10% from comparable year-ago levels. The decline in revenues was due to lower revenues in Citi Holdings (driven by a declining loan balance in Local Consumer Lending and lower positive net revenue marks in the Special Asset Pool) and lower Securities and Banking revenues excluding Credit Valuation Adjustment (CVA), offset by positive CVA of $99 million in the third quarter of 2010 (versus negative CVA of $1.8 billion in the prior-year period). Citicorp's net income was $3.5 billion; Citi Holdings had a net loss of $1.1 billion.

        In Citicorp, Securities and Banking revenues, excluding CVA, were $5.5 billion in the third quarter of 2010, down 17% from the prior-year period. While overall client market activity remained muted in the third quarter of 2010, Citi continued to benefit from consistent growth in Securities and Banking emerging markets revenues. Fixed income markets revenues excluding CVA were $3.4 billion compared to $4.9 billion in the third quarter of 2009. Equity markets revenues excluding CVA were $1.1 billion, compared to $1.3 billion in the prior-year quarter. Investment banking revenues declined 20% from the prior-year period to $930 million. Lending revenues were negative $18 million in the third quarter of 2010, compared with a negative $794 million in the third quarter of 2009.

        Regional Consumer Banking revenues were up $241 million on a comparable basis from the prior-year quarter to $8.2 billion, driven by growth in Latin America and Asia.

        Transaction Services revenues were up from year-ago levels by 3% to $2.5 billion, also driven by growth in Latin America and Asia.

        Within Citi Holdings, Local Consumer Lending revenues of $3.5 billion in the third quarter of 2010 were down 33% on a comparable basis from the year-ago period, driven by a lower loan balance and continued asset sales, as well as the addition of $322 million of mortgage repurchase reserves related to North America residential real estate (compared to a build of $33 million in the prior-year period).

        Revenues in the Special Asset Pool decreased to $0.3 billion in the third quarter of 2010, from $1.4 billion in the prior-year period, largely driven by lower positive net revenue marks of $567 million in the third quarter of 2010, compared to $1,517 million in the same quarter of 2009.

        Citi's Net interest revenue increased 10% from the third quarter of 2009, primarily driven by the impact from the adoption of SFAS 166/167. Sequentially, Citi's net interest margin (NIM) of 3.07% decreased by 8 basis points primarily due to the continued run-off and sales of higher-yielding assets in Citi Holdings and investments in lower-yielding securities, given current rates.

        Non-interest revenue decreased 11% from the year-ago period reflecting lower revenues on mortgage servicing rights, partially offset by higher realized gains on investment securities.

        Operating expenses decreased 3% from the year-ago quarter and were down 3% from the second quarter of 2010. The decline in expenses from the year-ago quarter reflected the decrease in Citi Holdings expenses, which more than offset the increase in Citicorp expenses resulting from continued investments in the Citicorp businesses. The sequential decline in expenses primarily related to the absence of the U.K. bonus tax in the second quarter of 2010, partially offset by ongoing investments in Citicorp businesses. Citi's full-time employees numbered 258,000 at September 30, 2010, down 18,000 from September 30, 2009 and down 1,000 from June 30, 2010.

        Net credit losses of $7.7 billion in the third quarter of 2010 were down 30% from year-ago levels on a comparable basis, and down 4% from the second quarter of 2010. Net credit losses (NCLs) improved for the fifth consecutive quarter. Consumer NCLs of $6.7 billion were down 29% on a comparable basis from the prior-year period and down 10% from the prior quarter. While North America NCLs continued to represent over 80% of Citi's total consumer NCLs, during the third quarter of 2010, losses in North America improved at a faster rate than in Citi's international consumer businesses. North America consumer NCLs were down 11% sequentially, while international consumer NCLs declined by 7%.

        Corporate NCLs of $922 million were down 40% from the prior-year period and up 95% from the prior quarter. The sequential increase in corporate NCLs was principally due to a charge-off on a specific corporate credit in Citicorp, and, in Citi Holdings, higher cost of loan sales and the charge-off of loans for which Citi had previously established specific SFAS 114 reserves that were released during the third quarter of 2010 upon recognition of the charge-off.

        Citi's total allowance for loan losses was $43.7 billion at September 30, 2010, or 6.73% of total loans. The percentage was essentially flat compared to June 30, 2010, which was 6.72% of total loans. During the third quarter of 2010, Citi had a net release of $2.0 billion to its credit reserves and allowance for unfunded lending commitments, compared to a net build of $802 million in the third quarter of 2009 and a net release of $1.5 billion in the second quarter of 2010. An improving to stabilizing credit environment contributed to the release during the current quarter. Citi experienced continued improvement in NCLs and 90 days or more delinquencies across its North America cards portfolios (both branded and Retail partner

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cards) and North America mortgage portfolio in Citi Holdings during the third quarter of 2010.

        The total allowance for consumer loan losses decreased $2.0 billion to $37.6 billion at the end of the quarter, but increased as a percentage of total consumer loans to 8.16%, compared to 7.87% at the end of the second quarter of 2010. The increase in the percentage was mainly due to the announced sale of SLC, which moved approximately $30 billion of loans to held-for-sale. The decrease in the total allowance was mainly due to a net release of $1.4 billion as well as reductions from asset sales in the U.S. real estate lending portfolio and certain loan portfolios moving to held-for-sale. The $1.4 billion net release was mainly driven by Retail partner cards in Citi Holdings, as well as the international Regional Consumer Banking businesses in Citicorp.

        The total allowance for loan losses for funded corporate loans declined by $552 million to $6.1 billion at September 30, 2010, or 3.22% of corporate loans, down from 3.59% in the second quarter of 2010. Corporate non-accrual loans were $9.9 billion at September 30, 2010, compared to $11.0 billion at June 30, 2010 and $14.7 billion in the year-ago period. The decrease in non-accrual loans from the prior quarter was mainly due to loan sales, write-offs and paydowns, which were partially offset by increases due to the weakening of certain borrowers.

        The effective tax rate on continuing operations for the third quarter of 2010 was 21%, reflecting taxable earnings in lower tax rate jurisdictions, as well as tax advantaged earnings.

        Total deposits were $850 billion at September 30, 2010, up 4% from June 30, 2010 and up 2% from year-ago levels. Citi's structural liquidity (equity, long-term debt and deposits as a percentage of assets) was 71% at September 30, 2010, unchanged as compared with June 30, 2010 and down slightly from 72% at September 30, 2009.

        Total assets increased $46 billion from the end of the second quarter of 2010 to $1,983 billion. Citi Holdings assets decreased $44 billion during the third quarter of 2010, consisting of approximately $32 billion of asset sales and business dispositions, $9 billion of net run-off and pay downs and $3 billion of net cost of credit and net asset marks. Citi Holdings total GAAP assets of $421 billion at September 30, 2010, represented 21% of Citi's total GAAP assets. Citi Holdings' risk-weighted assets were approximately $370 billion, or approximately 37% of Citi's risk-weighted assets, as of September 30, 2010.

        Citigroup's Total stockholders' equity increased by $8.1 billion during the third quarter of 2010 to                                     $162.9 billion, reflecting net income during the quarter, $1.9 billion related to the ADIA share issuance and a $3.9 billion improvement in Accumulated other comprehensive income largely from foreign exchange translation (generally referred to throughout this report as "FX translation"). Citigroup's total equity capital base and trust preferred securities were $183.4 billion at September 30, 2010. Citigroup maintained its "well-capitalized" position with a Tier 1 Capital ratio of 12.50% at September 30, 2010, up from 11.99% at June 30, 2010. Citigroup's Tier 1 Common ratio was 10.33% at September 30, 2010, compared to 9.71% at June 30, 2010.

Business Outlook

        Within Citicorp, overall trends in client activity and the global economic and capital markets environment are expected to continue to drive Citi's Securities and Banking revenues.

        Citi expects continued headwinds in North America Regional Consumer Banking from The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), which will continue to have a negative impact on U.S. credit card revenues. Citi currently estimates that the CARD Act will have a net pre-tax impact on Citi-branded cards for the full year 2010 at the lower end of its previously disclosed range of $400 million to $600 million. As previously disclosed, for Retail partner cards in Local Consumer Lending, Citi's full-year 2010 estimate of negative net revenue impact resulting from the CARD Act is approximately $150 million to $200 million. Within the international businesses in Regional Consumer Banking, Citi believes revenues should begin to reflect the growth Citi is seeing in the underlying revenue drivers, such as new loan and deposit growth.

        Within Citi Holdings, Citi currently believes Local Consumer Lending revenues should continue to decline given the shrinking loan balance resulting from paydowns and continued asset sales. Citi further believes that net revenue marks in the Special Asset Pool, which have been positive for the last six quarters, will remain episodic.

        NIM will likely remain under pressure throughout the remainder of the year.

        With respect to expenses, Citi expects quarterly expenses to continue to be in the range of $11.5 billion to $12 billion. As previously disclosed, Citicorp's expenses may continue to increase, reflecting ongoing investments in its core businesses, while in Citi Holdings expenses should continue to decline as assets are reduced.

        As in recent prior quarters, credit costs are expected to remain a significant component of earnings performance in the fourth quarter. In North America cards, Citi expects NCLs will continue to improve modestly for both portfolios, but likely remain at elevated levels until employment recovers in the U.S. In North America mortgages, Citi remains cautious as the improvement in NCLs and delinquency metrics to date reflects asset sales and loss mitigation efforts. Mortgages also remain at risk to economic factors, including unemployment, home prices, government programs, and foreclosure regulations. Internationally, Citi believes consumer NCLs should remain fairly stable in the fourth quarter.

        Consumer loan loss reserve balances will continue to reflect the losses embedded in Citi's consumer portfolios, given underlying credit trends and loss mitigation efforts. The recognition of credit losses and the build or release of loan loss reserves in Citi's corporate credit portfolio will continue to be episodic.

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CITIGROUP INC. AND SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA—Page 1

 
  Third Quarter    
  Nine Months Ended    
 
In millions of dollars,
except per share amounts
  %
Change
  %
Change
 
  2010   2009   2010   2009  

Total managed revenues(1)

  $ 20,738   $ 23,142     (10 )% $ 68,230   $ 83,210     (18 )%

Total managed net credit losses(1)

    7,659     10,982     (30 )   24,005     32,282     (26 )
                           

Net interest revenue

  $ 13,246   $ 11,998     10 % $ 41,846   $ 37,753     11 %

Non-interest revenue

    7,492     8,392     (11 )   26,384     37,127     (29 )
                           

Revenues, net of interest expense

  $ 20,738   $ 20,390     2 % $ 68,230   $ 74,880     (9 )%

Operating expenses

    11,520     11,824     (3 )   34,904     35,508     (2 )

Provisions for credit losses and for benefits and claims

    5,919     9,095     (35 )   21,202     32,078     (34 )
                           

Income (loss) from continuing operations before income taxes

  $ 3,299   $ (529 )   NM   $ 12,124   $ 7,294     66 %

Income taxes (losses)

    698     (1,122 )   NM     2,546     620     NM  
                           

Income from continuing operations

  $ 2,601   $ 593     NM   $ 9,578   $ 6,674     44 %

Loss from discontinued operations, net of taxes

    (374 )   (418 )   11     (166 )   (677 )   75  
                           

Net income before attribution of noncontrolling interests

  $ 2,227   $ 175     NM   $ 9,412   $ 5,997     57 %

Net income attributable to noncontrolling interests

    59     74     (20 )   119     24     NM  
                           

Citigroup's net income

  $ 2,168   $ 101     NM   $ 9,293   $ 5,973     56 %
                           

Less:

                                     
 

Preferred dividends—Basic

      $ 272             $ 2,988        
 

Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance—Basic(2)

                      1,285        
 

Preferred stock Series H discount accretion—Basic

        16               123        
 

Impact of the Public and Private preferred stock exchange offer(2)

        3,055               3,055        
 

Dividends and earnings allocated to participating securities, net of forfeitures applicable to Basic EPS

    20               78     2        
                           

Income (loss) allocated to unrestricted common shareholders for basic EPS

  $ 2,148   $ (3,242 )   NM   $ 9,215   $ (1,480 )   NM  
 

Less: Convertible Preferred Stock Dividends

                    540        
 

Add: Incremental dividends and earnings allocated to participating securities, net of forfeitures applicable to Diluted EPS

    1               2            
                           

Income (loss) allocated to unrestricted common shareholders for diluted EPS

  $ 2,149   $ (3,242 )   NM   $ 9,217   $ (940 )   NM  

Earnings per share

                                     
 

Basic(3)

                                     
 

Income (loss) from continuing operations

  $ 0.09   $ (0.23 )   NM   $ 0.32   $ (0.10 )   NM  
 

Net income (loss)

    0.07     (0.27 )   NM     0.32     (0.19 )   NM  
                           
 

Diluted(3)

                                     
 

Income (loss) from continuing operations

  $ 0.08   $ (0.23 )   NM   $ 0.32   $ (0.10 )   NM  
 

Net income (loss)

    0.07     (0.27 )   NM     0.31     (0.19 )   NM  
                           

[Continued on the following page, including notes to table.]

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SUMMARY OF SELECTED FINANCIAL DATA—Page 2

 
   
   
   
  Nine Months Ended September 30,    
 
 
  Third Quarter    
   
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

At September 30:

                                     

Total assets

  $ 1,983,280   $ 1,888,599     5 %                  

Total deposits

    850,095     832,603     2                    

Long-term debt

    387,330     379,557     2                    

Mandatorily redeemable securities of subsidiary Trusts (included in Long-term debt)

    20,449     34,531     (41 )                  

Common stockholders' equity

    162,601     140,530     16                    

Total stockholders' equity

    162,913     140,842     16                    

Direct staff (in thousands)

    258     276     (7 )                  
                           

Ratios:

                                     

Return on common stockholders' equity(4)

    5.4 %   (12.2 )%         8.1 %   (2.3 )%      
                           

Tier 1 Common(5)

    10.33 %   9.12 %                        

Tier 1 Capital

    12.50     12.76                          

Total Capital

    16.14     16.58                          

Leverage(6)

    6.57     6.85                          
                           

Common stockholders' equity to assets

    8.20 %   7.44 %                        

Ratio of earnings to fixed charges and preferred stock dividends

    1.53     0.95           1.63     1.16        
                           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

(2)
For the nine months ended September 30, 2009, Income (loss) allocated to unrestricted common stockholders includes a reduction of $1.285 billion related to a conversion price reset pursuant to Citigroup's prior agreement with the purchasers of $12.5 billion of convertible preferred stock issued in a private offering in January 2008. The conversion price was reset from $31.62 per share to $26.35 per share. There was no impact to net income, total stockholders' equity or capital ratios due to the reset. However, the reset resulted in a reclassification from Retained earnings to Additional paid-in capital of $1.285 billion and a reduction in Income allocated to unrestricted common stockholders of $1.285 billion. The 2009 third quarter Income (loss) allocated to unrestricted common stockholders includes a reduction of $3.055 billion related to the preferred stock exchanged for common stock and trust preferred securities as part of the exchange offers.

(3)
The Diluted EPS calculation for the third quarter and full year of 2009 utilize Basic shares and Income allocated to unrestricted common stockholders (Basic) due to the negative Income allocated to unrestricted common stockholders. Using Diluted shares and Income allocated to unrestricted common stockholders (Diluted) would result in anti-dilution.

(4)
The return on average common stockholders' equity is calculated using income (loss) available to common stockholders.

(5)
As defined by the banking regulators, the Tier 1 Common ratio represents Tier 1 Capital less qualifying perpetual preferred stock, qualifying noncontrolling interests in subsidiaries and qualifying mandatorily redeemable securities of subsidiary trusts divided by risk-weighted assets.

(6)
The Leverage ratio represents Tier 1 Capital divided by each period's quarterly adjusted average total assets.

NM
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SEGMENT, BUSINESS AND PRODUCT—INCOME (LOSS) AND REVENUES

        The following tables show the income (loss) and revenues for Citigroup on a segment, business and product view:


CITIGROUP INCOME (LOSS)

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Income (loss) from Continuing Operations

                                     

CITICORP

                                     

Regional Consumer Banking

                                     
 

North America

  $ 147   $ 206     (29 )% $ 231   $ 702     (67 )%
 

EMEA

    22     (23 )   NM     99     (166 )   NM  
 

Latin America

    558     77     NM     1,438     412     NM  
 

Asia

    505     444     14 %   1,655     971     70  
                           
   

Total

  $ 1,232   $ 704     75 % $ 3,423   $ 1,919     78 %
                           

Securities and Banking

                                     
 

North America

  $ 456   $ 7     NM   $ 2,719   $ 2,472     10 %
 

EMEA

    505     550     (8 )%   1,892     3,467     (45 )
 

Latin America

    266     219     21     735     1,158     (37 )
 

Asia

    180     71     NM     952     1,724     (45 )
                           
   

Total

  $ 1,407   $ 847     66 % $ 6,298   $ 8,821     (29 )%
                           

Transaction Services

                                     
 

North America

  $ 131   $ 152     (14 )% $ 456   $ 471     (3 )%
 

EMEA

    305     308     (1 )   929     984     (6 )
 

Latin America

    171     148     16     481     458     5  
 

Asia

    318     331     (4 )   934     904     3  
                           
   

Total

  $ 925   $ 939     (1 )% $ 2,800   $ 2,817     (1 )%
                           

Institutional Clients Group

  $ 2,332   $ 1,786     31 % $ 9,098   $ 11,638     (22 )%
                           

Total Citicorp

  $ 3,564   $ 2,490     43 % $ 12,521   $ 13,557     (8 )%
                           

CITI HOLDINGS

                                     

Brokerage and Asset Management

  $ (147 ) $ 90     NM   $ (154 ) $ 6,899     NM  

Local Consumer Lending

    (827 )   (2,142 )   61 %   (3,895 )   (8,060 )   52 %

Special Asset Pool

    (80 )   58     NM     922     (5,136 )   NM  
                           

Total Citi Holdings

  $ (1,054 ) $ (1,994 )   47 % $ (3,127 ) $ (6,297 )   50 %
                           

Corporate/Other

  $ 91   $ 97     (6 )% $ 184   $ (586 )   NM  
                           

Income from continuing operations

  $ 2,601   $ 593     NM   $ 9,578   $ 6,674     44 %
                           

Discontinued operations

  $ (374 ) $ (418 )       $ (166 ) $ (677 )      

Net income attributable to noncontrolling interests

    59     74           119     24        
                           

Citigroup's net income

  $ 2,168   $ 101     NM   $ 9,293   $ 5,973     56 %
                           

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CITIGROUP REVENUES(1)

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

CITICORP

                                     

Regional Consumer Banking

                                     
 

North America

  $ 3,740   $ 2,017     85 % $ 11,234   $ 6,702     68 %
 

EMEA

    349     415     (16 )   1,130     1,169     (3 )
 

Latin America

    2,233     1,971     13     6,427     5,845     10  
 

Asia

    1,839     1,717     7     5,484     4,958     11  
                           
   

Total

  $ 8,161   $ 6,120     33 % $ 24,275   $ 18,674     30 %
                           

Securities and Banking

                                     
 

North America

  $ 2,203   $ 1,301     69 % $ 8,383   $ 8,038     4 %
 

EMEA

    1,733     2,202     (21 )   6,010     8,982     (33 )
 

Latin America

    639     705     (9 )   1,804     2,554     (29 )
 

Asia

    1,018     683     49     3,354     4,218     (20 )
                           
   

Total

  $ 5,593   $ 4,891     14 % $ 19,551   $ 23,792     (18 )%
                           

Transaction Services

                                     
 

North America

  $ 620   $ 643     (4 )% $ 1,895   $ 1,888      
 

EMEA

    835     845     (1 )   2,516     2,549     (1 )%
 

Latin America

    384     337     14     1,084     1,020     6  
 

Asia

    696     632     10     1,979     1,857     7  
                           
   

Total

  $ 2,535   $ 2,457     3 % $ 7,474   $ 7,314     2 %
                           

Institutional Clients Group

  $ 8,128   $ 7,348     11 % $ 27,025   $ 31,106     (13 )%
                           
   

Total Citicorp

  $ 16,289   $ 13,468     21 % $ 51,300   $ 49,780     3 %
                           

CITI HOLDINGS

                                     

Brokerage and Asset Management

  $ (8 ) $ 525     NM   $ 473   $ 14,352     (97 )%

Local Consumer Lending

    3,547     4,362     (19 )%   12,423     13,864     (10 )

Special Asset Pool

    314     1,363     (77 )   2,426     (3,547 )   NM  
                           

Total Citi Holdings

  $ 3,853   $ 6,250     (38 )% $ 15,322   $ 24,669     (38 )%
                           

Corporate/Other

  $ 596   $ 672     (11 )% $ 1,608   $ 431     NM  
                           

Total net revenues

  $ 20,738   $ 20,390     2 % $ 68,230   $ 74,880     (9 )%
                           
 

Impact of Credit Card Securitization Activity

                                     
   

Citicorp

  $   $ 1,800     NM   $   $ 4,928     NM  
   

Citi Holdings

        952     NM         3,402     NM  
                           

Total impact of credit card securitization activity

  $   $ 2,752     NM   $   $ 8,330     NM  
                           

Total Citigroup—managed net revenues

  $ 20,738   $ 23,142     (10 )% $ 68,230   $ 83,210     (18 )%
                           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

NM    Not meaningful

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CITICORP

        Citicorp is the company's global bank for consumers and businesses and represents Citi's core franchise. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup's unparalleled global network. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 160 countries and jurisdictions. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of large multinational clients and for meeting the needs of retail, private banking, commercial and institutional customers around the world. Citigroup's global footprint provides coverage of the world's emerging economies, which Citi believes represent a strong area of growth. At September 30, 2010, Citicorp had approximately $1.3 trillion of assets and $757 billion of deposits, representing approximately 65% of Citi's total assets and approximately 89% of its deposits.

        Citicorp consists of the following businesses: Regional Consumer Banking (which includes retail banking and Citi-branded cards in four regions—North America, EMEA, Latin America and Asia) and Institutional Clients Group (which includes Securities and Banking and Transaction Services).

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  
 

Net interest revenue

  $ 9,475   $ 8,727     9 % $ 29,087   $ 26,012     12 %
 

Non-interest revenue

    6,814     4,741     44     22,213     23,768     (7 )
                           

Total revenues, net of interest expense

  $ 16,289   $ 13,468     21 % $ 51,300   $ 49,780     3 %
                           

Provisions for credit losses and for benefits and claims

                                     
 

Net credit losses

  $ 3,020   $ 1,734     74 % $ 9,127   $ 4,560     100 %
 

Credit reserve build (release)

    (427 )   522     NM     (1,426 )   2,751     NM  
                           
 

Provision for loan losses

  $ 2,593   $ 2,256     15 % $ 7,701   $ 7,311     5 %
 

Provision for benefits and claims

    38     43     (12 )   109     127     (14 )
 

Provision for unfunded lending commitments

    1             (32 )   115     NM  
                           
   

Total provisions for credit losses and for benefits and claims

  $ 2,632   $ 2,299     14 % $ 7,778   $ 7,553     3 %
                           

Total operating expenses

  $ 8,883   $ 8,422     5 % $ 26,458   $ 23,889     11 %
                           

Income from continuing operations before taxes

  $ 4,774   $ 2,747     74 % $ 17,064   $ 18,338     (7 )%

Provisions for income taxes

    1,210     257     NM     4,543     4,781     (5 )
                           

Income from continuing operations

  $ 3,564   $ 2,490     43 % $ 12,521   $ 13,557     (8 )%

Net income (loss) attributable to noncontrolling interests

    30     25     20     71     25     NM  
                           

Citicorp's net income

  $ 3,534   $ 2,465     43 % $ 12,450   $ 13,532     (8 )%
                           

Balance sheet data (in billions of dollars)

                                     

Total EOP assets

  $ 1,283   $ 1,075     19 %                  

Average assets

    1,252     1,096     14   $ 1,245   $ 1,076     16 %

Return on assets

    1.12 %   0.89 %         1.34 %   1.68 %      

Total EOP deposits

    757     731     4                    
                           

Total GAAP revenues

  $ 16,289   $ 13,468     21 % $ 51,300   $ 49,780     3 %
 

Net impact of credit card securitization activity(1)

        1,800     NM         4,928     NM  
                           

Total managed revenues

  $ 16,289   $ 15,268     7 % $ 51,300   $ 54,708     (6 )%
                           

GAAP net credit losses

  $ 3,020   $ 1,734     74 % $ 9,127   $ 4,560     100 %
 

Impact of credit card securitization activity(1)

        1,876     NM       $ 5,204     NM  
                           

Total managed net credit losses

  $ 3,020   $ 3,610     (16 )% $ 9,127   $ 9,764     (7 )%
                           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

NM
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REGIONAL CONSUMER BANKING

        Regional Consumer Banking (RCB) consists of Citigroup's four regional consumer banking businesses that provide traditional banking services to retail customers. RCB also contains Citigroup's branded cards business and Citi's local commercial banking business. RCB is a globally diversified business with over 4,200 branches in 39 countries around the world. During the third quarter of 2010, 54% of total RCB revenues were from outside North America. Additionally, the majority of international revenues and loans were from emerging economies in Asia, Latin America, and Central and Eastern Europe and the Middle East. At September 30, 2010, RCB had $311 billion of assets and $300 billion of deposits.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 5,689   $ 4,216     35 % $ 17,380   $ 12,198     42 %

Non-interest revenue

    2,472     1,904     30     6,895     6,476     6  
                           

Total revenues, net of interest expense

  $ 8,161   $ 6,120     33 % $ 24,275   $ 18,674     30 %
                           

Total operating expenses

  $ 4,087   $ 3,778     8 % $ 12,006   $ 10,985     9 %
                           
 

Net credit losses

  $ 2,731   $ 1,442     89 % $ 8,693   $ 4,022     NM  
 

Credit reserve build (release)

    (403 )   356     NM     (991 )   1,661     NM  
 

Provision for unfunded lending commitments

                (4 )        
 

Provisions for benefits and claims

    38     43     (12 )%   109     127     (14 )%
                           

Provisions for credit losses and for benefits and claims

  $ 2,366   $ 1,841     29 % $ 7,807   $ 5,810     34 %
                           

Income from continuing operations before taxes

  $ 1,708   $ 501     NM   $ 4,462   $ 1,879     NM  

Income taxes

    476     (203 )   NM     1,039     (40 )   NM  
                           

Income from continuing operations

  $ 1,232   $ 704     75 % $ 3,423   $ 1,919     78 %

Net income (loss) attributable to noncontrolling interests

    (4 )   2     NM     (9 )   2     NM  
                           

Net income

  $ 1,236   $ 702     76 % $ 3,432   $ 1,917     79 %
                           

Average assets (in billions of dollars)

  $ 311   $ 248     25 % $ 308   $ 239     29 %

Return on assets

    1.58 %   1.12 %         1.49 %   1.07 %      

Average deposits (in billions of dollars)

    296     279     6 %                  
                           

Managed net credit losses as a percentage of average managed loans

    4.90 %   5.97 %                        
                           

Revenue by business

                                     
 

Retail banking

  $ 4,005   $ 3,760     7 % $ 11,735   $ 11,086     6 %
 

Citi-branded cards

    4,156     2,360     76     12,540     7,588     65  
                           
   

Total GAAP revenues

  $ 8,161   $ 6,120     33 % $ 24,275   $ 18,674     30 %
 

Net impact of credit card securitization activity(1)

        1,800     NM         4,928     NM  
                           
 

Total managed revenues

  $ 8,161   $ 7,920     3 % $ 24,275   $ 23,602     3 %
                           

Net credit losses by business

                                     
 

Retail banking

  $ 333   $ 395     (16 )% $ 926   $ 1,161     (20 )%
 

Citi-branded cards

    2,398     1,047     NM     7,767     2,861     NM  
                           
   

Total GAAP net credit losses

  $ 2,731   $ 1,442     89 % $ 8,693   $ 4,022     NM  
 

Net impact of credit card securitization activity(1)

        1,876     NM         5,204     NM  
                           
 

Total managed net credit losses

  $ 2,731   $ 3,318     (18 )% $ 8,693   $ 9,226     (6 )%
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ 778   $ 698     11 % $ 2,510   $ 1,983     27 %
 

Citi-branded cards

    454     6     NM     913     (64 )   NM  
                           
   

Total

  $ 1,232   $ 704     75 % $ 3,423   $ 1,919     78 %
                           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

NM
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NORTH AMERICA REGIONAL CONSUMER BANKING

        North America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded card services to retail customers and small- to mid-size businesses in the U.S. NA RCB's approximately 1,000 retail bank branches and 13.3 million retail customer accounts are largely concentrated in the greater metropolitan areas of New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia, and certain larger cities in Texas. At September 30, 2010, NA RCB had approximately $29 billion of retail banking and residential real estate loans and $144 billion of deposits. In addition, NA RCB had approximately 21 million Citi-branded credit card accounts, with $77 billion in outstanding card loan balances.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 2,734   $ 1,387     97 % $ 8,466   $ 3,909     NM  

Non-interest revenue

    1,006     630     60     2,768     2,793     (1 )%
                           

Total revenues, net of interest expense

  $ 3,740   $ 2,017     85 % $ 11,234   $ 6,702     68 %
                           

Total operating expenses

  $ 1,501   $ 1,499       $ 4,611   $ 4,479     3 %
                           
 

Net credit losses

  $ 1,971   $ 279     NM   $ 6,254   $ 843     NM  
 

Credit reserve build

    40     54     (26 )%   35     456     (92 )%
 

Provisions for benefits and claims

    6     14     (57 )   19     42     (55 )
                           

Provisions for loan losses and for benefits and claims

  $ 2,017   $ 347     NM   $ 6,308   $ 1,341     NM  
                           

Income from continuing operations before taxes

  $ 222   $ 171     30 % $ 315   $ 882     (64 )%

Income taxes (benefits)

    75     (35 )   NM     84     180     (53 )
                           

Income from continuing operations

  $ 147   $ 206     (29 )% $ 231   $ 702     (67 )%

Net income attributable to noncontrolling interests

                         
                           

Net income

  $ 147   $ 206     (29 )% $ 231   $ 702     (67 )%
                           

Average assets (in billions of dollars)

  $ 118   $ 75     57 % $ 119   $ 74     61 %

Average deposits (in billions of dollars)

    145     142     2                    
                           

Managed net credit losses as a percentage of average managed loans(1)

    7.40 %   7.31 %                        
                           

Revenue by business

                                     
 

Retail banking

  $ 1,372   $ 1,333     3 % $ 3,975   $ 4,005     (1 )%
 

Citi-branded cards(2)

    2,368     684     NM     7,259     2,697     NM  
                           
   

Total GAAP revenues

  $ 3,740   $ 2,017     85 % $ 11,234   $ 6,702     68 %
 

Net impact of credit card securitization activity(2)

        1,800     NM         4,928     NM  
                           
 

Total managed revenues

  $ 3,740   $ 3,817     (2 )% $ 11,234   $ 11,630     (3 )%
                           

Net credit losses by business

                                     
 

Retail banking

  $ 90   $ 78     15 % $ 242   $ 222     9 %
 

Citi-branded cards(2)

    1,881     201     NM   $ 6,012     621     NM  
                           
   

Total GAAP net credit losses

  $ 1,971   $ 279     NM   $ 6,254   $ 843     NM  
 

Net impact of credit card securitization activity(2)

        1,876     NM         5,204     NM  
                           
 

Total managed net credit losses

  $ 1,971   $ 2,155     (9 )% $ 6,254   $ 6,047     3 %
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ 189   $ 193     (2 )% $ 598   $ 676     (12 )%
 

Citi-branded cards

    (42 )   13     NM     (367 )   26     NM  
                           
   

Total

  $ 147   $ 206     (29 )% $ 231   $ 702     (67 )%
                           

(1)
See "Managed Presentations" below.

(2)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

NM
Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, increased 85% primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167 effective January 1, 2010. On a managed basis, revenues, net of interest expense, decreased 2%, primarily reflecting the impact of the CARD Act on branded cards revenues, partially offset by improved revenues in mortgages due to an increase in originations in the current quarter (the vast majority of which were originated for sale).

        Net interest revenue was down 11% on a managed basis driven by the impact of the CARD Act as well as lower volumes in cards, where average managed loans were down 8% from the prior-year quarter. This decline was partially offset by lower write-offs of accrued interest in cards as credit continued to improve. A decrease in deposit spreads in the current interest rate environment was partially offset by higher deposit volumes, up 2% from the prior-year quarter.

        Non-interest revenue increased 33% on a managed basis primarily due to higher gains on mortgage sales resulting from

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increased originations, which were up 56% from the prior-year quarter.

        Operating expenses were flat compared to the prior-year quarter as increased investment spending was offset by the one-time benefit related to the renegotiation of a third-party contract.

        Provisions for loan losses and for benefits and claims increased $1.7 billion primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167. On a comparable basis, Provisions for loan losses and for benefits and claims decreased $206 million, or 9%, from the prior-year quarter primarily due to lower net credit losses in cards as underlying credit trends in the cards portfolio continued to improve. The cards managed net credit loss ratio decreased 16 basis points to 9.82%.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, increased 68% primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167 effective January 1, 2010. On a managed basis, revenues, net of interest expense, declined 3% from the prior-year period, mainly due to lower volumes in branded cards, as well as the net impact of the CARD Act on cards revenues. This decrease was partially offset by better servicing hedge results in mortgages.

        Net interest revenue was down 7% on a managed basis driven primarily by lower volumes in cards, with average managed loans down 6% from the prior-year period. The increase in deposit volumes, up 5% from the prior-year period, was offset by lower spreads in the current interest rate environment.

        Non-interest revenue increased 9% on a managed basis from the prior-year period mainly driven by better servicing hedge results in mortgages.

        Operating expenses increased 3% from the prior-year period. Expenses were fairly flat excluding the impact of a litigation reserve in the first quarter of 2010.

        Provisions for loan losses and for benefits and claims increased $5.0 billion primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167. On a comparable basis, Provisions for loan losses and for benefits and claims decreased $237 million, or 4%, primarily due to a lower loan loss reserve build, down $421 million from the prior-year period, offset by higher net credit losses in the branded cards portfolio, which increased $187 million. The cards managed net credit loss ratio increased 98 basis points to 10.43%.

Managed Presentations

 
  Third Quarter  
 
  2010   2009  

Managed credit losses as a percentage of average managed loans

    7.40 %   7.31 %

Impact from credit card securitizations(1)

        (4.91 )%
           

Net credit losses as a percentage of average loans

    7.40 %   2.40 %
           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

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EMEA REGIONAL CONSUMER BANKING

        EMEA Regional Consumer Banking (EMEA RCB) provides traditional banking and Citi-branded card services to retail customers and small- to mid-size businesses, primarily in Central and Eastern Europe, the Middle East and Africa. Remaining activities in respect of Western Europe retail banking are included in Citi Holdings. EMEA RCB has generally repositioned its business, shifting from a strategy of widespread distribution to a focused strategy concentrating on larger urban markets within the region. An exception is Bank Handlowy, which has a mass market presence in Poland. The countries in which EMEA RCB has the largest presence are Poland, Turkey, Russia and the United Arab Emirates. At September 30, 2010, EMEA RCB had approximately 300 retail bank branches with approximately 4 million customer accounts, $5 billion in retail banking loans and $9 billion in average deposits. In addition, the business had approximately 3 million Citi-branded card accounts with $3 billion in outstanding card loan balances.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 222   $ 262     (15 )% $ 700   $ 729     (4 )%

Non-interest revenue

    127     153     (17 )   430     440     (2 )
                           

Total revenues, net of interest expense

  $ 349   $ 415     (16 )% $ 1,130   $ 1,169     (3 )%
                           

Total operating expenses

  $ 303   $ 270     12 % $ 848   $ 808     5 %
                           
 

Net credit losses

  $ 65   $ 139     (53 )% $ 247   $ 349     (29 )%
 

Provision for unfunded lending commitments

                (4 )        
 

Credit reserve build (release)

    (51 )   67     NM     (107 )   297     NM  
 

Provisions for benefits and claims

                         
                           

Provisions for credit losses and for benefits and claims

  $ 14   $ 206     (93 )% $ 136   $ 646     (79 )%
                           

Income (loss) from continuing operations before taxes

  $ 32   $ (61 )   NM   $ 146   $ (285 )   NM  

Income taxes (benefits)

    10     (38 )   NM     47     (119 )   NM  
                           

Income (loss) from continuing operations

  $ 22   $ (23 )   NM   $ 99   $ (166 )   NM  

Net income (loss) attributable to noncontrolling interests

    (1 )   2     NM     (1 )   2     NM  
                           

Net income (loss)

  $ 23   $ (25 )   NM   $ 100   $ (168 )   NM  
                           

Average assets (in billions of dollars)

  $ 10   $ 11     (9 )% $ 10   $ 11     (9 )%

Return on assets

    0.91 %   (0.90 )%         1.34 %   (2.04 )%      

Average deposits (in billions of dollars)

    9     10     (4 )                  
                           

Net credit losses as a percentage of average loans

    3.53 %   6.34 %                        
                           

Revenue by business

                                     
 

Retail banking

  $ 186   $ 237     (22 )% $ 613   $ 676     (9 )%
 

Citi-branded cards

    163     178     (8 )   517     493     5  
                           
   

Total

  $ 349   $ 415     (16 )% $ 1,130   $ 1,169     (3 )%
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ (18 ) $ (23 )   22 % $ (15 ) $ (140 )   89 %
 

Citi-branded cards

    40             114     (26 )   NM  
                           
   

Total

  $ 22   $ (23 )   NM   $ 99   $ (166 )   NM  
                           

NM
Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, decreased 16%. A majority of the decrease was due to lower results from Citi's equity investment in Akbank, lower lending revenues due to credit tightening and FX translation. This was partially offset by higher revenues in wealth management. Cards purchase sales were up 5% and investment sales were up 20%. Assets under management increased 10% primarily due to market valuations and the introduction of new, regional initiatives.

        Net interest revenue decreased 15%, primarily due to lower volumes due to tighter origination criteria and various promotions aimed at client acquisition.

        Non-interest revenue decreased 17% due to lower results from Citi's equity investment in Akbank.

        Operating expenses increased 12% reflecting increased investments and marketing expenditures in the business.

        Provisions for credit losses and for benefits and claims decreased 93% mainly due to the impact of a $51 million loan loss reserve release in the current quarter, compared to a $67 million build in the prior-year quarter, and a 53% decline in net credit losses, driven by credit improvements across most markets. The release of loan loss reserves in the current period was driven by improvement in credit in most countries coupled with a decline in receivables. The cards net credit loss ratio improved to 4.39% in the current quarter from 7.27% and there was a 7% improvement in the net credit margin. The retail banking net credit loss ratio decreased from 5.85% in the prior-year quarter to 3.00% in the current quarter.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, decreased 3%. The decrease in revenue was primarily attributable to lower retail bank lending revenues as a result of lower volumes, which were due to tighter origination criteria. This was partially offset by FX translation and higher revenues in cards due to higher volumes. Cards purchase sales increased 10%.

        Net interest revenue decreased 4%, mainly due to a decline in volumes as a result of tighter origination criteria.

        Non-interest revenue decreased 2%, primarily driven by a litigation reserve build in the first half of 2010.

        Operating expenses increased 5% driven by the impact of FX translation and increased investment in the business, largely offset by cost savings from branch closures, headcount reductions and re-engineering benefits.

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        Provisions for credit losses and for benefits and claims decreased 79% mainly due to the impact of a $107 million loan loss reserve release in the first nine months of 2010, compared to a $297 million build in the prior-year period, as well as a 29% decline in net credit losses. The release of loan loss reserves in the current period was driven by an improvement in credit in most countries coupled with a decline in receivables.

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LATIN AMERICA REGIONAL CONSUMER BANKING

        Latin America Regional Consumer Banking (LATAM RCB) provides traditional banking and Citi-branded card services to retail customers and small- to mid-size businesses, with the largest presence in Mexico and Brazil. LATAM RCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico's second largest bank with over 1,700 branches. At September 30, 2010, LATAM RCB had approximately 2,215 retail branches, with 27 million customer accounts, $21 billion in retail banking loan balances and $41 billion in average deposits. In addition, the business had approximately 12 million Citi-branded card accounts with $13 billion in outstanding loan balances.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 1,501   $ 1,366     10 % $ 4,430   $ 4,009     11 %

Non-interest revenue

    732     605     21     1,997     1,836     9  
                           

Total revenues, net of interest expense

  $ 2,233   $ 1,971     13 % $ 6,427   $ 5,845     10 %
                           

Total operating expenses

  $ 1,258   $ 1,127     12 % $ 3,666   $ 3,175     15 %
                           
 

Net credit losses

  $ 450   $ 657     (32 )% $ 1,416   $ 1,808     (22 )%
 

Credit reserve build (release)

    (300 )   141     NM     (677 )   463     NM  
 

Provision for benefits and claims

    32     29     10     90     85     6  
                           

Provisions for loan losses and for benefits and claims

  $ 182   $ 827     (78 )% $ 829   $ 2,356     (65 )%
                           

Income from continuing operations before taxes

  $ 793   $ 17     NM   $ 1,932   $ 314     NM  

Income taxes

    235     (60 )   NM     494     (98 )   NM  
                           

Income from continuing operations

  $ 558   $ 77     NM   $ 1,438   $ 412     NM  

Net (loss) attributable to noncontrolling interests

    (3 )           (8 )        
                           

Net income

  $ 561   $ 77     NM   $ 1,446   $ 412     NM  
                           

Average assets (in billions of dollars)

  $ 74   $ 66     12 % $ 73   $ 64     14 %

Return on assets

    3.01 %   0.46 %         2.65 %   0.86 %      

Average deposits (in billions of dollars)

    41     36     13                    
                           

Net credit losses as a percentage of average loans

    5.48 %   8.99 %                        
                           

Revenue by business

                                     
 

Retail banking

  $ 1,300   $ 1,114     17 % $ 3,732   $ 3,252     15 %
 

Citi-branded cards

    933     857     9     2,695     2,593     4  
                           
   

Total

  $ 2,233   $ 1,971     13 % $ 6,427   $ 5,845     10 %
                           

Income (loss) from continuing operations by business

                                     
 

Retail banking

  $ 277   $ 154     80 % $ 808   $ 580     39 %
 

Citi-branded cards

    281     (77 )   NM     630     (168 )   NM  
                           
   

Total

  $ 558   $ 77     NM   $ 1,438   $ 412     NM  
                           

NM
Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, increased 13% mainly due to higher lending and deposit volumes as well as better margins in retail banking and, in cards, higher ANR and fees from new account acquisitions as well as the impact of FX translation.

        Net interest revenue increased 10%, mainly driven by higher lending and deposit volumes in retail banking and the impact of FX translation. Average retail banking loans and deposits increased 20% and 13%, respectively. The increases were also spurred by better spreads and positive FX translation.

        Non-interest revenue increased 21%, primarily due to higher fees in the cards business and the impact of FX translation.

        Operating expenses increased 12%, mainly due to the investments initiatives for account acquisitions in cards, the prior-year quarter's release of legal reserves and excess restructuring provisions, and the impact of FX translation.

        Provisions for loan losses and for benefits and claims decreased 78%, mainly due to the impact of a $300 million loan loss reserve release in the current period, compared to a $141 million build in the same period last year, and a 32% decline in net credit losses, reflecting improved credit conditions, especially in Mexico cards. The cards net credit loss ratio declined across the region during the period, from 17.80% to 10.39%, reflecting continued economic recovery. The retail banking net credit loss ratio dropped from 2.68% to 2.50%.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, increased 10%, mainly due to higher lending and deposit volumes in retail banking aided by a moderate increase in cards loans volumes and the impact of FX translation.

        Net interest revenue increased 11%, mainly driven by higher lending and deposit volumes in retail banking. Average retail banking loans and deposits increased 21% and 13%, respectively. Additionally, cards ANR moderately increased and there was a positive FX translation.

        Non-interest revenue increased 9%, due to higher fees in the cards business and the impact of FX translation.

        Provisions for loan losses and for benefits and claims decreased 65%, mainly due to the impact of a net loan loss reserve release of $677 million year-to-date 2010, compared to a $463 million build in the same period last year, and a 22% decline in net credit losses, reflecting improved credit conditions, especially in Mexico cards. The cards net credit

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loss ratio declined from 16.36% to 12.14%, while the retail banking net credit loss ratio declined from 3.01% to 2.17%.

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ASIA REGIONAL CONSUMER BANKING

        Asia Regional Consumer Banking (Asia RCB) provides traditional banking and Citi-branded card services to retail customers and small- to mid-size businesses, with the largest Citi presence in South Korea, Japan, Taiwan, Singapore, Australia, Hong Kong, India and Indonesia. At September 30, 2010, Asia RCB had approximately 707 retail branches, 16 million retail banking accounts, $101 billion in average customer deposits, and $59 billion in retail banking loans. In addition, the business had approximately 15 million Citi-branded card accounts with $19 billion in outstanding loan balances.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 1,232   $ 1,201     3 % $ 3,784   $ 3,551     7 %

Non-interest revenue

    607     516     18     1,700     1,407     21  
                           

Total revenues, net of interest expense

  $ 1,839   $ 1,717     7 % $ 5,484   $ 4,958     11 %
                           

Total operating expenses

  $ 1,025   $ 882     16 % $ 2,881   $ 2,523     14 %
                           
 

Net credit losses

  $ 245   $ 367     (33 )% $ 776   $ 1,022     (24 )%
 

Credit reserve build (release)

    (92 )   94     NM     (242 )   445     NM  
                           

Provisions for loan losses and for benefits and claims

  $ 153   $ 461     (67 )% $ 534   $ 1,467     (64 )%
                           

Income from continuing operations before taxes

  $ 661   $ 374     77 % $ 2,069   $ 968     NM  

Income taxes

    156     (70 )   NM     414     (3 )   NM  
                           

Income from continuing operations

  $ 505   $ 444     14 % $ 1,655   $ 971     70 %

Net income attributable to noncontrolling interests

                         
                           

Net income

  $ 505   $ 444     14 % $ 1,655   $ 971     70 %
                           

Average assets (in billions of dollars)

  $ 109   $ 96     14 % $ 106   $ 90     18 %

Return on assets

    1.84 %   1.83 %         2.09 %   1.44 %      

Average deposits (in billions of dollars)

    101     91     11                    
                           

Net credit losses as a percentage of average loans

    1.29 %   2.21 %                        
                           

Revenue by business

                                     
 

Retail banking

  $ 1,147   $ 1,076     7 % $ 3,415   $ 3,153     8 %
 

Citi-branded cards

    692     641     8     2,069     1,805     15  
                           
   

Total

  $ 1,839   $ 1,717     7 % $ 5,484   $ 4,958     11 %
                           

Income from continuing operations by business

                                     
 

Retail banking

  $ 330   $ 374     (12 )% $ 1,119   $ 867     29 %
 

Citi-branded cards

    175     70     NM     536     104     NM  
                           
   

Total

  $ 505   $ 444     14 % $ 1,655   $ 971     70 %
                           

NM
Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, increased 7%, reflecting higher cards purchase sales, investment sales, loan and deposit volumes, and the impact of FX translation, partially offset by lower spreads.

        Net interest revenue was 3% higher than the prior-year period, mainly due to higher lending and deposit volumes and the impact of FX translation, partially offset by lower spreads. Average loans and deposits were up 15% and 11%, respectively.

        Non-interest revenue increased 18%, primarily due to higher investment revenues, higher cards purchase sales, and the impact of FX translation.

        Operating expenses increased 16%, primarily due to the increase in volumes and higher investment spending, and the impact of FX translation.

        Provisions for loan losses and for benefits and claims decreased 67%, mainly due to the impact of a $92 million loan loss reserve release in the current quarter, compared to a $94 million loan loss reserve build in the prior-year quarter, and a decrease in net credit losses of 33%. These declines were partially offset by the impact of FX translation. Delinquencies and net credit losses continued to decline from their peak level in the second quarter of 2009 as the region benefitted from continued economic recovery and increased levels of customer activity. The cards net credit loss ratio decreased from 5.89% in the prior-year quarter to 3.54% in the current quarter. The retail banking net credit loss ratio decreased from 0.96% in the prior-year quarter to 0.56% in the current quarter.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, increased 11%, driven by higher cards purchase sales, investment sales and loan and deposit volumes, and the impact of FX translation, partially offset by lower spread.

        Net interest revenue was 7% higher than the prior-year period, mainly due to higher lending and deposit volumes and the impact of FX translation, partially offset by lower spreads.

        Non-interest revenue increased 21%, primarily due to higher investment revenues, higher cards purchase sales, and the impact of FX translation.

        Operating expenses increased 14%, primarily due to increase in volumes, continued investment spending, and the impact of FX translation.

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        Provisions for loan losses and for benefits and claims decreased 64%, mainly due to the impact of a net loan loss reserve release of $242 million in the first nine months of 2010, compared to a $445 million loan loss reserve build in the prior-year period, and a 24% decline in net credit losses. These declines were partially offset by the impact of FX translation. The decrease in provisions for loan losses and for benefits and claims reflects continued credit quality improvement across the region, particularly in India and South Korea.

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INSTITUTIONAL CLIENTS GROUP

        Institutional Clients Group (ICG) includes Securities and Banking and Transaction Services. ICG provides corporate, institutional and ultra-high net worth clients with a full range of products and services, including cash management, trading, underwriting, lending and advisory services, around the world. ICG's international presence is supported by trading floors in approximately 75 countries and a proprietary network within Transaction Services in over 95 countries. At September 30, 2010, ICG had approximately $963 billion of assets and $457 billion of deposits.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Commissions and fees

  $ 1,016   $ 1,122     (9 )% $ 3,210   $ 3,100     4 %

Administration and other fiduciary fees

    672     702     (4 )   2,008     2,122     (5 )

Investment banking

    829     1,066     (22 )   2,374     3,247     (27 )

Principal transactions

    982     (571 )   NM     5,958     7,259     (18 )

Other

    843     518     63     1,768     1,564     13  
                           
 

Total non-interest revenue

  $ 4,342   $ 2,837     53 % $ 15,318   $ 17,292     (11 )%
 

Net interest revenue (including dividends)

    3,786     4,511     (16 )   11,707     13,814     (15 )
                           

Total revenues, net of interest expense

  $ 8,128   $ 7,348     11 % $ 27,025   $ 31,106     (13 )%

Total operating expenses

    4,796     4,644     3     14,452     12,904     12  
 

Net credit losses

    289     292     (1 )   434     538     (19 )
 

Provision for unfunded lending commitments

    1             (28 )   115     NM  
 

Credit reserve build (release)

    (24 )   166     NM     (435 )   1,090     NM  
 

Provisions for benefits and claims

                         
                           

Provisions for credit losses and for benefits and claims

  $ 266   $ 458     (42 )% $ (29 ) $ 1,743     NM  
                           

Income from continuing operations before taxes

  $ 3,066   $ 2,246     37 % $ 12,602   $ 16,459     (23 )%

Income taxes

    734     460     60     3,504     4,821     (27 )
                           

Income from continuing operations

  $ 2,332   $ 1,786     31 % $ 9,098   $ 11,638     (22 )%

Net income attributable to noncontrolling interests

    34     23     48     80     23     NM  
                           

Net income

  $ 2,298   $ 1,763     30 % $ 9,018   $ 11,615     (22 )%
                           

Average assets (in billions of dollars)

  $ 941   $ 848     11 % $ 937   $ 837     12 %

Return on assets

    0.97 %   0.82 %         1.29 %   1.86 %      
                           

Revenues by region

                                     
 

North America

  $ 2,823   $ 1,944     45 % $ 10,278   $ 9,926     4 %
 

EMEA

    2,568     3,047     (16 )   8,526     11,531     (26 )
 

Latin America

    1,023     1,042     (2 )   2,888     3,574     (19 )
 

Asia

    1,714     1,315     30     5,333     6,075     (12 )
                           

Total revenues

  $ 8,128   $ 7,348     11 % $ 27,025   $ 31,106     (13 )%
                           

Income from continuing operations by region

                                     
 

North America

  $ 587   $ 159     NM   $ 3,175   $ 2,943     8 %
 

EMEA

    810     858     (6 )%   2,821     4,451     (37 )
 

Latin America

    437     367     19     1,216     1,616     (25 )
 

Asia

    498     402     24     1,886     2,628     (28 )
                           

Total income from continuing operations

  $ 2,332   $ 1,786     31 % $ 9,098   $ 11,638     (22 )%
                           

Average loans by region (in billions of dollars)

                                     
 

North America

  $ 66   $ 49     35 %                  
 

EMEA

    38     43     (12 )                  
 

Latin America

    22     22                        
 

Asia

    37     27     37                    
                           

Total average loans

  $ 163   $ 141     16 %                  
                           

NM
Not meaningful

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SECURITIES AND BANKING

        Securities and Banking (S&B) offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and retail investors, and ultra-high net worth individuals. S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, foreign exchange, structured products, cash instruments and related derivatives, and private banking. S&B revenue is generated primarily from fees for investment banking and advisory services, fees and interest on loans, fees and spread on foreign exchange, structured products, cash instruments and related derivatives, income earned on principal transactions, and fees and spreads on private banking services.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 2,353   $ 3,118     (25 )% $ 7,488   $ 9,560     (22 )%

Non-interest revenue

    3,240     1,773     83     12,063     14,232     (15 )
                           

Revenues, net of interest expense

  $ 5,593   $ 4,891     14 % $ 19,551   $ 23,792     (18 )%

Total operating expenses

    3,566     3,503     2     10,901     9,601     14  
 

Net credit losses

    288     294     (2 )   431     540     (20 )
 

Provisions for unfunded lending commitments

    1             (28 )   115     NM  
 

Credit reserve build (release)

    (8 )   171     NM     (366 )   1,089     NM  
 

Provisions for benefits and claims

                         
                           

Provisions for credit losses and benefits and claims

  $ 281   $ 465     (40 ) $ 37   $ 1,744     (98 )%
                           

Income before taxes and noncontrolling interests

  $ 1,746   $ 923     89 % $ 8,613   $ 12,447     (31 )%

Income taxes (benefits)

    339     76     NM     2,315     3,626     (36 )
                           

Income from continuing operations

    1,407     847     66     6,298     8,821     (29 )

Net income attributable to noncontrolling interests

    29     18     61     65     19     NM  
                           

Net income

  $ 1,378   $ 829     66 % $ 6,233   $ 8,802     (29 )%
                           

Average assets (in billions of dollars)

  $ 869   $ 788     10 % $ 869   $ 778     12 %

Return on assets

    0.63 %   0.42 %         0.96 %   1.51 %      
                           

Revenues by region

                                     
 

North America

  $ 2,203   $ 1,301     69 % $ 8,383   $ 8,038     4 %
 

EMEA

    1,733     2,202     (21 )   6,010     8,982     (33 )
 

Latin America

    639     705     (9 )   1,804     2,554     (29 )
 

Asia

    1,018     683     49     3,354     4,218     (20 )
                           

Total revenues

  $ 5,593   $ 4,891     14 % $ 19,551   $ 23,792     (18 )%
                           

Income (loss) from continuing operations by region

                                     
 

North America

  $ 456   $ 7     NM   $ 2,719   $ 2,472     10 %
 

EMEA

    505     550     (8 )%   1,892     3,467     (45 )
 

Latin America

    266     219     21     735     1,158     (37 )
 

Asia

    180     71     NM     952     1,724     (45 )
                           

Total income from continuing operations

  $ 1,407   $ 847     66 % $ 6,298   $ 8,821     (29 )%
                           

Securities and Banking revenue details

                                     
 

Fixed income markets

  $ 3,501   $ 4,024     (13 )% $ 12,594   $ 19,616     (36 )%
 

Investment banking

    930     1,164     (20 )   2,661     3,308     (20 )
 

Equity markets

    1,040     446     NM     2,905     3,152     (8 )
 

Lending

    (18 )   (794 )   98     747     (2,261 )   NM  
 

Private Bank

    497     522     (5 )   1,503     1,507      
 

Other Securities and Banking

    (357 )   (471 )   24     (859 )   (1,530 )   44  
                           

Total Securities and Banking revenues

  $ 5,593   $ 4,891     14 % $ 19,551   $ 23,792     (18 )%
                           

NM
Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, were $5.6 billion, compared to $4.9 billion in the prior-year quarter, resulting from an increase in CVA, lending and advisory revenues, partially offset by a decrease in fixed income markets, debt and equity underwriting, equity markets and Private Bank revenues. CVA was $99 million in the third quarter of 2010, reflecting derivative CVA gains as corporate spreads tightened during the quarter. CVA of negative $1.8 billion in the third quarter of 2009 was driven by narrowing of Citigroup spreads during the period. Lending revenues increased from negative $0.8 billion to negative $18 million, due to lower losses on credit default swap hedges. Fixed income markets revenues (excluding CVA, net of hedges, of $0.1 billion and negative $0.8 billion in the current quarter and prior-year quarter, respectively) declined $1.5 billion to $3.4 billion, with a majority of the decline coming from weaker results in Credit Products, Securitized Products and G10 Rates trading, which reflected a challenging market environment. This was partially offset by strong performance in emerging markets. Equity markets revenues (excluding CVA, net of hedges, of

22


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negative $22 million and negative $0.9 billion in the current quarter and prior-year quarter, respectively), decreased $0.3 billion to $1.1 billion, driven by lower client activity levels. Investment banking revenues decreased $0.2 billion to $0.9 billion, reflecting lower levels of market activity in debt and equity underwriting, partially offset by an increase in advisory revenues resulting from increased M&A transaction volume and improvement in completed M&A market share.

        Operating expenses increased 2%, or $63 million, to $3.6 billion, reflecting select investments in the businesses.

        Provisions for loan losses and for benefits and claims decreased by $0.2 billion to $0.3 billion, primarily attributable to the impact of a $7 million credit reserve release in the current quarter, compared to a $171 million build in the prior-year quarter, as improvements continued in the corporate loan portfolio.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense for the current period were $19.6 billion, compared to $23.8 billion for the prior-year period, which was a particularly strong nine months driven by robust fixed income markets and higher client activity levels in investment banking. The decrease was partially offset by an increase in lending revenues, due to gains on credit default swap hedges. Revenue declines were also partially offset by an increase in CVA.

        Operating expenses increased 14%, or $1.3 billion, to $10.9 billion, mainly driven by higher compensation costs, the U.K. bonus tax in the second quarter of 2010 and a net change in the litigation reserve releases.

        Provisions for loan losses and for benefits and claims decreased by $1.7 billion to $37 million primarily attributable to the impact of a $394 million credit reserve release in the current period, compared to a $1.2 billion build in the prior-year period, as the market environment showed signs of stabilization.

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TRANSACTION SERVICES

        Transaction Services is composed of Treasury and Trade Solutions (TTS) and Securities and Fund Services (SFS). TTS provides comprehensive cash management and trade finance for corporations, financial institutions and public sector entities worldwide. SFS provides custody and funds services to investors such as insurance companies, mutual funds and hedge funds, clearing services to intermediaries such as broker-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue is generated from net interest revenue on deposits in TTS and SFS, as well as from trade loans and from fees for transaction processing and fees on assets under custody in SFS.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 1,433   $ 1,393     3 % $ 4,219   $ 4,254     (1 )%

Non-interest revenue

    1,102     1,064     4     3,255     3,060     6  
                           

Total revenues, net of interest expense

  $ 2,535   $ 2,457     3 % $ 7,474   $ 7,314     2 %

Total operating expenses

    1,230     1,141     8     3,551     3,303     8  

Provisions for loan losses and for benefits and claims

    (15 )   (7 )   NM     (66 )   (1 )   NM  
                           

Income before taxes and noncontrolling interests

  $ 1,320   $ 1,323       $ 3,989   $ 4,012     (1 )%

Income taxes

    395     384     3     1,189     1,195     (1 )
                           

Income from continuing operations

    925     939     (1 )   2,800     2,817     (1 )

Net income attributable to noncontrolling interests

    5     5         15     4     NM  
                           

Net income

  $ 920   $ 934     (1 )% $ 2,785   $ 2,813     (1 )%
                           

Average assets (in billions of dollars)

    72     60     20 %   68     59     15 %

Return on assets

    5.07 %   6.18 %         5.48 %   6.37 %      
                           

Revenues by region

                                     
 

North America

  $ 620   $ 643     (4 )% $ 1,895   $ 1,888      
 

EMEA

    835     845     (1 )   2,516     2,549     (1 )%
 

Latin America

    384     337     14     1,084     1,020     6  
 

Asia

    696     632     10     1,979     1,857     7  
                           

Total revenues

  $ 2,535   $ 2,457     3 % $ 7,474   $ 7,314     2 %
                           

Revenue details

                                     
 

Treasury and Trade Solutions

  $ 1,846   $ 1,794     3 % $ 5,432   $ 5,337     2 %
 

Securities and Fund Services

    689     663     4     2,042     1,977     3  
                           

Total revenues

  $ 2,535   $ 2,457     3 % $ 7,474   $ 7,314     2 %
                           

Income from continuing operations by region

                                     
 

North America

  $ 131   $ 152     (14 )% $ 456   $ 471     (3 )%
 

EMEA

    305     308     (1 )   929     984     (6 )
 

Latin America

    171     148     16     481     458     5  
 

Asia

    318     331     (4 )   934     904     3  
                           

Total income from continuing operations

  $ 925   $ 939     (1 )% $ 2,800   $ 2,817     (1 )%
                           

Key indicators

                                     

Average deposits and other customer liability balances (in billions of dollars)

  $ 340   $ 314     8 %                  

EOP assets under custody (in trillions of dollars)

    12.4     12.1     2                    
                           

NM
Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, grew 3% with increases in both the TTS and SFS businesses. TTS revenue increased 3%, driven primarily by growth in Trade and Cards businesses as well as higher balances which more than offset spread compression. SFS revenues increased 4%, driven by higher fees as well as increased client activity.

        Operating expenses increased 8%, related to increased technology and other investment spend required to support future business growth.

        Provisions for loan losses and for benefits and claims declined by $8 million, primarily attributable to a credit reserve release of $16 million in the current quarter, reflecting the improved quality of the portfolio.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, grew 2% as improvement in fees in both the TTS and SFS businesses more than offset spread compression. TTS revenue increased 2%, driven primarily by growth in Trade and Cards businesses. SFS revenues increased 3%, driven by higher fees as a result of growth in assets under custody and client activity.

        Operating expenses increased 8%, related to continued investment spend required to support future business growth, as well as higher transaction related costs.

        Provisions for loan losses and for benefits and claims declined by $65 million, primarily attributable to a credit reserve release of $69 million, reflecting the improved quality of the portfolio.

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CITI HOLDINGS

        Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses. These noncore businesses tend to be more asset intensive and reliant on wholesale funding and also may be product-driven rather than client-driven. Citi intends to exit these businesses as quickly as practicable in an economically rational manner through business divestitures, portfolio run-offs and asset sales.

        Citi has made substantial progress divesting and exiting businesses from Citi Holdings, having completed more than 30 divestiture transactions since the beginning of 2009 through September 30, 2010, including Smith Barney, Nikko Cordial Securities, Nikko Asset Management, Primerica Financial Services, various credit card businesses and Diners Club North America. During the third quarter of 2010, Citi announced sale of The Student Loan Corporation, which is currently expected to close in the fourth quarter of 2010. (The Student Loan Corporation is reported as Discontinued Operations within the Corporate/Other segment for the third quarter of 2010 only.) Citi Holdings' GAAP assets have been reduced by approximately 24%, or $135 billion, from the third quarter of 2009, and 49% from the peak in the first quarter of 2008. Citi Holdings' GAAP assets of $421 billion represent approximately 21% of Citi's assets as of September 30, 2010. Citi Holdings' risk-weighted assets of approximately $370 billion represent approximately 37% of Citi's risk-weighted assets as of September 30, 2010. Asset reductions from Citi Holdings have the combined benefits of further fortifying Citigroup's capital base, lowering risk, simplifying the organization and allowing Citi to allocate capital to fund long-term strategic businesses.

        Citi Holdings consists of the following businesses: Brokerage and Asset Management, Local Consumer Lending, and Special Asset Pool.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 3,519   $ 3,732     (6 )% $ 11,865   $ 12,951     (8 )%

Non-interest revenue

    334     2,518     (87 )   3,457     11,718     (70 )
                           

Total revenues, net of interest expense

  $ 3,853   $ 6,250     (38 )% $ 15,322   $ 24,669     (38 )%
                           

Provisions for credit losses and for benefits and claims

                                     

Net credit losses

  $ 4,640   $ 6,234     (26 )% $ 14,879   $ 19,042     (22 )%

Credit reserve build (release)

    (1,567 )   281     NM     (2,027 )   4,563     NM  
                           

Provision for loan losses

  $ 3,073   $ 6,515     (53 )% $ 12,852   $ 23,605     (46 )%

Provision for benefits and claims

    189     280     (33 )   617     837     (26 )

Provision for unfunded lending commitments

    26             (45 )   80     NM  
                           

Total provisions for credit losses and for benefits and claims

  $ 3,288   $ 6,795     (52 )% $ 13,424   $ 24,522     (45 )%
                           

Total operating expenses

  $ 2,209   $ 2,962     (25 )% $ 7,207   $ 10,756     (33 )%
                           

(Loss) from continuing operations before taxes

  $ (1,644 ) $ (3,507 )   53 % $ (5,309 ) $ (10,609 )   50 %

Income taxes (benefits)

    (590 )   (1,513 )   61     (2,182 )   (4,312 )   49  
                           

(Loss) from continuing operations

  $ (1,054 ) $ (1,994 )   47 % $ (3,127 ) $ (6,297 )   50 %

Net income attributable to noncontrolling interests

    80     49     63     99     1     NM  
                           

Net (loss)

  $ (1,134 ) $ (2,043 )   44 % $ (3,226 ) $ (6,298 )   49 %
                           

Balance sheet data (in billions of dollars)

                                     

Total EOP assets

  $ 421   $ 556     (24 )%                  
                           

Total EOP deposits

  $ 82   $ 87     (6 )%                  
                           

Total GAAP Revenues

  $ 3,853   $ 6,250     (38 )% $ 15,322   $ 24,669     (38 )%
 

Net Impact of Credit Card Securitization Activity(1)

        952     NM         3,402     NM  
                           

Total Managed Revenues

  $ 3,853   $ 7,202     (47 )% $ 15,322   $ 28,071     (45 )%
                           

GAAP Net Credit Losses

  $ 4,640   $ 6,234     (26 )% $ 14,879   $ 19,042     (22 )%
 

Impact of Credit Card Securitization Activity(1)

        1,137     NM         3,472     NM  
                           

Total Managed Net Credit Losses

  $ 4,640   $ 7,371     (37 )% $ 14,879   $ 22,514     (34 )%
                           

(1)
See discussion of adoption of SFAS 166/167 in Note 1 to the Consolidated Financial Statements.


NM
Not meaningful

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BROKERAGE AND ASSET MANAGEMENT

        Brokerage and Asset Management (BAM), which constituted approximately 7% of Citi Holdings by assets as of September 30, 2010, consists of Citi's global retail brokerage and asset management businesses. This segment was substantially affected by, and reduced in size, due to the sales of Smith Barney (SB) to the Morgan Stanley Smith Barney joint venture (MSSB JV) and by the sale of Nikko Cordial Securities in 2009. At September 30, 2010, BAM had approximately $28 billion of assets, primarily consisting of Citi's investment in, and assets related to, the MSSB JV. Morgan Stanley has options to purchase Citi's remaining stake in the MSSB JV over three years starting in 2012.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ (87 ) $ (82 )   (6 )% $ (223 ) $ 444     NM  

Non-interest revenue

    79     607     (87 )   696     13,908     (95 )%
                           

Total revenues, net of interest expense

  $ (8 ) $ 525     NM   $ 473   $ 14,352     (97 )%
                           

Total operating expenses

  $ 221   $ 307     (28 )% $ 744   $ 2,850     (74 )%
                           
 

Net credit losses

  $ 2   $ 1     100 % $ 14   $ 1     NM  
 

Credit reserve build (release)

    (4 )   (11 )   64     (14 )   35     NM  
 

Provision for benefits and claims

    9     8     13     27     27      
 

Provision for unfunded lending commitments

                (6 )        
                           

Provisions for credit losses and for benefits and claims

  $ 7   $ (2 )   NM   $ 21   $ 63     (67 )%
                           

Income (loss) from continuing operations before taxes

  $ (236 ) $ 220     NM   $ (292 ) $ 11,439     NM  

Income taxes (benefits)

    (89 )   130     NM     (138 )   4,540     NM  
                           

Income from continuing operations

  $ (147 ) $ 90     NM   $ (154 ) $ 6,899     NM  

Net income attributable to noncontrolling interests

    6     16     (63 )%   8     5     60 %
                           

Net income (loss)

  $ (153 ) $ 74     NM   $ (162 ) $ 6,894     NM  
                           

EOP assets (in billions of dollars)

    28   $ 54     (48 )%                  

EOP deposits (in billions of dollars)

  $ 57     60     (5 )                  
                           

NM    Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, decreased $533 million primarily due to the absence of the $320 million pre-tax gain on sale ($159 million after-tax) of Managed Futures which occurred in the prior-year quarter. Excluding the gain, revenues declined $213 million driven primarily by lower revenues from the MSSB JV, negative private equity marks and divestitures.

        Operating expenses decreased 28% from the prior-year quarter, mainly due to the absence of Nikko and other divestitures.

        Provisions for credit losses and for benefits and claims increased $9 million, mainly reflecting a lower reserve release of $7 million.

        Assets declined 48% versus the prior year, primarily driven by the sale of Nikko Cordial Securities and Nikko Asset Management.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, decreased 97% primarily due to the absence of the $11.1 billion pre-tax gain on the sale of SB ($6.7 billion after-tax) which closed on June 1, 2009 and the absence of a $320 million pre-tax gain on sale ($159 million after-tax) of Managed Futures. Excluding the gains, revenue declined $2.5 billion, or 84%, driven primarily by the absence of SB revenues.

        Operating expenses decreased 74% from the prior-year period, primarily driven by the absence of expenses from SB and the Nikko businesses.

        Provisions for credit losses and for benefits and claims declined 67% primarily due to lower reserve build of $49 million, partially offset by increased net credit losses of $13 million.

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Table of Contents


LOCAL CONSUMER LENDING

        Local Consumer Lending (LCL), which constituted approximately 71% of Citi Holdings by assets as of September 30, 2010, includes a portion of Citigroup's North American mortgage business, Retail partner cards, Western European cards and retail banking, CitiFinancial North America and other local consumer finance businesses globally. The Student Loan Corporation is reported as Discontinued Operations within the Corporate/Other segment for the third quarter of 2010 only. At September 30, 2010, LCL had $298 billion of assets ($269 billion in North America). Approximately $137 billion of assets in LCL as of September 30, 2010 consisted of U.S. mortgages in the company's CitiMortgage and CitiFinancial operations. The North American assets consist of residential mortgage loans (first and second mortgages), retail partner card loans, personal loans, commercial real estate, and other consumer loans and assets.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 3,383   $ 3,272     3 % $ 11,091   $ 10,161     9 %

Non-interest revenue

    164     1,090     (85 )   1,332     3,703     (64 )
                           

Total revenues, net of interest expense(1)

  $ 3,547   $ 4,362     (19 )% $ 12,423   $ 13,864     (10 )%
                           

Total operating expenses

  $ 1,872   $ 2,442     (23 )% $ 6,096   $ 7,288     (16 )%
                           
 

Net credit losses

  $ 3,949   $ 4,912     (20 )% $ 13,422   $ 14,573     (8 )%
 

Credit reserve build (release)

    (953 )   577     NM     (988 )   4,923     NM  
 

Provision for benefits and claims

    180     272     (34 )   590     810     (27 )
 

Provision for unfunded lending commitments

                         
                           

Provisions for credit losses and for benefits and claims

  $ 3,176   $ 5,761     (45 )% $ 13,024   $ 20,306     (36 )%
                           

(Loss) from continuing operations before taxes

  $ (1,501 ) $ (3,841 )   61 % $ (6,697 ) $ (13,730 )   51  

Income taxes

    (674 )   (1,699 )   60     (2,802 )   (5,670 )   51  
                           

Income (Loss) from continuing operations

  $ (827 ) $ (2,142 )   61 % $ (3,895 ) $ (8,060 )   52 %

Net income attributable to noncontrolling interests

        13     (100 )   7     24     (71 )
                           

Net (loss)

  $ (827 ) $ (2,155 )   62 % $ (3,902 ) $ (8,084 )   52 %
                           

Average assets (in billions of dollars)

  $ 317   $ 345     (8 )% $ 335   $ 357     (6 )%
                           

Net credit losses as a percentage of average managed loans(2)

    6.31 %   7.21 %                        
                           

Revenue by business

                                     
 

International

  $ 500   $ 852     (41 )% $ 1,279   $ 3,565     (64 )%
 

Retail partner cards(1)

    2,060     1,441     43     6,379     3,757     70  
 

North America (ex Cards)

    987     2,069     (52 )   4,765     6,542     (27 )
                           
   

Total GAAP Revenues

  $ 3,547   $ 4,362     (19 )% $ 12,423   $ 13,864     (10 )%
 

Net impact of credit card securitization activity(1)

        952     NM         3,402     NM  
                           
 

Total Managed Revenues

  $ 3,547   $ 5,314     (33 )% $ 12,423   $ 17,266     (28 )%
                           

Net Credit Losses by business

                                     
 

International

  $ 444   $ 957     (54 )% $ 1,551   $ 2,737     (43 )%
 

Retail partner cards(1)

    1,505     867     74     5,212     2,640     97  
 

North America (ex Cards)

    2,000     3,088     (35 )   6,659     9,196     (28 )
                           
   

Total GAAP net credit losses

  $ 3,949   $ 4,912     (20 )% $ 13,422   $ 14,573     (8 )%
 

Net impact of credit card securitization activity(1)

        1,137     NM         3,472     NM  
                           
 

Total Managed Net Credit Losses

  $ 3,949   $ 6,049     (35 )% $ 13,422   $ 18,045     (26 )%
                           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

(2)
See "Managed Presentations" below.

NM    Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, decreased 19% due to lower balances from portfolio run-off, asset sales, divestitures and held-for-sale reclassifications (primarily Primerica and The Student Loan Corporation), and a higher mortgage repurchase reserve, partially offset by the adoption of SFAS 166/167. Net interest revenue increased 3%, primarily due to the adoption of SFAS 166/167, partially offset by the impact of lower balances.

        Operating expenses declined 23%, due to the impact of divestitures, lower volumes, re-engineering benefits and the absence of costs associated with the U.S. government loss-sharing agreement, which was exited in the fourth quarter of 2009.

        Provisions for credit losses and for benefits and claims decreased 45% from the prior-year quarter, reflecting a reserve release of $1.0 billion, principally related to U.S. Retail partner cards, in the current quarter, compared to a reserve build in the prior-year quarter of $0.6 billion. Lower net credit losses were partially offset by the impact of the adoption of SFAS 166/167. On a managed basis, net credit losses declined for the fifth consecutive quarter, driven by improvement in the international portfolios as well as U.S. mortgages and Retail partner cards.

        Assets declined 8% versus the prior year, primarily driven by portfolio run-off and the impact of asset sales, partially

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offset by an increase of $41 billion resulting from the adoption of SFAS 166/167.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, decreased 10% from the prior-year period. Net interest revenue increased 9% due to the adoption of SFAS 166/167, partially offset by the impact of lower balances due to portfolio run-off and asset sales. Non-interest revenue declined 64%, primarily due to the absence of the $1.1 billion gain on sale of Redecard in the first quarter of 2009 and a higher mortgage repurchase reserve in the second and third quarters.

        Operating expenses decreased 16%, primarily due to the impact of divestitures, lower volumes, re-engineering actions and the absence of costs associated with the U.S. government loss-sharing agreement, which was exited in the fourth quarter of 2009.

        Provisions for credit losses and for benefits and claims decreased 36%, reflecting a net $1.0 billion reserve release in the first nine months of 2010 compared to a $4.9 billion build in the comparable period of 2009. Lower net credit losses across most businesses were partially offset by the impact of the adoption of SFAS 166/167. On a managed basis, net credit losses were lower, driven by improvement in the international portfolios, as well as U.S. mortgages and Retail partner cards.

        Assets declined 6% versus the prior-year period, primarily driven by portfolio run-off, higher loan loss reserve balances, and the impact of asset sales and divestitures, partially offset by an increase of $41 billion resulting from the adoption of SFAS 166/167.

Managed Presentations

 
  Third Quarter  
 
  2010   2009  

Managed credit losses as a percentage of average managed loans

    6.31 %   7.21 %

Impact from credit card securitizations(1)

        (0.62 )
           

Net credit losses as a percentage of average loans

    6.31 %   6.59 %
           

(1)
See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

Japan Consumer Finance

        As previously disclosed, Citigroup continues to actively monitor a number of matters involving its Japan Consumer Finance business, including customer refund claims and defaults, as well as financial and legislative, regulatory, judicial and other political developments, relating to the charging of "gray zone" interest. Gray zone interest represents interest at rates that are legal but for which claims may not be enforceable.

        On September 28, 2010, one of Japan's largest consumer finance companies (Takefuji) declared bankruptcy and is now seeking to restructure, with court protection and assistance. Citi believes this action reflects the financial distress that Japan's top consumer finance lenders are facing as they continue to deal with liabilities for "gray zone" interest refund claims. Citi will continue to monitor and evaluate these matters and its reserves related thereto.

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SPECIAL ASSET POOL

        Special Asset Pool (SAP), which constituted approximately 23% of Citi Holdings by assets as of September 30, 2010, is a portfolio of securities, loans and other assets that Citigroup intends to continue to reduce actively over time through asset sales and portfolio run-off. At September 30, 2010, SAP had $95 billion of assets. SAP assets have declined by $233 billion, or 71%, from peak levels in the fourth quarter of 2007, reflecting cumulative asset sales, write-downs and portfolio run-off.

 
  Third Quarter    
  Nine Months    
 
 
  %
Change
  %
Change
 
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 223   $ 542     (59 )% $ 997   $ 2,346     (58 )%

Non-interest revenue

    91     821     (89 )   1,429     (5,893 )   NM  
                           

Revenues, net of interest expense

  $ 314   $ 1,363     (77 )% $ 2,426   $ (3,547 )   NM  
                           

Total operating expenses

  $ 116   $ 213     (46 )%   367   $ 618     (41 )%
                           
 

Net credit losses

  $ 689   $ 1,321     (48 )% $ 1,443   $ 4,468     (68 )%
 

Credit reserve builds (release)

    (610 )   (285 )   NM     (1,025 )   (395 )   NM  
 

Provision for unfunded lending commitments

    26             (39 )   80     NM  
                           

Provisions for credit losses and for benefits and claims

  $ 105   $ 1,036     (90 )%   379   $ 4,153     (91 )%
                           

Income (loss) from continuing operations before taxes

  $ 93   $ 114     (18 )% $ 1,680   $ (8,318 )   NM  

Income taxes (benefits)

    173     56     NM     758     (3,182 )   NM  
                           

Income (loss) from continuing operations

  $ (80 ) $ 58     NM   $ 922   $ (5,136 )   NM  

Net income (loss) attributable to noncontrolling interests

    74     20     NM     84     (28 )   NM  
                           

Net income (loss)

  $ (154 ) $ 38     NM   $ 838   $ (5,108 )   NM  
                           

EOP assets (in billions of dollars)

  $ 95   $ 163     (42 )%                  
                           

NM
Not meaningful

3Q10 vs. 3Q09

        Revenues, net of interest expense, decreased 77% from the prior-year quarter, driven by lower positive net revenue marks. Revenues in the current quarter included non-credit accretion of $267 million and positive marks of $160 million on subprime-related direct exposures, partially offset by write-downs on commercial real estate of $123 million.

        Operating expenses decreased 46% driven by the absence of the U.S. government loss-sharing agreement, exited in the fourth quarter of 2009, and lower tax charges, transaction expenses and compensation expenses.

        Provisions for credit losses and for benefits and claims decreased 90%, primarily driven by lower net credit losses of $632 million and a larger reserve release of $325 million.

        Assets declined 42% versus the prior-year quarter due to asset sales in the current quarter (approximately $15 billion), amortization and prepayments, partially offset by the impact of the adoption of SFAS 166/167.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, increased $6.0 billion primarily due to favorable net revenue marks relative to the prior-year period. Revenues for the first nine months of 2010 include positive marks of $2.0 billion on subprime-related direct exposures and non-credit accretion of $1.0 billion, partially offset by write-downs on commercial real estate of $355 million and on Alt-A mortgages of $333 million.

        Operating expenses decreased 41% mainly driven by lower volumes, lower transaction expenses, and the absence of the U.S. government loss-sharing agreement.

        Provisions for credit losses and for benefits and claims decreased 91%, primarily driven by a $3.0 billion decrease in net credit losses versus the prior-year period.

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        The following table provides details of the composition of SAP assets as of September 30, 2010.

 
  Assets within Special Asset Pool as of
September 30, 2010
 
In billions of dollars   Carrying
value
of assets
  Face value   Carrying value
as % of face
value
 

Securities in Available-for-Sale (AFS)

                   
 

Corporates

  $ 7.1   $ 7.3     97 %
 

Prime and non-U.S. mortgage-backed securities (MBS)

    1.7     2.1     81  
 

Auction rate securities (ARS)

    2.0     2.5     80  
 

Other securities

    0.7     0.9     78  
               

Total securities in AFS

  $ 11.5   $ 12.8     90 %
               

Securities in Held-to-Maturity (HTM)

                   
 

Prime and non-U.S. MBS

  $ 8.5   $ 10.5     81 %
 

Alt-A mortgages

    9.0     17.6     51  
 

Corporates

    6.3     7.0     90  
 

ARS

    1.0     1.2     83  
 

Other securities

    3.1     4.1     76  
               

Total securities in HTM

  $ 27.9   $ 40.4     69 %
               

Loans, leases and letters of credit (LCs) in Held-for-Investment (HFI)/Held-for-Sale (HFS)(1)

                   
 

Corporates

  $ 9.6   $ 10.6     91 %
 

Commercial real estate (CRE)

    7.1     7.4     96  
 

Other

    2.0     2.4     83  
 

Loan loss reserves

    (2.5 )       NM  
               

Total loans, leases and LCs in HFI/HFS

  $ 16.2   $ 20.5     79 %
               

Mark to market

                   
 

Subprime securities

  $ 0.2   $ 1.6     13 %
 

Other securities(2)

    8.7     32.2     27  
 

Derivatives

    6.8     NM     NM  
 

Loans, leases and letters of credit

    3.1     4.6     67  
 

Repurchase agreements

    5.7     NM     NM  
               

Total mark-to-market

  $ 24.5     NM     NM  
               

Highly leveraged finance commitments

  $ 2.0   $ 2.8     69 %

Equities (excludes ARS in AFS)

    5.8     NM     NM  

Monolines

    0.5     NM     NM  

Consumer and other(3)

    6.6     NM     NM  
               

Total

  $ 95.0              
               

(1)
HFS accounts for approximately $1.4 billion of the total.

(2)
Includes $4.6 billion of ARS and $1.4 billion of corporate securities.

(3)
Includes $1.6 billion of small business banking and finance loans and $1.0 billion of personal loans.

Notes: Assets previously held by the Citi-advised SIVs have been allocated to the corresponding asset categories above. SAP had total CRE exposures of $10.5 billion at September 30, 2010, which included unfunded commitments of $2.2 billion. SAP had total subprime assets of $2.3 billion at September 30, 2010, including assets of $1.0 billion of subprime-related direct exposures and $1.3 billion of trading account positions, which includes securities purchased from CDO liquidations.

Excludes Discontinued Operations.

Totals may not sum due to rounding.

NM    Not meaningful

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Items Impacting SAP Revenues

        The table below provides additional information regarding the net revenue marks affecting the SAP during the third quarters of 2010 and 2009.

 
  Pretax revenue  
In millions of dollars   Third
Quarter
2010
  Third
Quarter
2009
 

Subprime-related direct exposures(1)

  $ 160   $ 1,967  

CVA related to exposure to monoline insurers

    61     (61 )

Alt-A mortgages(2)(3)

    (6 )   (196 )

CRE positions(2)(4)

    (123 )   (485 )

CVA on derivatives positions, excluding monoline insurers(2)

    19     (61 )

SIV assets

    (4 )   (40 )

Private equity and equity investments

    87     (21 )

Highly leveraged loans and financing commitments(5)

        (24 )

ARS proprietary positions(6)

    109      

CVA on Citi debt liabilities under fair value option

    (3 )   (64 )
           

Subtotal

  $ 300   $ 1,015  

Accretion on reclassified assets(7)

    267     502  
           

Total selected revenue items

  $ 567   $ 1,517  
           

(1)
Net of impact from hedges against direct subprime asset-backed security (ABS) collateralized debt obligation (CDO) super senior positions.

(2)
Net of hedges.

(3)
For these purposes, Alt-A mortgage securities are non-agency residential MBS (RMBS) where (i) the underlying collateral has weighted average FICO scores between 680 and 720 or (ii) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

(4)
Excludes CRE positions in SIV assets.

(5)
Net of underwriting fees.

(6)
Excludes gains of $23 million and $6 million in the third quarter of 2010 and 2009, respectively, from buy-backs of auction rate securities (ARS).

(7)
Recorded as net interest revenue.

        Totals may not sum due to rounding.

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CORPORATE/OTHER

        Corporate/Other includes global staff functions (including finance, risk, human resources, legal and compliance) and other corporate expense, global operations and technology, residual Corporate Treasury and corporate items.

        At September 30, 2010, this segment had approximately $279 billion of assets, consisting primarily of Citi's liquidity portfolio. The Student Loan Corporation is reported as Discontinued Operations within the Corporate/Other segment for the third quarter of 2010 period only.

 
  Third Quarter   Nine Months  
In millions of dollars   2010   2009   2010   2009  

Net interest revenue

  $ 252   $ (461 ) $ 894   $ (1,210 )

Non-interest revenue

    344     1,133     714     1,641  
                   

Total revenues, net of interest expense

  $ 596   $ 672   $ 1,608   $ 431  
                   

Total operating expenses

  $ 428   $ 440   $ 1,239   $ 863  

Provisions for loan losses and for benefits and claims

    (1 )   1         3  
                   

Income (loss) from continuing operations before taxes

  $ 169   $ 231   $ 369   $ (435 )

Income taxes (benefits)

    78     134     185     151  
                   

Income (loss) from continuing operations

  $ 91   $ 97   $ 184   $ (586 )

(Loss) from discontinued operations, net of taxes

    (374 )   (418 )   (166 )   (677 )
                   

Net income (loss) before attribution of noncontrolling interests

  $ (283 ) $ (321 ) $ 18   $ (1,263 )

Net (loss) attributable to noncontrolling interests

    (51 )       (51 )   (2 )
                   

Net income (loss)

  $ (232 ) $ (321 ) $ 69   $ (1,261 )
                   

3Q10 vs. 3Q09

        Revenues, net of interest expense, decreased primarily due to the absence of the pretax gain related to the exchange of preferred stock in 2009, offset partially by gains on sales of AFS securities, benefits from lower short-term interest rates and other improved Treasury results during the current quarter.

3Q10 YTD vs. 3Q09 YTD

        Revenues, net of interest expense, increased primarily due to gains on sales of AFS securities, benefits from lower short-term interest rates and other improved Treasury results, offset partially by the absence of the pretax gain related to the preferred exchange, referenced above.

        Operating expenses increased by 44% primarily due to compensation-related costs and legal reserve charges.

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SEGMENT BALANCE SHEET AT SEPTEMBER 30, 2010

In millions of dollars   Regional
Consumer
Banking
  Institutional
Clients
Group
  Subtotal
Citicorp
  Citi
Holdings
  Corporate/Other
and
Consolidating
Eliminations
  Total
Citigroup
Consolidated
 

Assets

                                     
 

Cash and due from banks

  $ 8,203   $ 16,320   $ 24,523   $ 1,203   $ 616   $ 26,342  
 

Deposits with banks

    8,593     49,006     57,599     5,081     87,391     150,071  
 

Federal funds sold and securities borrowed or purchased under agreements to resell

    270     233,793     234,063     5,994         240,057  
 

Brokerage receivables

    208     25,664     25,872     11,181     85     37,138  
 

Trading account assets

    12,503     301,347     313,850     23,248         337,098  
 

Investments

    34,863     104,755     139,618     55,427     145,205     340,250  
 

Loans, net of unearned income

                                     
 

Consumer

    223,034         223,034     240,070         463,104  
 

Corporate

        169,468     169,468     21,739         191,207  
                           
 

Loans, net of unearned income

  $ 223,034   $ 169,468   $ 392,502   $ 261,809   $   $ 654,311  
 

Allowance for loan losses

    (13,856 )   (3,515 )   (17,371 )   (26,303 )       (43,674 )
                           
 

Total loans, net

  $ 209,178   $ 165,953   $ 375,131   $ 235,506   $   $ 610,637  
 

Goodwill

    10,347     10,808     21,155     4,642         25,797  
 

Intangible assets (other than MSRs)

    2,254     987     3,241     4,464         7,705  
 

Mortgage servicing rights (MSRs)

    1,546     75     1,621     2,355         3,976  
 

Other assets

    31,689     54,279     85,968     40,877     45,955     172,800  
 

Assets of discontinued operations

                31,409         31,409  
                           

Total assets

  $ 319,654   $ 962,987   $ 1,282,641   $ 421,387   $ 279,252   $ 1,983,280  
                           

Liabilities and equity

                                     
 

Total deposits

  $ 300,268   $ 456,882   $ 757,150   $ 82,327   $ 10,618   $ 850,095  
 

Federal funds purchased and securities loaned or sold under agreements to repurchase

    4,946     186,676     191,622     264     179     192,065  
 

Brokerage payables

    176     51,092     51,268         249     51,517  
 

Trading account liabilities

    36     139,727     139,763     2,242         142,005  
 

Short-term borrowings

    137     58,776     58,913     1,046     27,054     87,013  
 

Long-term debt

    3,284     75,504     78,788     12,610     295,932     387,330  
 

Other liabilities

    18,819     22,717     41,536     15,619     21,043     78,198  
 

Liabilities of discontinued operations

                29,874         29,874  
 

Net inter-segment funding (lending)

    (8,012 )   (28,387 )   (36,399 )   277,405     (241,006 )    
 

Total Citigroup stockholders' equity

                  $ 162,913   $ 162,913  
 

Noncontrolling interest

                    2,270     2,270  
                           

Total equity

                    165,183     165,183  
                           

Total liabilities and equity

  $ 319,654   $ 962,987   $ 1,282,641     421,387   $ 279,252   $ 1,983,280  
                           

        The supplemental information presented above reflects Citigroup's consolidated GAAP balance sheet by reporting segment as of September 30, 2010. The respective segment information depicts the assets and liabilities managed by each segment as of such date. While this presentation is not defined by GAAP, Citi believes that these non-GAAP financial measures enhance investors' understanding of the balance sheet components managed by the underlying business segments, as well as the beneficial inter-relationship of the asset and liability dynamics of the balance sheet components among Citi's business segments.

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CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES

Overview

        Historically, Citi has generated capital by earnings from its operating businesses. However, Citi may augment, and during the recent financial crisis did augment, its capital through issuances of common stock, convertible preferred stock, preferred stock, equity issued through awards under employee benefit plans, and, in the case of regulatory capital, through the issuance of subordinated debt underlying trust preferred securities. Further, the impact of future events on Citi's business results, such as corporate and asset dispositions, as well as changes in regulatory and accounting standards, also affects Citi's capital levels.

        Capital is used primarily to support assets in Citi's businesses and to absorb market, credit or operational losses. While capital may be used for other purposes, such as to pay dividends or repurchase common stock, Citi's ability to utilize its capital for these purposes is currently restricted due to its agreements with the U.S. government, generally for so long as the U.S. government continues to hold Citi's common stock or trust preferred securities.

        Citigroup's capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with Citi's risk profile and all applicable regulatory standards and guidelines, as well as external rating agency considerations. The capital management process is centrally overseen by senior management and is reviewed at the consolidated, legal entity and country levels.

        Senior management is responsible for the capital management process mainly through Citigroup's Finance and Asset and Liability Committee (FinALCO), with oversight from the Risk Management and Finance Committee of Citigroup's Board of Directors. FinALCO is composed of the senior-most management of Citigroup for the purpose of engaging management in decision-making and related discussions on capital and liquidity matters. Among other things, FinALCO's responsibilities include: determining the financial structure of Citigroup and its principal subsidiaries; ensuring that Citigroup and its regulated entities are adequately capitalized in consultation with its regulators; determining appropriate asset levels and return hurdles for Citigroup and individual businesses; reviewing the funding and capital markets plan for Citigroup; and setting and monitoring corporate and bank liquidity levels, and the impact of currency translation on non-U.S. capital.

Capital Ratios

        Citigroup is subject to the risk-based capital guidelines issued by the Federal Reserve Board. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of "core capital elements," such as qualifying common stockholders' equity, as adjusted, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts, principally reduced by goodwill, other disallowed intangible assets, and disallowed deferred tax assets. Total Capital also includes "supplementary" Tier 2 Capital elements, such as qualifying subordinated debt and a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets.

        In 2009, the U.S. banking regulators developed a new measure of capital termed "Tier 1 Common," which is defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts. For more detail on all of these capital metrics, see "Components of Capital Under Regulatory Guidelines" below.

        Citigroup's risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk. Pursuant to these guidelines, on-balance-sheet assets and the credit equivalent amount of certain off-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit, and derivatives) are assigned to one of several prescribed risk-weight categories based upon the perceived credit risk associated with the obligor, or if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See "Components of Capital Under Regulatory Guidelines" below.

        Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.

        To be "well capitalized" under current federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6%, a Total Capital ratio of at least 10%, and a Leverage ratio of at least 3%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. The following table sets forth Citigroup's regulatory capital ratios as of September 30, 2010 and December 31, 2009, respectively.

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Citigroup Regulatory Capital Ratios

 
  Sept. 30,
2010
  Dec. 31,
2009
 

Tier 1 Common

    10.33 %   9.60 %

Tier 1 Capital

    12.50 %   11.67  

Total Capital (Tier 1 Capital + Tier 2 Capital)

    16.14 %   15.25  

Leverage

    6.57 %   6.87  
           

        As noted in the table above, Citigroup was "well capitalized" under the current federal bank regulatory agency definitions as of September 30, 2010 and December 31, 2009.

Components of Capital Under Regulatory Guidelines

In millions of dollars   September 30,
2010
  December 31,
2009
 

Tier 1 Common

             

Citigroup common stockholders' equity

  $ 162,601   $ 152,388  

Less: Net unrealized losses on securities available-for-sale, net of tax(1)

    (997 )   (4,347 )

Less: Accumulated net losses on cash flow hedges, net of tax

    (3,305 )   (3,182 )

Less: Pension liability adjustment, net of tax(2)

    (3,500 )   (3,461 )

Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax(3)

    662     760  

Less: Disallowed deferred tax assets(4)

    34,303     26,044  

Less: Intangible assets:

             
 

Goodwill

    25,797     25,392  
 

Other disallowed intangible assets

    5,242     5,899  

Other

    (706 )   (788 )
           

Total Tier 1 Common

  $ 103,693   $ 104,495  
           

Qualifying perpetual preferred stock

  $ 312   $ 312  

Qualifying mandatorily redeemable securities of subsidiary trusts

    20,321     19,217  

Qualifying noncontrolling interests

    1,121     1,135  

Other

        1,875  
           

Total Tier 1 Capital

  $ 125,447   $ 127,034  
           

Tier 2 Capital

             

Allowance for credit losses(5)

  $ 12,971   $ 13,934  

Qualifying subordinated debt(6)

    22,569     24,242  

Net unrealized pretax gains on available-for-sale equity securities(1)

    971     773  
           

Total Tier 2 Capital

  $ 36,511   $ 38,949  
           

Total Capital (Tier 1 Capital and Tier 2 Capital)

  $ 161,958   $ 165,983  
           

Risk-weighted assets(7)

  $ 1,003,458   $ 1,088,526  
           

(1)
Tier 1 Capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with risk-based capital guidelines. In arriving at Tier 1 Capital, banking organizations are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax. Banking organizations are permitted to include in Tier 2 Capital up to 45% of net unrealized pretax gains on available-for-sale equity securities with readily determinable fair values.

(2)
The Federal Reserve Board granted interim capital relief for the impact of ASC 715-20, Compensation—Retirement Benefits—Defined Benefits Plans (formerly SFAS 158).

(3)
The impact of including Citigroup's own credit rating in valuing financial liabilities for which the fair value option has been elected is excluded from Tier 1 Capital, in accordance with risk-based capital guidelines.

(4)
Of Citi's approximately $51 billion of net deferred tax assets at September 30, 2010, approximately $14 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capital guidelines, while approximately $34 billion of such assets exceeded the limitation imposed by these guidelines and, as "disallowed deferred tax assets," were deducted in arriving at Tier 1 Capital. Citigroup's approximately $3 billion of other net deferred tax assets primarily represented approximately $1 billion of deferred tax effects of unrealized gains and losses on available-for-sale debt securities and approximately $2 billion of deferred tax effects of the pension liability adjustment, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines. Citi had approximately $26 billion of disallowed deferred tax assets at December 31, 2009.

(5)
Includable up to 1.25% of risk-weighted assets. Any excess allowance for credit losses is deducted in arriving at risk-weighted assets.

(6)
Includes qualifying subordinated debt in an amount not exceeding 50% of Tier 1 Capital.

(7)
Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $62.5 billion for interest rate, commodity, and equity derivative contracts, foreign exchange contracts, and credit derivatives as of September 30, 2010, compared with $64.5 billion as of December 31, 2009. Market risk equivalent assets included in risk-weighted assets amounted to $56.3 billion at September 30, 2010 and $80.8 billion at December 31, 2009. Risk-weighted assets also include the effect of certain other off-balance-sheet exposures, such as unused lending commitments and letters of credit, and reflect deductions such as certain intangible assets and any excess allowance for credit losses.

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Adoption of SFAS 166/167 Impact on Capital

        As previously disclosed, the adoption of SFAS 166/167 had a significant and immediate impact on Citigroup's capital ratios as of January 1, 2010.

        As described further in Note 1 to the Consolidated Financial Statements, the adoption of SFAS 166/167 resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto Citigroup's Consolidated Balance Sheet, including securitized credit card receivables on the date of adoption, January 1, 2010. The adoption of SFAS 166/167 also resulted in a net increase of $10 billion in risk-weighted assets. In addition, Citi added $13.4 billion to the loan loss allowance, increased deferred tax assets by $5.0 billion, and reduced retained earnings by $8.4 billion. This translated into a decrease in Tier 1 Common, Tier 1 Capital, and Total Capital of $14.2 billion, $14.2 billion and $14.0 billion, respectively, and a reduction in Tangible Common Equity (described below) of $8.4 billion, which were partially offset by net income of $4.4 billion and $2.3 billion of qualifying mandatorily redeemable securities of subsidiary trusts issued during the first quarter of 2010.

        The impact on Citigroup's capital ratios from the January 1, 2010 adoption of SFAS 166/167 was as follows:

As of January 1, 2010   Impact  

Tier 1 Common

    (138 ) bps

Tier 1 Capital

    (141 ) bps

Total Capital

    (142 ) bps

Leverage

    (118 ) bps
       

TCE (TCE/RWA)

    (87 ) bps
       

        For more information, see Note 1 to the Consolidated Financial Statements below.

Common Stockholders' Equity

        Citigroup's common stockholders' equity increased during the nine months ended September 30, 2010 by $10.2 billion to $162.6 billion, and represented 8.2% of total assets as of September 30, 2010.

        The table below summarizes the change in Citigroup's common stockholders' equity during the first nine months of 2010:

In billions of dollars    
 

Common stockholders' equity, December 31, 2009

  $ 152.4  

Transition adjustment to retained earnings associated with the adoption of SFAS 166/167 (as of January 1, 2010) and the adoption of ASU 2010-11 (recorded on July 1, 2010)

    (8.5 )

Net income

    9.3  

Employee benefit plans and other activities

    2.0  

ADIA Upper DECs equity units purchase contract

    3.8  

Net change in accumulated other comprehensive income (loss), net of tax

    3.6  
       

Common stockholders' equity, September 30, 2010

  $ 162.6  
       

        As of September 30, 2010, $6.7 billion of stock repurchases remained under Citi's authorized repurchase programs. No material repurchases were made in the first nine months of 2010, or the year ended December 31, 2009. For so long as the U.S. government holds any Citigroup common stock or trust preferred securities, Citigroup has generally agreed not to acquire, repurchase or redeem any Citigroup equity or trust preferred securities, other than pursuant to administering its employee benefit plans or other customary exceptions, or with the consent of the U.S. government.

Tangible Common Equity (TCE)

        TCE, as defined by Citigroup, represents Common equity less Goodwill and Intangible assets (other than Mortgage Servicing Rights (MSRs)), net of the related net deferred taxes. Other companies may calculate TCE in a manner different from that of Citigroup. Citi's TCE was $129.0 billion at September 30, 2010 and $118.2 billion at December 31, 2009.

        The TCE ratio (TCE divided by risk-weighted assets) was 12.9% at September 30, 2010 and 10.9% at December 31, 2009.

        TCE is a capital adequacy metric used and relied upon by industry analysts; however, it is a non-GAAP financial measure for SEC purposes. A reconciliation of Citigroup's total stockholders' equity to TCE follows:

In millions of dollars   Sept. 30,
2010
  Dec. 31,
2009
 

Total Citigroup stockholders' equity

  $ 162,913   $ 152,700  

Less:

             
 

Preferred stock

    312     312  
           

Common equity

  $ 162,601   $ 152,388  

Less:

             
 

Goodwill

    25,797     25,392  
 

Intangible assets (other than MSRs)

    7,705     8,714  
 

Related net deferred tax assets

    59     68  
           

Tangible common equity (TCE)

  $ 129,040   $ 118,214  
           

Tangible assets

             

GAAP assets

  $ 1,983,280   $ 1,856,646  
 

Less:

             
   

Goodwill

    25,797     25,392  
   

Intangible assets (other than MSRs)

    7,705     8,714  
   

Related deferred tax assets

    361     386  

Federal bank regulatory reclassification

        5,746  
           

Tangible assets (TA)

  $ 1,949,417   $ 1,827,900  
           

Risk-weighted assets (RWA)

  $ 1,003,458   $ 1,088,526  
           

TCE/TA ratio

    6.62 %   6.47 %
           

TCE/RWA ratio

    12.86 %   10.86 %
           

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Capital Resources of Citigroup's Depository Institutions

        Citigroup's U.S. subsidiary depository institutions are also subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are similar to the guidelines of the Federal Reserve Board. To be "well capitalized" under current regulatory definitions, Citigroup's depository institutions must have a Tier 1 Capital ratio of at least 6%, a Total Capital (Tier 1 Capital + Tier 2 Capital) ratio of at least 10%, and a Leverage ratio of at least 5%, and not be subject to a regulatory directive to meet and maintain higher capital levels.

        At September 30, 2010 and December 31, 2009, all of Citigroup's U.S. subsidiary depository institutions including Citigroup's primary subsidiary depository institution, Citibank, N.A., were "well capitalized" under current federal bank regulatory agency definitions, as noted in the following table:

Citibank, N.A. Components of Capital and Ratios Under Regulatory Guidelines

In billions of dollars   Sept. 30,
2010
  Dec. 31,
2009
 

Tier 1 Common

  $ 103.6   $ 95.8  

Tier 1 Capital

    104.5     96.8  

Total Capital (Tier 1 Capital + Tier 2 Capital)

    117.9     110.6  
           

Tier 1 Common ratio

    14.52 %   13.02 %

Tier 1 Capital ratio

    14.64     13.16  

Total Capital ratio

    16.52     15.03  

Leverage ratio(1)

    9.04     8.31  
           

(1)
Tier 1 Capital divided by each period's quarterly adjusted average total assets.

        Similar to pending changes to capital standards applicable to Citigroup and its broker-dealer subsidiaries, as discussed below, the capital requirements applicable to Citigroup's subsidiary depository institutions may be subject to change in light of actions currently being considered, particularly at the regulatory level. Citigroup will continue to monitor these developments closely.

        There are various legal and regulatory limitations on the ability of Citigroup's subsidiary depository institutions to pay dividends to Citigroup and its non-bank subsidiaries. In determining the declaration of dividends, each depository institution must also consider its effect on applicable risk-based capital and Leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup did not receive any dividends from its bank subsidiaries during the first nine months of 2010. See also "Funding and Liquidity—Other" below.

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Impact of Changes on Capital Ratios

        The following table presents the estimated sensitivity of Citigroup's and Citibank, N.A.'s capital ratios to changes of $100 million in Tier 1 Common, Tier 1 Capital, or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or adjusted average total assets (denominator), based on financial information as of September 30, 2010. This information is provided for the purpose of analyzing the impact that a change in Citigroup's or Citibank, N.A.'s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets, or adjusted average total assets. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in this table.

 
  Tier 1 Common ratio   Tier 1 Capital ratio   Total Capital ratio   Leverage ratio  
 
  Impact of $100
million change in
Tier 1 Common
  Impact of $1
billion change in
risk-weighted
assets
  Impact of $100
million change in
Tier 1 Capital
  Impact of $1
billion change in
risk-weighted
assets
  Impact of $100
million change in
Total Capital
  Impact of $1
billion change in
risk-weighted
assets
  Impact of $100
million change in
Tier 1 Capital
  Impact of $1
billion change in
adjusted average
total assets
 

Citigroup

    1.0 bps     1.0 bps     1.0 bps     1.2 bps     1.0 bps     1.6 bps     0.5 bps     0.3 bps  
                                   

Citibank, N.A. 

    1.4 bps     2.0 bps     1.4 bps     2.1 bps     1.4 bps     2.3 bps     0.9 bps     0.8 bps  
                                   

Broker-Dealer Subsidiaries

        At September 30, 2010, Citigroup Global Markets Inc., a broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup Global Markets Holdings Inc. (CGMHI), had net capital, computed in accordance with the SEC's net capital rule, of $9.0 billion, which exceeded the minimum requirement by $8.2 billion.

        In addition, certain of Citi's broker-dealer subsidiaries are subject to regulation in the other countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup's broker-dealer subsidiaries were in compliance with their capital requirements at September 30, 2010.

        Similar to pending changes to capital standards applicable to Citigroup, as discussed under "Regulatory Capital and Liquidity Standards Developments" below, net capital requirements applicable to Citigroup's broker-dealer subsidiaries in the U.S. and other jurisdictions will be subject to change in light of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act) and other actions currently being considered, particularly at the regulatory level. Citi will continue to monitor these developments closely.

Regulatory Capital and Liquidity Standards Developments

        The prospective regulatory capital and liquidity standards for financial institutions are currently subject to significant debate, rulemaking activity and uncertainty, both in the U.S. as well as internationally. Citi will continue to monitor these developments closely.

        Basel II and III.    In late 2005, the Basel Committee on Banking Supervision (Basel Committee) published a new set of risk-based capital standards (Basel II) which would permit banks, including Citigroup, to leverage internal risk models used to measure credit, operational, and market risk exposures to drive regulatory capital calculations. In late 2007, the U.S. banking regulators adopted these standards for large banks, including Citigroup. As adopted, the standards require Citigroup, as a large and internationally active bank, to comply with the most advanced Basel II approaches for calculating credit and operational risk capital requirements. The U.S. implementation timetable consists of a parallel calculation period under the current regulatory capital regime (Basel I) and Basel II, followed by a three-year transitional period.

        Citi began parallel reporting on April 1, 2010. There will be at least four quarters of parallel reporting before Citi enters the three-year transitional period. U.S. regulators have reserved the right to change how Basel II is applied in the U.S. following a review at the end of the second year of the transitional period, and to retain the existing prompt corrective action and leverage capital requirements applicable to banking organizations in the U.S. Citigroup intends to implement Basel II within the timeframe required by the U.S. regulators.

        Apart from the Basel II rules regarding credit and operational risks, in June 2010 the Basel Committee proposed revisions to the market risk capital framework which could also result in additional capital requirements.

        Further, as an outgrowth of the financial crisis, the Basel Committee undertook to establish global financial reforms designed to strengthen existing capital requirements as well as set forth new liquidity risk measures (Basel III). The Basel III effort, which began with the issuance of capital and liquidity proposals in December 2009, and which were subsequently partially amended, culminated with the announcement by the Basel Committee in September 2010 as to agreement with respect to the calibration of the risk-based capital ratios and newly introduced Leverage ratio, the planned approach for the proposed liquidity ratios, and transitional arrangements for implementing all of the new requirements.

        Under these standards, when fully phased-in on January 1, 2019, Citigroup would be required to maintain risk-based capital ratios as follows:

 
  Tier 1
Common
  Tier 1
Capital
  Total
Capital
 

Stated Minimum Ratio

    4.5 %   6.0 %   8.0 %

Plus: Capital Conservation Buffer Requirement

    2.5 %   2.5 %   2.5 %
               

Effective Minimum Ratio

    7.0 %   8.5 %   10.5 %
               

        While banking organizations may draw on the 2.5% capital conservation buffer to absorb losses during periods of financial or economic stress, restrictions on earnings distributions (e.g., dividends, equity repurchases, and discretionary compensation) would ensue, with the degree of such restrictions greater based upon the extent to which the buffer is utilized. Moreover, subject to national discretion by the respective bank supervisory or regulatory authorities, a countercyclical capital buffer ranging from 0% – 2.5%,

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consisting of common equity or other fully loss absorbing capital, would also be invoked on banking organizations when it is deemed that excess aggregate credit growth is resulting in a build-up of systemic risk in a given country. This countercyclical capital buffer, when in effect, would serve as an additional buffer supplementing the capital conservation buffer.

        As a systemically important financial institution, Citigroup may also be subject to additional capital requirements. The Basel Committee and the Financial Stability Board are currently developing an integrated approach to systemically important financial institutions which could include combinations of capital surcharges, contingent capital, and bail-in debt.

        The Basel Committee's objective of strengthening the quality, consistency and transparency of banking organizations' regulatory capital base is not only evidenced by formalizing the desired predominance of Tier 1 Common capital through a substantial effective minimum ratio requirement, but is also demonstrated by requiring that Tier 1 Common capital be measured after applying generally all regulatory adjustments (including applicable deductions). The impact of these regulatory adjustments on Tier 1 Common capital would be phased-in incrementally at 20% annually beginning on January 1, 2014, with full implementation by January 1, 2018. During the transition period, the portion of the regulatory adjustments (including applicable deductions) not applied against Tier 1 Common capital would continue to be subject to existing national treatments.

        Further, under Basel III, certain capital instruments would no longer qualify as non-common components of Tier 1 Capital (e.g., trust preferred securities and cumulative perpetual preferred stock) or Tier 2 Capital. These instruments would be subject to a 10% per-year phase-out over 10 years beginning on January 1, 2013 (although this phase-out period will be substantially shorter in the U.S. as a result of the so-called "Collins Amendment" to the Financial Reform Act discussed below), except for certain limited grandfathering. In addition, the Basel Committee is considering a proposal that would require capital instruments to contain mandatory write-down or common stock conversion features in order to qualify as components of Tier 1 or Tier 2 Capital.

        Although U.S. banking organizations, such as Citigroup, are currently subject to a supplementary, non-risk-based measure of leverage for capital adequacy purposes (see "Capital Ratios" above), Basel III would establish a more constrained Leverage ratio requirement. Initially, during a four-year parallel run beginning on January 1, 2013, banking organizations will be required to maintain a minimum 3% Tier 1 Capital Leverage ratio. Disclosure of such ratio, and its components, would start on January 1, 2015. Depending upon the results of the parallel run test period, there could be subsequent adjustments to the Leverage ratio, which is targeted to be finalized in 2017 and a formal requirement by January 1, 2018.

        The Basel Committee also proposed the establishment of two formal measures intended to strengthen liquidity risk management and supervision, a short-term Liquidity Coverage Ratio (LCR) as well as a long-term, structural, Net Stable Funding Ratio (NSFR). The LCR, which would become a minimum standard on January 1, 2015 (after an observation period beginning in 2011), has been designed to ensure banking organizations maintain an adequate level of unencumbered cash and high quality unencumbered assets that can be converted into cash to meet liquidity needs. The NSFR would be introduced as a minimum requirement by January 1, 2018 (after an observation period beginning in 2012), and is designed to promote the medium and long-term funding of assets and activities over a one-year time horizon. Both ratios must be at least 100%.

        Certain of the Basel III rules are currently expected to be ratified as final in November 2010 and published by January 2011. The U.S. banking agencies will then be required to finalize, within two years, the rules to be applied by U.S. banking organizations commencing on January 1, 2013.

        Financial Reform Act.    In addition to the implementation of Basel II and Basel III, the Financial Reform Act grants new regulatory authority to various U.S. federal regulators, including the Federal Reserve Board and a newly created Financial Stability Oversight Council (Oversight Council), to impose heightened prudential standards on financial institutions such as Citigroup. These standards could include heightened capital, leverage and liquidity standards, as well as requirements for periodic stress tests. The Federal Reserve Board will also have discretion to impose other prudential standards, including contingent capital requirements, and will retain important flexibility to distinguish among bank holding companies such as Citigroup based on their perceived riskiness, complexity, activities, size and other factors.

        Further, the so-called "Collins Amendment" to the Financial Reform Act will result in new minimum capital requirements for bank holding companies such as Citigroup, and could require Citigroup to replace certain of its outstanding securities that are currently counted towards Citi's Tier 1 Capital requirements, such as trust preferred securities, over a period of time.

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FUNDING AND LIQUIDITY

Overview

        Citi's funding and liquidity objective is to both fund its existing asset base and maintain sufficient excess liquidity so that it can operate under a wide variety of market conditions. A wide range of liquidity scenarios are considered based on both historical industry experience and hypothetical situations. The approach is to ensure Citi has sufficient funding that is structural in nature so as to accommodate market disruptions for both short- and long-term periods. Due to various constraints that limit the free transfer of liquidity or capital between Citi-affiliated entities (as discussed below), Citigroup's primary liquidity objectives are established by entity and in aggregate across:

        Citigroup's goal is to make certain that there is sufficient funding to ensure that aggregate liquidity resources are available for these two entities. The primary sources of funding include (i) deposits via Citi's bank subsidiaries, which are Citi's lowest-cost source of long-term funding, (ii) long-term debt (including trust preferred securities and other long-term collateralized financing) issued at the parent and broker-dealer and certain bank subsidiaries, and (iii) stockholders' equity. These sources are supplemented by a modest amount of short-term borrowings, primarily in the form of commercial paper and secured financing (securities loaned or sold under agreements to repurchase) at the Citigroup parent and broker-dealer.

        Citigroup works to ensure that the structural tenor of these funding sources is sufficiently long in relation to the tenor of its asset base. In fact, the key goal of Citi's asset-liability management is to ensure that there is excess tenor in the liability structure so as to provide excess liquidity to fund the assets. The net tenor profile of this excess liquidity can effectively offset potential draws on liquidity that may occur under stress. This excess funding is held in the form of the aggregate liquidity resources, as described below.

        For additional information on prospective regulatory liquidity standards for financial institutions such as Citi, see "Capital Resources—Regulatory Capital and Liquidity Standards Developments" above.

Aggregate Liquidity Resources

 
  Parent & Broker-Dealer   Significant Bank Entities   Total  
In billions of dollars
  Sept. 30,
2010
  Jun. 30,
2010
  Sept. 30,
2009
  Sept. 30,
2010
  Jun. 30,
2010
  Sept. 30,
2009
  Sept. 30,
2010
  Jun. 30,
2010
  Sept. 30,
2009
 

Cash at major central banks

  $ 16.1   $ 24.7   $ 19.6   $ 79.1   $ 86.0   $ 148.8   $ 95.2   $ 110.7   $ 168.4  

Unencumbered Liquid Securities

    73.9     56.8     56.4     161.7     143.4     59.4     235.6     200.2     115.8  
                                       

Total

  $ 90.0   $ 81.5   $ 76.0   $ 240.8   $ 229.4   $ 208.2   $ 330.8   $ 310.9   $ 284.2  
                                       

        As noted in the table above, Citigroup's aggregate liquidity resources totaled $330.8 billion at September 30, 2010, compared with $310.9 billion at June 30, 2010 and $284.2 billion at September 30, 2009. These amounts are as of quarter-end, and may increase or decrease intra-quarter in the ordinary course of business. During the quarter ended September 30, 2010, the intra-quarter amounts did not fluctuate materially from the quarter-end amounts noted above.

        At September 30, 2010, Citigroup's parent and broker-dealer "cash box" totaled $90.0 billion, an increase of $8.5 billion from June 30, 2010 and compared with $76.0 billion at September 30, 2009. This includes the liquidity portfolio and "cash box" held in the United States as well as government bonds held by Citigroup's broker-dealer entities in the United Kingdom and Japan.

        Citigroup's bank subsidiaries had an aggregate of approximately $79.1 billion of cash on deposit with major central banks (including the U.S. Federal Reserve Banks, European Central Bank, Bank of England, Swiss National Bank, Bank of Japan, the Monetary Authority of Singapore, and the Hong Kong Monetary Authority) at September 30, 2010, compared with approximately $86 billion at June 30, 2010 and $148.8 billion at September 30, 2009.

        Citigroup's bank subsidiaries also have significant additional liquidity resources through unencumbered highly liquid government and government-backed securities. These securities are available for sale or secured funding through private markets or by pledging to the major central banks. The value of these liquid securities was $161.7 billion at September 30, 2010, compared with $143.4 billion at June 30, 2010 and $59.4 billion at September 30, 2009. Significant amounts of cash and liquid securities are also available in other Citigroup entities.

        In addition to the highly liquid securities noted above, Citigroup's bank subsidiaries also maintain additional unencumbered securities and loans, which are currently pledged to the U.S. Federal Home Loan Banks' and U.S. Federal Reserve Banks discount window.

Deposits

        Citi views its deposit base within its bank subsidiaries as its most stable and lowest-cost funding source. Citi continues to focus on maintaining a geographically diverse retail and corporate deposit base that stood at approximately $850 billion at September 30, 2010, as compared with $814 billion at June 30, 2010 and $828 billion at March 31, 2010. Approximately 60% of the deposit increase from the second quarter of 2010 to the third quarter of 2010 was driven by FX translation, with the rest primarily driven by an increase in deposits in our international Transaction Services businesses. Citigroup's deposits are diversified across clients, products and regions, with approximately 64% outside of the United States as of September 30, 2010. The Financial Reform Act,

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signed into law on July 21, 2010, permanently increased the statutory standard maximum deposit insurance amount for U.S. deposits to $250,000 per depositor.

Long-Term Debt

        Long-term debt is an important funding source because of its multi-year maturity structure. At September 30, 2010, long-term debt outstanding for Citigroup, was as follows:

In billions of dollars   Parent &
Broker-Dealer
  Bank   Total
Citigroup(1)
 

Long-term debt(2)

  $ 271.2   $ 116.1 (3) $ 387.3  

(1)
Includes $69.6 billion of long-term debt related to VIEs consolidated effective January 1, 2010 with the adoption of SFAS 166/167.

(2)
Of this amount, approximately $59.6 billion is guaranteed by the FDIC under the TLGP with $1.3 billion maturing in the remainder of 2010, $20.3 billion maturing in 2011 and $38 billion maturing in 2012.

(3)
At September 30, 2010, approximately $18.5 billion relates to collateralized advances from the Federal Home Loan Bank.

        The table below details the long-term debt issuances of Citigroup during the past five quarters.

In billions of dollars
  3Q09   4Q09   1Q10   2Q10   3Q10  

Unsecured long-term debt issued under TLGP guarantee

  $ 10.0   $ 10.0   $   $   $  

Unsecured long-term debt issued without TLGP guarantee:

    12.6     4.6 (1)   1.3     4.4 (2)   6.8  

Unsecured long-term debt issued by local country

    2.7     2.5     1.7     1.0     2.1  

Trust Preferred Securities (TRUPS)

    27.1         2.3          

Secured Debt & Securitizations

    5.2     2.7     2.0          
                       

Total

  $ 57.6   $ 19.8   $ 7.3   $ 5.4   $ 8.9  
                       

(1)
Includes approximately $1.9 billion of senior debt issued under remarketing of an equal amount of trust preferred securities held by Abu Dhabi Investment Authority (ADIA) to enable ADIA to execute the forward stock purchase contract in March 2010.

(2)
Includes approximately $1.9 billion of senior debt issued under remarketing of an equal amount of trust preferred securities held by ADIA to enable ADIA to execute the forward stock purchase contract in September 2010.

Liquidity Ratios

        Structural liquidity ensures that the asset base is funded by sufficiently long-dated liabilities. The structural liquidity ratio, defined as the sum of deposits, long-term debt and stockholders' equity as a percentage of total assets, measures this in broad terms. Citi's structural liquidity ratio was 71% at September 30, 2010, virtually unchanged from June 30, 2010 and compared with 72% at September 30, 2009.

        Another measure of Citi's structural liquidity is cash capital. Cash capital is a more detailed measure of the ability to fund the structurally illiquid portion of Citigroup's balance sheet than traditional measures, such as deposits to loans or core deposits to loans. Cash capital measures the amount of long-term funding (>1 year) available to fund illiquid assets. Long-term funding includes core customer deposits, long-term debt and equity. Illiquid assets include loans (net of sale/securitization adjustments), illiquid securities, securities haircuts and other assets (i.e., goodwill, intangibles, fixed assets, receivables, etc.). At September 30, 2010, both the parent and broker-dealer and the aggregate bank subsidiaries had a significant excess of cash capital.

        In addition, as of September 30, 2010, the parent and broker-dealer maintained liquidity to meet all maturing obligations significantly in excess of a one-year period without access to the unsecured wholesale markets.

Short-Term Borrowings

        As noted above, Citi supplements its primary sources of funding with a modest amount of short-term borrowings. Short-term borrowings primarily consist of commercial paper, borrowings from banks and other market participants and secured financing (securities loaned or sold under agreements to repurchase).

        At September 30, 2010, commercial paper outstanding for Citigroup's parent and broker-dealer and bank subsidiaries, respectively, was as follows:

In billions of dollars   Parent &
Broker-Dealer
  Bank(1)   Total
Citigroup
 

Commercial paper

  $ 9.6   $ 26.6   $ 36.2  
               

(1)
Includes $26.6 billion of commercial paper related to VIEs consolidated effective January 1, 2010 with the adoption of SFAS 166/167.

        As noted in the footnote to the table above, $26.6 billion of the commercial paper outstanding at September 30, 2010 reflects the consolidation of VIEs pursuant to the adoption of SFAS 166/167 effective January 1, 2010. The VIE consolidation led to an increase in bank subsidiary commercial paper, while parent and broker-dealer commercial paper remained at recent levels. For the quarter ended September 30, 2010, the average outstanding commercial paper was approximately $35 billion.

        The short-term borrowings line on Citi's balance sheet at September 30, 2010 also includes $41.8 billion of borrowings from banks and other market participants, which includes borrowing from the Federal Home Loan Banks. The average balance of borrowings from banks and other market

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participants for the quarter ended September 30, 2010 was approximately $46 billion.

        Secured financing is conducted through Citi's broker-dealer subsidiaries to facilitate customer matched-book activity and to efficiently fund a portion of the trading inventory. At September 30, 2010, secured financing was $192.1 billion and averaged approximately $203 billion during the three months ended September 30, 2010.

        The majority of this secured financing is collateralized by highly liquid government and government-backed securities. Of the remainder, a portion relates to matched-book transactions that are part of the business activity of secured lending to customers, which appears as an asset on Citi's Consolidated Balance Sheet ("Securities Borrowed or Purchased Under Agreements to Resell"). These matched-book transactions have matching tenor profiles resulting in minimal funding requirements. The balance of secured financing that is not matched-book transactions is carefully calibrated by asset quality, tenor and counterparty exposure and, as discussed above, supplement Citi's other sources of funding.

        See Note 12 to the Consolidated Financial Statements for further detail on Citigroup's and its affiliates' outstanding long-term debt and short-term borrowings.

Liquidity Transfer Between Entities

        Liquidity is generally transferable across the various affiliates of the parent and broker-dealer, subject to standard legal terms. Similarly, the parent and broker-dealer can generally transfer excess liquidity into its bank subsidiaries, such as Citibank, N.A. In addition, Citigroup's bank subsidiaries, including Citibank, N.A., can lend to the Citigroup parent and broker dealer in accordance with Section 23A of the Federal Reserve Act. As of September 30, 2010, the amount available for lending under Section 23A was approximately $30 billion, provided the funds are collateralized appropriately.

Funding Outlook

        Citi currently estimates its long-term debt maturing for the full year 2010 is approximately $36 billion (approximately $31.6 billion had matured as of September 30, 2010). Given the current status of Citi's liquidity resources, Citi currently expects to refinance approximately $20 billion of its long-term debt maturing in 2010, and does not expect to refinance its TLGP debt maturing in 2010. As of September 30, 2010, Citi had issued approximately $15.7 billion of long-term debt, and expects to issue approximately $4.5 billion during the rest of 2010. Looking forward, Citi currently estimates its long-term debt maturing during 2011 is approximately $40 billion, and it expects to re-issue approximately $20 billion of this debt during the year. Citi does not expect to refinance its TLGP debt as it matures during 2011 and 2012 (approximately $58 billion). Citi continues to review its funding and liquidity needs and may adjust its expected issuances due to market conditions or regulatory requirements, among other factors.

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Credit Ratings

        Citigroup's ability to access the capital markets and other sources of funds, as well as the cost of these funds and its ability to maintain certain deposits, is dependent on its credit ratings. The table below indicates the current ratings for Citigroup. (As a result of the Citigroup guarantee, changes in ratings for CFI are the same as those of Citigroup.)

Citigroup's Debt Ratings as of September 30, 2010

 
  Citigroup Inc/Citigroup Funding Inc.   Citibank, N.A.
 
  Senior
debt
  Commercial
paper
  Long-
term
  Short-
term

Fitch Ratings

  A+   F1+   A+   F1+

Moody's Investors Service (Moody's)

  A3   P-1   A1   P-1

Standard & Poor's (S&P)

  A   A-1   A+   A-1
                 

        The credit rating agencies included in the chart above have each indicated that they are evaluating the impact of the Financial Reform Act on the rating support assumptions currently included in their methodologies as related to large U.S. bank holding companies. These evaluations are generally as a result of agencies' belief that the Financial Reform Act increases the uncertainty regarding the U.S. government's willingness to provide extraordinary support to such companies.

        Consistent with such belief and to bring Citi in line with other large U.S. banks, S&P and Moody's revised their outlooks on Citigroup's supported ratings from stable to negative in February and July of 2010, respectively. In addition, Fitch placed Citigroup's supported ratings on rating watch negative in October of 2010, along with most U.S. bank and bank holding companies' support ratings, support floors and other ratings that are sovereign-support dependent. While the ultimate timing of the completion of the credit rating agencies' evaluations, as well as the outcomes, is uncertain, the agencies have indicated that their evaluations for the large, U.S. banks will likely conclude on or around the following time periods:

        Ratings downgrades by Fitch, Moody's or S&P could have material impacts on funding and liquidity through cash obligations, reduced funding capacity and due to collateral triggers. Because of the current credit ratings of Citigroup, a one-notch downgrade of its senior debt/long-term rating may or may not impact Citigroup's commercial paper/short-term rating by one notch. As of September 30, 2010, Citi currently believes that a one-notch downgrade of both the senior debt/long-term rating of Citigroup and a one-notch downgrade of Citigroup's commercial paper/short-term rating could result in the assumed loss of unsecured commercial paper ($8.8 billion) and tender option bonds funding ($0.4 billion) as well as derivative triggers and additional margin requirements ($1.1 billion). Other funding sources, such as secured financing and other margin requirements for which there are no explicit triggers, could also be adversely affected. The aggregate liquidity resources of Citigroup's parent and broker-dealer stood at $90.0 billion as of September 30, 2010, in part as a contingency for such an event, and a broad range of mitigating actions are currently included in the Citigroup Contingency Funding Plan. These mitigating factors include, but are not limited to, accessing funding capacity from existing clients, diversifying funding sources, tailoring levels of secured lending, adjusting the size of select trading books, and collateralized borrowings from significant bank subsidiaries.

        Citi currently believes that a more severe ratings downgrade scenario, such as a two-notch downgrade of the senior debt/long-term rating of Citigroup, accompanied by a one-notch downgrade of Citigroup's commercial paper/short-term rating, could result in an additional $1.4 billion in funding requirement in the form of cash obligations and collateral.

        Further, as of September 30, 2010, a one-notch downgrade of the senior debt/long-term ratings of Citibank, N.A. could result in an approximate $3.8 billion funding requirement in the form of collateral and cash obligations. Because of the current credit ratings of Citibank, N.A., a one-notch downgrade of its senior debt/long-term rating is unlikely to have any impact on its commercial paper/short-term rating. The significant bank entities, Citibank, N.A., and other bank vehicles have aggregate liquidity resources of $241 billion, and have a detailed contingency funding plan that encompasses a broad range of mitigating actions.

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OFF-BALANCE-SHEET ARRANGEMENTS

        Citigroup and its subsidiaries are involved with several types of off-balance-sheet arrangements, including special purpose entities (SPEs), primarily in connection with securitization activities in Regional Consumer Banking and Institutional Clients Group. Citigroup and its subsidiaries use SPEs principally to obtain liquidity and favorable capital treatment by securitizing certain of Citigroup's financial assets, assisting clients in securitizing their financial assets and creating investment products for clients. The adoption of SFAS 166/167, effective on January 1, 2010, caused certain SPEs, including credit card receivables securitization trusts and asset-backed commercial paper conduits, to be consolidated in Citi's Consolidated Financial Statements. For further information on Citi's securitization activities and involvement in SPEs, see Notes 1 and 14 to the Consolidated Financial Statements.

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MANAGING GLOBAL RISK

        Citigroup's risk management framework balances strong corporate oversight with well-defined independent risk management functions for each business and region, as well as cross-business product expertise. The Citigroup risk management framework is described in Citigroup's 2009 Annual Report on Form 10-K.


CREDIT RISK

Loan and Credit Overview

        During the third quarter of 2010, Citigroup's aggregate loan portfolio decreased by $37.9 billion to $654.3 billion. Citi's total allowance for loan losses totaled $43.7 billion at September 30, 2010, a coverage ratio of 6.73% of total loans, essentially flat from 6.72% at June 30, 2010 and up from 5.85% at September 30, 2009.

        During the third quarter of 2010, Citi had a net release of $2.0 billion from its credit reserves and allowance for unfunded lending commitments, compared to a net build of $802 million in the third quarter of 2009 and a net release of $1.5 billion in the second quarter of 2010. The release consisted of a net release of $601 million for corporate loans (primarily in SAP) and a net release of $1.4 billion for consumer loans (mainly a $403 million release in RCB and a $953 million release in LCL). Despite the reserve release for consumer loans, the coincident months of net credit loss coverage for the consumer portfolio increased from 15.9 to 16.7 months, significantly higher than the year-ago level of 13.3 months.

        Net credit losses of $7.7 billion during the third quarter of 2010 decreased $3.3 billion from year-ago levels (on a managed basis). The decrease consisted of a net decrease of $2.7 billion for consumer loans (mainly a $2.1 billion decrease in LCL and a $587 million decrease in RCB) and a decrease of $619 million for corporate loans (almost all of which is related to SAP).

        Consumer non-accrual loans (excluding credit card receivables) totaled $12.4 billion at September 30, 2010, compared to $13.8 billion at June 30, 2010 and $18.0 billion at September 30, 2009. For total consumer loans, the 90 days or more past due delinquency rate was 3.38% at September 30, 2010, compared to 3.67% at June 30, 2010 and 4.07% a year ago. The 30 to 89 days past due consumer loan delinquency rate was 3.14% at September 30, 2010, compared to 3.06% at June 30, 2010 and 3.55% a year ago. During the third quarter of 2010, early- and later-stage delinquencies improved on a dollar basis across most of the consumer loan portfolios, driven by improvement in North America mortgages, both in first and second mortgages, Citi-branded cards in Citicorp and Retail partner cards in Citi Holdings. The improvement in first mortgages was driven by asset sales and loans moving from the trial period under HAMP to permanent modification, partially offset by the continued backlog in foreclosures in process. In addition to these improvements, consumer delinquencies declined during the quarter due to the announced sale of SLC, which resulted in moving its loan portfolio to held-for-sale. As a result, SLC is presented as discontinued operations for the third quarter of 2010 only.

        Corporate non-accrual loans were $9.9 billion at September 30, 2010, compared to $11.0 billion at June 30, 2010 and $14.7 billion a year ago. The decrease in non-accrual loans from the prior quarter was mainly due to loan sales, write-offs and paydowns, which were partially offset by increases due to the weakening of certain borrowers.

Loan Accounting Policies

        Citigroup's accounting policies for loans, allowance for loan losses and related lending activities can be found in Citi's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

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Loans Outstanding

In millions of dollars   3rd Qtr.
2010
  2nd Qtr.
2010
  1st Qtr.
2010
  4th Qtr.
2009
  3rd Qtr.
2009
 

Consumer loans

                               

In U.S. offices

                               
 

Mortgage and real estate(1)

  $ 158,986   $ 171,102   $ 180,334   $ 183,842   $ 191,748  
 

Installment, revolving credit, and other

    29,455     61,867     69,111     58,099     57,820  
 

Cards

    120,781     125,337     127,818     28,951     36,039  
 

Commercial and industrial

    4,952     5,540     5,386     5,640     5,848  
 

Lease financing

    3     6     7     11     15  
                       

  $ 314,177   $ 363,852   $ 382,656   $ 276,543   $ 291,470  
                       

In offices outside the U.S.

                               
 

Mortgage and real estate(1)

  $ 50,692   $ 47,921   $ 49,421   $ 47,297   $ 47,568  
 

Installment, revolving credit, and other

    39,755     38,115     44,541     42,805     45,004  
 

Cards

    39,466     37,510     38,191     41,493     41,443  
 

Commercial and industrial

    17,653     16,420     14,828     14,780     14,858  
 

Lease financing

    639     677     771     331     345  
                       

  $ 148,205   $ 140,643   $ 147,752   $ 146,706   $ 149,218  
                       

Total consumer loans

  $ 462,382   $ 504,495   $ 530,408   $ 423,249   $ 440,688  

Unearned income

    722     951     1,061     808     803  
                       

Consumer loans, net of unearned income

  $ 463,104   $ 505,446   $ 531,469   $ 424,057   $ 441,491  
                       

Corporate loans

                               

In U.S. offices

                               
 

Commercial and industrial

  $ 11,750   $ 11,656   $ 15,558   $ 15,614   $ 19,692  
 

Loans to financial institutions

    29,518     31,450     31,279     6,947     7,666  
 

Mortgage and real estate(1)

    21,479     22,453     21,283     22,560     23,221  
 

Installment, revolving credit, and other

    16,182     14,812     15,792     17,737     17,734  
 

Lease financing

    1,255     1,244     1,239     1,297     1,275  
                       

  $ 80,184   $ 81,615   $ 85,151   $ 64,155   $ 69,588  
                       

In offices outside the U.S.

                               
 

Commercial and industrial

  $ 67,531   $ 63,355   $ 62,854   $ 66,747   $ 71,759  
 

Installment, revolving credit, and other

    10,586     11,174     10,956     9,683     10,949  
 

Mortgage and real estate(1)

    6,272     7,301     9,771     9,779     12,023  
 

Loans to financial institutions

    24,019     20,646     19,003     15,113     16,906  
 

Lease financing

    568     582     663     1,295     1,462  
 

Governments and official institutions

    3,179     3,306     3,373     2,949     2,631  
                       

  $ 112,155   $ 106,364   $ 106,620   $ 105,566   $ 115,730  
                       

Total corporate loans

  $ 192,339   $ 187,979   $ 191,771   $ 169,721   $ 185,318  

Unearned income

    (1,132 )   (1,259 )   (1,436 )   (2,274 )   (4,598 )
                       

Corporate loans, net of unearned income

  $ 191,207   $ 186,720   $ 190,335   $ 167,447   $ 180,720  
                       

Total loans—net of unearned income

  $ 654,311   $ 692,166   $ 721,804   $ 591,504   $ 622,211  

Allowance for loan losses—on drawn exposures

    (43,674 )   (46,197 )   (48,746 )   (36,033 )   (36,416 )
                       

Total loans—net of unearned income and allowance for credit losses

  $ 610,637   $ 645,969   $ 673,058   $ 555,471   $ 585,795  

Allowance for loan losses as a percentage of total loans—net of unearned income(2)

    6.73 %   6.72 %   6.80 %   6.09 %   5.85 %
                       

Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income(2)

    8.16 %   7.87 %   7.84 %   6.70 %   6.44 %
                       

Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income(2)

    3.22 %   3.59 %   3.90 %   4.56 %   4.42 %
                       

(1)
Loans secured primarily by real estate.

(2)
The first, second and third quarters of 2010 exclude loans which are carried at fair value.

        Certain lending products included in the loan table above have terms that may give rise to additional credit issues. Credit cards with below-market introductory interest rates, multiple loans supported by the same collateral (e.g., home equity loans), and interest-only loans are examples of such products. However, Citi does not believe these products are material to its financial position and results and are closely managed via credit controls that mitigate the additional inherent risk.

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Details of Credit Loss Experience

In millions of dollars   3rd Qtr.
2010
  2nd Qtr.
2010
  1st Qtr.
2010
  4th Qtr.
2009
  3rd Qtr.
2009
 

Allowance for loan losses at beginning of period

  $ 46,197   $ 48,746   $ 36,033   $ 36,416   $ 35,940  
                       

Provision for loan losses

                               
   

Consumer

  $ 5,345   $ 6,672   $ 8,244   $ 7,077   $ 7,321  
   

Corporate

    321     (149 )   122     764     1,450  
                       

  $ 5,666   $ 6,523   $ 8,366   $ 7,841   $ 8,771  
                       

Gross credit losses

                               

Consumer

                               
 

In U.S. offices

  $ 5,727   $ 6,379   $ 6,846   $ 4,360   $ 4,459  
 

In offices outside the U.S. 

    1,701     1,774     1,797     2,187     2,406  

Corporate

                               
 

In U.S. offices

    806     563     404     478     1,101  
 

In offices outside the U.S. 

    265     290     155     877     483  
                       

  $ 8,499   $ 9,006   $ 9,202   $ 7,902   $ 8,449  
                       

Credit recoveries

                               

Consumer

                               
 

In U.S. offices

  $ 341   $ 345   $ 323   $ 160   $ 149  
 

In offices outside the U.S. 

    350     318     300     327     288  

Corporate

                               
 

In U.S. offices

    78     307     177     246     30  
 

In offices outside the U.S. 

    71     74     18     34     13  
                       

  $ 840   $ 1,044   $ 818   $ 767   $ 480  
                       

Net credit losses

                               
 

In U.S. offices

  $ 6,114   $ 6,290   $ 6,750   $ 4,432   $ 5,381  
 

In offices outside the U.S. 

    1,545     1,672     1,634     2,703     2,588  
                       

Total

  $ 7,659   $ 7,962   $ 8,384   $ 7,135   $ 7,969  
                       

Other—net(1)(2)(3)(4)(5)

  $ (530 ) $ (1,110 ) $ 12,731   $ (1,089 ) $ (326 )
                       

Allowance for loan losses at end of period(6)

  $ 43,674   $ 46,197   $ 48,746   $ 36,033   $ 36,416  
                       

Allowance for loan losses as a % of total loans

    6.73 %   6.72 %   6.80 %   6.09 %   5.85 %

Allowance for unfunded lending commitments(7)

  $ 1,102   $ 1,054   $ 1,122   $ 1,157   $ 1,074  
                       

Total allowance for loan losses and unfunded lending commitments

  $ 44,776   $ 47,251   $ 49,868   $ 37,190   $ 37,490  
                       

Net consumer credit losses

  $ 6,737   $ 7,490   $ 8,020   $ 6,060   $ 6,428  

As a percentage of average consumer loans

    5.78 %   5.75 %   6.04 %   5.43 %   5.66 %
                       

Net corporate credit losses

  $ 922   $ 472   $ 364   $ 1,075   $ 1,541  

As a percentage of average corporate loans

    0.49 %   0.25 %   0.19 %   0.61 %   0.82 %
                       

Allowance for loan losses at end of period(8)

                               
 

Citicorp

  $ 17,371   $ 17,524   $ 18,503   $ 10,731   $ 10,956  
 

Citi Holdings

    26,303     28,673     30,243     25,302     25,460  
                       
     

Total Citigroup

  $ 43,674   $ 46,197   $ 48,746   $ 36,033   $ 36,416  
                       

Allowance by type

                               
 

Consumer(9)

  $ 37,607   $ 39,578   $ 41,422   $ 28,397   $ 28,420  
 

Corporate

    6,067     6,619     7,324     7,636     7,996  
                       
     

Total Citigroup

  $ 43,674   $ 46,197   $ 48,746   $ 36,033   $ 36,416  
                       

(1)
The third quarter of 2010 includes a reduction of approximately $54 million related to the announced sale of The Student Loan Corporation (the allowance was transferred to assets held-for-sale). Additionally, the third quarter of 2010 includes a reduction of approximately $950 million related to the sale or transfer to held-for-sale of various U.S. loan portfolios.

(2)
The second quarter of 2010 includes a reduction of approximately $237 million related to the transfers to held-for-sale of the Canada cards portfolio and an auto portfolio. Additionally, second quarter of 2010 includes a reduction of approximately $480 million related to the sale or transfers to held-for-sale of U.S. real estate lending loans.

(3)
The first quarter of 2010 primarily includes $13.4 billion related to the impact of consolidating entities in connection with Citi's adoption of SFAS 166/167 (see discussion on page 3 and in Note 1 to the Consolidated Financial Statements) and reductions of approximately $640 million related to the sale or transfer to held-for-sale of U.S. and U.K. real estate lending loans.

(4)
The fourth quarter of 2009 includes a reduction of approximately $330 million related to securitizations and approximately $400 million related to the sale or transfer to held-for-sale of U.S. real estate lending loans.

(5)
The third quarter of 2009 primarily includes a reduction to the credit loss reserves of $562 million related to the transfer of the U.K. cards portfolio to held-for-sale, partially offset by increases related to FX translation.

(6)
Included in the allowance for loan losses are reserves for loans which have been modified subject to troubled debt restructurings (TDRs) of $7,090 million, $7,320 million, $6,926 million, $4,819 million, and $4,587 million as of September 30, 2010, June 30, 2010, March 31, 2010, December 31, 2009, and September 30, 2009, respectively.

(7)
Represents additional credit loss reserves for unfunded corporate lending commitments and letters of credit recorded in Other Liabilities on the Consolidated Balance Sheet.

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(8)
Allowance for loan losses represents management's best estimate of probable losses inherent in the portfolio, as well as probable losses related to large individually evaluated impaired loans and TDRs. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable credit losses inherent in the overall portfolio.

(9)
Included in the third quarter of 2010 consumer loan loss reserve is $19.3 billion related to Citi's global credit card portfolio. See discussion on page 3 and in Note 1 to the Consolidated Financial Statements.

Impaired Loans, Non-Accrual Loans and Assets, and Renegotiated Loans

        The following pages include information on Citi's "Impaired Loans," "Non-Accrual Loans and Assets" and "Renegotiated Loans." There is a certain amount of overlap between these categories. The following general summary provides a basic description of each category:

Impaired Loans:


Non-Accrual Loans and Assets:

Renegotiated Loans:

Impaired Loans

        Impaired loans are those where Citigroup believes it is probable that it will not collect all amounts due according to the original contractual terms of the loan. Impaired loans include corporate and Consumer (commercial market) non-accrual loans as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower's financial difficulties and Citigroup has granted a concession to the borrower. Such modifications may include interest rate reductions and/or principal forgiveness.

        Valuation allowances for impaired loans are determined in accordance with ASC 310-10-35 and estimated considering all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan's original contractual effective rate, the secondary market value of the loan and the fair value of collateral less disposal costs.

        Consumer impaired loans exclude smaller-balance homogeneous loans that have not been modified and are carried on a non-accrual basis, as well as substantially all loans modified for periods of 12 months or less. As of September 30, 2010, loans included in those short-term programs amounted to approximately $6.8 billion. The allowance for loan losses for these loans is materially consistent with the requirements of ASC 310-10-35.

        The following table presents information about impaired loans:

In millions of dollars   Sept. 30,
2010
  Dec. 31,
2009
 

Non-accrual corporate loans

             
 

Commercial and industrial

  $ 5,596   $ 6,347  
 

Loans to financial institutions

    750     1,794  
 

Mortgage and real estate

    2,138     4,051  
 

Lease financing

    57      
 

Other

    1,406     1,287  
           
 

Total non-accrual corporate loans

  $ 9,947   $ 13,479  
           

Impaired consumer loans(1)

             
 

Mortgage and real estate

  $ 16,339   $ 10,629  
 

Installment and other

    4,268     3,853  
 

Cards

    5,297     2,453  
           
 

Total impaired consumer loans

  $ 25,904   $ 16,935  
           

Total(2)

  $ 35,851   $ 30,414  
           

Non-accrual corporate loans with valuation allowances

  $ 6,383   $ 8,578  

Impaired consumer loans with valuation allowances

    25,430     16,453  
           

Non-accrual corporate valuation allowance

  $ 2,082   $ 2,480  

Impaired consumer valuation allowance

    7,234     4,977  
           

Total valuation allowances(3)

  $ 9,316   $ 7,457  
           

(1)
Prior to 2008, Citi's financial accounting systems did not separately track impaired smaller-balance, homogeneous consumer loans whose terms were modified due to the borrowers' financial difficulties and it was determined that a concession was granted to the borrower. Smaller-balance consumer loans modified since January 1, 2008 amounted to $25.1 billion and $15.9 billion at September 30, 2010 and December 31, 2009, respectively. However, information derived from Citi's risk management systems indicates that the amounts of outstanding modified loans, including those modified prior to 2008, approximated $26.9 billion and $18.1 billion at September 30, 2010 and December 31, 2009, respectively.

(2)
Excludes loans purchased for investment purposes.

(3)
Included in the Allowance for loan losses.

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Non-Accrual Loans and Assets

        The table below summarizes Citigroup's view of non-accrual loans as of the periods indicated. Non-accrual loans are loans in which the borrower has fallen behind in interest payments or, for corporate and Consumer (commercial market) loans, where Citi has determined that the payment of interest or principal is doubtful, and which are therefore considered impaired. In situations where Citi reasonably expects that only a portion of the principal and interest owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. There is no industry-wide definition of non-accrual assets, however, and as such, analysis across the industry is not always comparable.

        Corporate non-accrual loans may still be current on interest payments but are considered non-accrual as Citi has determined that the payment of interest on principal is doubtful. Consistent with industry conventions, Citi generally accrues interest on credit card loans until such loans are charged-off, which typically occurs at 180 days contractual delinquency. As such, the non-accrual loan disclosures in this section do not include credit card loans.

Non-accrual loans

In millions of dollars   3rd Qtr.
2010
  2nd Qtr.
2010
  1st Qtr.
2010
  4th Qtr.
2009
  3rd Qtr.
2009
 

Citicorp

  $ 4,928   $ 4,510   $ 5,024   $ 5,353   $ 5,507  

Citi Holdings

    17,491     20,302     23,544     26,387     27,177  
                       
 

Total non-accrual loans (NAL)

  $ 22,419   $ 24,812   $ 28,568   $ 31,740   $ 32,684  
                       

Corporate NAL(1)

                               

North America

  $ 3,299   $ 4,411   $ 5,660   $ 5,621   $ 5,263  

EMEA

    5,473     5,508     5,834     6,308     7,969  

Latin America

    658     570     608     569     416  

Asia

    517     547     830     981     1,061  
                       

  $ 9,947   $ 11,036   $ 12,932   $ 13,479   $ 14,709  
                       
 

Citicorp

  $ 2,961   $ 2,573   $ 2,975   $ 3,238   $ 3,300  
 

Citi Holdings

    6,986     8,463     9,957     10,241     11,409  
                       

  $ 9,947   $ 11,036   $ 12,932   $ 13,479   $ 14,709  
                       

Consumer NAL(1)

                               

North America

  $ 9,978   $ 11,289   $ 12,966   $ 15,111   $ 14,609  

EMEA

    758     690     790     1,159     1,314  

Latin America

    1,150     1,218     1,246     1,340     1,342  

Asia

    586     579     634     651     710  
                       

  $ 12,472   $ 13,776   $ 15,636   $ 18,261   $ 17,975  
                       
 

Citicorp

  $ 1,967   $ 1,937   $ 2,049   $ 2,115   $ 2,207  
 

Citi Holdings

    10,505     11,839     13,587     16,146     15,768  
                       

  $ 12,472   $ 13,776   $ 15,636   $ 18,261   $ 17,975  
                       

(1)
Excludes purchased distressed loans as they are generally accreting interest until write-off. The carrying value of these loans was $568 million at September 30, 2010, $672 million at June 30, 2010, $804 million at March 31, 2010, $920 million at December 31, 2009, and $1.267 billion at September 30, 2009.

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Non-Accrual Loans and Assets (continued)

        The table below summarizes Citigroup's other real estate owned (OREO) assets. This represents the carrying value of all real estate property acquired by foreclosure or other legal proceedings when Citi has taken possession of the collateral.

Non-Accrual Assets

OREO (in millions of dollars)   3rd Qtr.
2010
  2nd Qtr.
2010
  1st Qtr.
2010
  4th Qtr.
2009
  3rd Qtr.
2009
 

Citicorp

  $ 879   $ 866   $ 881   $ 874   $ 284  

Citi Holdings

    855     800     632     615     585  

Corporate/Other

    7     7     8     11     15  
                       
 

Total OREO

  $ 1,741   $ 1,673   $ 1,521   $ 1,500   $ 884  
                       

North America

  $ 1,470   $ 1,422   $ 1,291   $ 1,294   $ 682  

EMEA

    164     146     134     121     105  

Latin America

    53     49     51     45     40  

Asia

    54     56     45     40     57  
                       

  $ 1,741   $ 1,673   $ 1,521   $ 1,500   $ 884  
                       

Other repossessed assets

  $ 38   $ 55   $ 64   $ 73   $ 76  
                       

 

Non-accrual assets (NAA)—Total Citigroup   3rd Qtr.
2010
  2nd Qtr.
2010
  1st Qtr.
2010
  4th Qtr.
2009
  3rd Qtr.
2009
 

Corporate NAL

  $ 9,947   $ 11,036   $ 12,932   $ 13,479   $ 14,709  

Consumer NAL

    12,472     13,776     15,636     18,261     17,975  
                       
 

NAL

  $ 22,419   $ 24,812   $ 28,568   $ 31,740   $ 32,684  
                       

OREO

  $ 1,741   $ 1,673   $ 1,521   $ 1,500   $ 884  

Other repossessed assets

    38     55     64     73     76  
                       
 

NAA

  $ 24,198   $ 26,540   $ 30,153   $ 33,313   $ 33,644  
                       

NAL as a percentage of total loans

    3.43 %   3.58 %   3.96 %   5.37 %   5.25 %

NAA as a percentage of total assets

    1.22 %   1.37 %   1.51 %   1.79 %   1.78 %

Allowance for loan losses as a percentage of NAL(1)

    195 %   186 %   171 %   114 %   111 %
                       

 

NAA—Total Citicorp   3rd Qtr.
2010
  2nd Qtr.
2010
  1st Qtr.
2010
  4th Qtr.
2009
  3rd Qtr.
2009
 

NAL

  $ 4,928   $ 4,510   $ 5,024   $ 5,353   $ 5,507  

OREO

    879     866     881     874     284  

Other repossessed assets

    N/A     N/A     N/A     N/A     N/A  
                       
 

Non-accrual assets (NAA)

  $ 5,807   $ 5,376   $ 5,905   $ 6,227   $ 5,791  
                       

NAA as a percentage of total assets

    0.45 %   0.44 %   0.48 %   0.55 %   0.54 %

Allowance for loan losses as a percentage of NAL(1)

    352 %   389 %   368 %   200 %   199 %
                       

NAA—Total Citi Holdings

                               

NAL

  $ 17,491   $ 20,302   $ 23,544   $ 26,387   $ 27,177  

OREO

    855     800     632     615     585  

Other repossessed assets

    N/A     N/A     N/A     N/A     N/A  
                       
 

NAA

  $ 18,346   $ 21,102   $ 24,176   $ 27,002   $ 27,762  
                       

NAA as a percentage of total assets

    4.36 %   4.54 %   4.81 %   5.54 %   4.99 %

Allowance for loan losses as a percentage of NAL(1)

    150 %   141 %   128 %   96 %   94 %
                       

(1)
The allowance for loan losses includes the allowance for credit card ($19.3 billion at September 30, 2010) and purchased distressed loans, while the non-accrual loans exclude credit card balances and purchased distressed loans, as these generally continue to accrue interest until write-off.

N/A
Not available at the Citicorp or Citi Holdings level.

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Renegotiated Loans

        The following table presents loans which were modified in TDRs.

In millions of dollars   Sept. 30,
2010
  Dec. 31,
2009
 

Corporate renegotiated loans(1)

             

In U.S. offices

             
 

Commercial and industrial(2)

  $ 284   $ 203  
 

Mortgage and real estate(3)

    35      
 

Other

    241      
           

  $ 560   $ 203  
           

In offices outside the U.S.

             
 

Commercial and industrial(2)

  $ 218   $ 145  
 

Mortgage and real estate(3)

    2     2  
 

Other

    11      
           

  $ 231   $ 147  
           

Total corporate renegotiated loans

  $ 791   $ 350  
           

Consumer renegotiated loans(4)(5)(6)(7)

             

In U.S. offices

             
 

Mortgage and real estate

  $ 16,611   $ 11,165  
 

Cards

    4,288     992  
 

Installment and other

    1,972     2,689  
           

  $ 22,871   $ 14,846  
           

In offices outside the U.S.

             
 

Mortgage and real estate

  $ 749   $ 415  
 

Cards

    1,009     1,461  
 

Installment and other

    2,368     1,401  
           

  $ 4,126     3,277  
           

Total consumer renegotiated loans

  $ 26,997   $ 18,123  
           

(1)
Includes $500 million and $317 million of non-accrual loans included in the non-accrual assets table above, at September 30, 2010 and December 31, 2009, respectively. The remaining loans are accruing interest.

(2)
In addition to modifications reflected as TDRs, at September 30,2010, Citi also modified $348 million and $513 million of commercial loans risk rated "Substandard Non-Performing" or worse (asset category defined by banking regulators) in U.S. offices and in offices outside the U.S., respectively. These modifications were not considered TDRs because the modifications did not involve a concession (a required element of a TDR for accounting purposes).

(3)
In addition to modifications reflected as TDRs, at September 30, 2010, Citi also modified $1,333 million and $142 million of commercial real estate loans risk rated "Substandard Non-Performing" or worse (asset category defined by banking regulators) in U.S. offices and in offices outside the U.S., respectively. These modifications were not considered TDRs because the modifications did not involve a concession (a required element of a TDR for accounting purposes).

(4)
Includes $2,441 million and $2,000 million of non-accrual loans included in the non-accrual assets table above at September 30, 2010 and December 31, 2009, respectively. The remaining loans are accruing interest.

(5)
Includes $8 million of commercial real estate loans at September 30, 2010.

(6)
Includes $131 million and $16 million of commercial loans at September 30, 2010 and December 31, 2009, respectively.

(7)
Smaller-balance homogeneous loans were derived from Citi's risk management systems.

        In certain circumstances, Citigroup modifies certain of its corporate loans involving a non-troubled borrower. These modifications are subject to Citi's normal underwriting standards for new loans and are made in the normal course of business to match customers' needs with available Citi products or programs (these modifications are not included in the table above). In other cases, loan modifications involve a troubled borrower that Citi may grant a concession (modification). Modifications involving troubled borrowers may include extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, reduction in the face amount of the debt, or reduction of past accrued interest. In cases where Citi grants a concession to a troubled borrower, Citi accounts for the modification as a TDR under ASC 310-40.

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U.S. Consumer Mortgage Lending

Overview

        Citi's North America consumer mortgage portfolio consists of both first and second mortgages. As of September 30, 2010, the first mortgage portfolio totaled approximately $104 billion while the second mortgage portfolio was approximately $50 billion. Although the majority of the mortgage portfolio is reported in LCL within Citi Holdings, there are $18 billion of first mortgages and $4 billion of second mortgages reported in Citicorp.

        Citi's first mortgage portfolio includes $9.9 billion of loans with FHA or VA guarantees. These portfolios consist of loans originated to low-to-moderate-income borrowers with lower FICO (Fair Isaac Corporation) scores and generally have higher loan-to-value ratios (LTVs). Losses on FHA loans are borne by the sponsoring agency, provided that the insurance has not been breached as a result of an origination defect. The VA establishes a loan-level loss cap, beyond which Citi is liable for loss. FHA and VA loans have high delinquency rates but, given the guarantees, Citi has experienced negligible credit losses on these loans. The first mortgage portfolio also includes $1.8 billion of loans with LTVs above 80%, which have insurance through private mortgage insurance (PMI) companies, and $1.8 billion of loans subject to long-term standby commitments(1) (LTSC) with U.S. government sponsored entities (GSEs), for which Citi has limited exposure to credit losses. Citi's second mortgage portfolio also includes $0.6 billion of loans subject to LTSCs with GSEs, for which Citi has limited exposure to credit losses. Citi's allowance for loan loss calculations take into consideration the impact of these guarantees.

        Citi continually reviews its foreclosure processes with respect to its U.S. mortgage portfolios. As a result of increased attention to the foreclosure process on an industry-wide basis, Citi has intensified the review of its foreclosure processes, and numerous governmental entities have commenced proceedings or otherwise sought information in this area (see "Legal Proceedings" below). To date, Citi has not identified systemic deficiencies in its existing foreclosure processes. However, Citi's review of its existing and historical processes continues and, depending on the results of that review, or if any industry-wide adverse regulatory or judicial actions are taken in respect of foreclosures, Citi's ability to continue to carry out its current foreclosure processes, and its financial results of operations and financial condition, could be adversely affected.

Consumer Mortgage Quarterly Trends—Delinquencies and Net Credit Losses

        The following charts detail the quarterly trends in delinquencies and net credit losses for Citi's first and second consumer mortgage portfolios in North America.

        Delinquencies and net credit losses in the first mortgage portfolio continued to be impacted by the Home Affordable Modification Program (HAMP) trial loans and the growing backlog of foreclosures in process. Loans in the HAMP trial modification period that do not make their original contractual payments are reported as delinquent, even if the reduced payments agreed to under the program are made by the borrower. Upon conclusion of the trial period, loans that are not modified permanently are returned to the delinquency status in which they began their trial period, adjusted for the number of payments received during the trial period. If the loans are modified permanently, they will be returned to current status. For additional information on HAMP, see "Consumer Loan Modification Programs" below.

        In addition, as previously disclosed, the growing amount of foreclosures in process, which continues to be related to an industry-wide phenomenon resulting from foreclosure moratoria and other efforts to prevent or forestall foreclosure, have specific implications for the portfolio:

        As set forth in the charts below, net credit losses and 90 days or more delinquencies in both first and second mortgages continued to improve during the third quarter of 2010. For first mortgages, the sequential improvement in 90 days or more delinquencies, as well as net credit losses, was driven predominantly by asset sales and HAMP trial modifications converting into permanent modifications, offset by the continued backlog in foreclosures in process. During the third quarter of 2010, Citi sold $1 billion in delinquent mortgages. In addition, as of September 30, 2010, Citi had converted a total of approximately $4.1 billion of HAMP trial modifications to permanent modifications.

        For second mortgages, the net credit loss and 90 days or more delinquency improvement was driven by modification programs and, to a lesser extent, overall portfolio dynamics. Citi does not currently sell second mortgages.


(1)
A LTSC is a structured transaction in which Citi transfers the credit risk of certain eligible loans to an investor in exchange for a fee. These loans remain on balance sheet unless they reach a certain delinquency level (between 120 and 180 days), in which case the LTSC investor is required to buy the loan at par.

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GRAPHIC

Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value since 1Q'10 and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.

GRAPHIC

Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value since 1Q'10 and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.

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Consumer Mortgage FICO and LTV

        Data appearing in the tables below have been sourced from Citigroup's risk systems and, as such, may not reconcile with disclosures elsewhere generally due to differences in methodology or variations in the manner in which information is captured. Citi has noted such variations in instances where it believes they could be material to reconcile the information presented elsewhere.

        Citi's credit risk policy is not to offer option adjustable rate mortgages (ARMs)/negative amortizing mortgage products to its customers. As a result, option ARMs/negative amortizing mortgages represent an insignificant portion of total balances since they were acquired only incidentally as part of prior portfolio and business purchases.

        A portion of loans in the U.S. consumer mortgage portfolio currently requires a payment to satisfy only the current accrued interest for the payment period, or an interest-only payment. Citi's mortgage portfolio includes approximately $28 billion of first- and second- mortgage home equity lines of credit (HELOCs) that are still within their revolving period and have not commenced amortization. The interest-only payment feature during the revolving period is standard for the HELOC product across the industry. The first mortgage portfolio contains approximately $26 billion of ARMs that are currently required to make an interest-only payment. These loans will be required to make a fully amortizing payment upon expiration of their interest-only payment period, and most will do so within a few years of origination. Borrowers that are currently required to make an interest-only payment cannot select a lower payment that would negatively amortize the loan. First mortgage loans with this payment feature are primarily to high credit quality borrowers that have on average significantly higher origination and refreshed FICO scores than other loans in the first mortgage portfolio.

Loan Balances

        First Mortgages—Loan Balances.    As a consequence of the economic environment and the decrease in housing prices, LTV and FICO scores have generally deteriorated since origination, as depicted in the table below, although they have generally stabilized since the quarter ended June 30, 2010. On a refreshed basis, approximately 29% of first mortgages had a LTV ratio above 100%, compared to approximately 0% at origination. Approximately 29% of the first mortgages had FICO scores less than 620 on a refreshed basis, compared to 16% at origination.

Balances: September 30, 2010—First Mortgages

At Origination
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    58 %   6 %   7 %

80% < LTV £ 100%

    13 %   7 %   9 %

LTV > 100%

    NM     NM     NM  

 

Refreshed
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    27 %   4 %   9 %

80% < LTV £ 100%

    18 %   4 %   9 %

LTV > 100%

    15 %   3 %   11 %

Note: NM—Not meaningful. First mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans guaranteed by U.S. government sponsored agencies, loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.6 billion from At Origination balances and $0.4 billion from Refreshed balances for which FICO or LTV data was unavailable. Balances exclude deferred fees/costs. Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.

        Second Mortgages—Loan Balances.    In the second mortgage portfolio, the majority of loans are in the higher FICO categories. Economic conditions have generally caused a migration towards lower FICO scores and higher LTV ratios, although the negative migration has slowed since the quarter ended June 30, 2010. Approximately 46% of second mortgages had refreshed LTVs above 100%, compared to approximately 0% at origination. Approximately 17% of second mortgages had FICO scores less than 620 on a refreshed basis, compared to 3% at origination.

Balances: September 30, 2010—Second Mortgages

At Origination
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    50 %   2 %   2 %

80% < LTV £ 100%

    42 %   3 %   1 %

LTV > 100%

    NM     NM     NM  

 

Refreshed
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    23 %   1 %   3 %

80% < LTV £ 100%

    21 %   2 %   4 %

LTV > 100%

    31 %   5 %   10 %

Note: N.M.—Not meaningful. Second mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.5 billion from At Origination balances and $0.4 billion from Refreshed balances for which FICO or LTV data was unavailable. Refreshed FICO scores are based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.

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Delinquencies

        The tables below provide delinquency statistics for loans 90 or more days past due (90+DPD) as a percentage of outstandings in each of the FICO/LTV combinations, in both the first and second mortgage portfolios. For example, loans with FICO ³ 660 and LTV £ 80% at origination have a 90+DPD rate of 5.1%.

        As evidenced by the tables below, loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band. Similarly, loans with LTVs greater than 100% have higher delinquencies than LTVs of less than or equal to 100%.

        While the dollar balances of 90+DPD loans have declined for both first and second mortgages, the delinquency rates have declined for first mortgages, and increased for second mortgages, from those reflected in refreshed statistics at June 30, 2010.

Delinquencies: 90+DPD Rates—First Mortgages

At Origination
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    5.1 %   10.3 %   11.7 %

80% < LTV £ 100%

    7.7 %   12.9 %   16.3 %

LTV > 100%

    NM     NM     NM  

 

Refreshed
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    0.2 %   3.5 %   14.9 %

80% < LTV £ 100%

    0.7 %   7.4 %   21.4 %

LTV > 100%

    1.8 %   13.5 %   27.6 %

Note: NM—Not meaningful. 90+DPD are based on balances referenced in the tables above.

Delinquencies: 90+DPD Rates—Second Mortgages

At Origination
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    1.7 %   4.2 %   5.9 %

80% < LTV £ 100%

    3.5 %   5.4 %   7.5 %

LTV > 100%

    NM     NM     NM  

 

Refreshed
  FICO³660   620£FICO<660   FICO<620  

LTV £ 80%

    0.0 %   1.5 %   8.7 %

80% < LTV £ 100%

    0.1 %   2.0 %   10.7 %

LTV > 100%

    0.3 %   3.3 %   16.1 %

Note: NM—Not meaningful. 90+DPD are based on balances referenced in the tables above.

Origination Channel, Geographic Distribution and Origination Vintage

        The following tables detail Citi's first and second mortgage portfolios by origination channels, geographic distribution and origination vintage.

By Origination Channel

        Citi's U.S. consumer mortgage portfolio has been originated from three main channels: retail, broker and correspondent.

First Mortgages: September 30, 2010

        As of September 30, 2010, approximately 53% of the first mortgage portfolio was originated through third-party channels. Given that loans originated through correspondents have exhibited higher 90+DPD delinquency rates than retail originated mortgages, Citi terminated business with a number of correspondent sellers in 2007 and 2008. During 2008, Citi also severed relationships with a number of brokers, only maintaining those who have produced strong, high-quality and profitable volume. 90+DPD delinquency amounts, amount of loans with FICO scores of less than 620, and amount of loans with LTV over 100% have generally improved since June 30, 2010.

CHANNEL
($ in billions)
  First Lien
Mortgages
  Channel
% Total
  90+DPD %   *FICO < 620   *LTV > 100%  

Retail

  $ 43.2     47.0 %   5.2 % $ 13.2   $ 9.1  

Broker

  $ 15.9     17.2 %   7.2 % $ 2.9   $ 5.0  

Correspondent

  $ 32.9     35.8 %   11.1 % $ 10.8   $ 12.7  

*
Refreshed FICO and LTV.

Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.

Second Mortgages: September 30, 2010

        For second mortgages, approximately 47% of the loans were originated through third-party channels. As these mortgages have demonstrated a higher incidence of delinquencies, Citi no longer originates second mortgages through third-party channels. 90+DPD delinquency amounts, amount of loans with FICO scores of less than 620, and amount of loans with LTV over 100% have generally slightly improved since June 30, 2010.

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CHANNEL
($ in billions)
  Second Lien
Mortgages
  Channel
% Total
  90+DPD %   *FICO < 620   *LTV > 100%  

Retail

  $ 23.3     53.0 %   1.9 % $ 3.7   $ 6.6  

Broker

  $ 10.8     24.6 %   3.7 % $ 1.8   $ 6.3  

Correspondent

  $ 9.8     22.4 %   3.8 % $ 2.3   $ 7.1  

*
Refreshed FICO and LTV.

Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.

By State

        Approximately half of Citi's U.S. consumer mortgage portfolio is located in five states: California, New York, Florida, Illinois and Texas. These states represent 50% of first mortgages and 55% of second mortgages.

        With respect to first mortgages, Florida and Illinois had above average 90+DPD delinquency rates as of September 30, 2010. Florida has 55% of its first mortgage portfolio with refreshed LTV>100%, compared to 29% overall for first mortgages. Illinois has 33% of its loan portfolio with refreshed LTV>100%. Texas, despite having 40% of its portfolio with FICO<620, has a lower delinquency rate relative to the overall portfolio. Texas has 6% of its loan portfolio with refreshed LTV>100%.

        In the second mortgage portfolio, Florida continued to experience above-average delinquencies at 4.5% as of September 30, 2010, with approximately 71% of its loans with refreshed LTV > 100%, compared to 46% overall for second mortgages.

By Vintage

        For Citigroup's combined U.S. consumer mortgage portfolio (first and second mortgages), as of September 30, 2010, approximately half of the portfolio consisted of 2006 and 2007 vintages, which demonstrate above average delinquencies. In first mortgages, approximately 42% of the portfolio is of 2006 and 2007 vintages, which had 90+DPD rates well above the overall portfolio rate, at 9.8% for 2006 and 11.0% for 2007. In second mortgages, 61% of the portfolio is of 2006 and 2007 vintages, which again had higher delinquencies compared to the overall portfolio rate, at 3.4% for 2006 and 3.2% for 2007.

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FICO and LTV Trend Information—U.S. Consumer Mortgage Lending

1st Mortgage ($B)   2nd Mortgage ($B)

GRAPHIC

 

GRAPHIC

GRAPHIC

 

GRAPHIC

Note: First mortgage chart/table excludes loans in Canada and Puerto Rico, loans guaranteed by U.S. government sponsored agencies, loans recorded at fair value and loans subject to LTSCs. Balances exclude deferred fees/costs. Balances based on refreshed FICO and LTV ratios. Chart/table also excludes balances for which FICO or LTV data was unavailable ($1.0 billion in 4Q09, $0.6 billion in 1Q10, $0.4 billion in 2Q10 and $0.4 billion in 3Q10).

 

Note: Second mortgage chart/table excludes loans in Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs. Balances based on refreshed FICO and LTV ratios. Chart/table also excludes balances for which FICO or LTV data was unavailable ($0.8 billion in 4Q09, $0.4 billion in 1Q10, $0.4 billion in 2Q10 and $0.4 billion in 3Q10).

        As of September 30, 2010, the first mortgage portfolio was approximately $92 billion, a reduction of $15 billion or 14% from December 2009. First mortgage loans with refreshed FICO score below 660 and refreshed LTV above 100% were $13.2 billion as of September 30, 2010, $1.7 billion or 11% lower than the balance as of December 2009. Similarly, the second mortgage portfolio was approximately $44 billion as of September 30, 2010, a reduction of $5 billion or 11% from December 2009. Second mortgage loans with refreshed FICO score below 660 and refreshed LTV above 100% were $6.4 billion as of September 30, 2010, $0.3 billion or 4% lower than the balance as of December 2009. Across both portfolios, 90+ DPD rates have generally improved since December 31, 2009 across each of the FICO/LTV segments outlined above, particularly those segments with refreshed FICO scores below 660.

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Interest Rate Risk Associated with Consumer Mortgage Lending Activity

        Citigroup originates and funds mortgage loans. As with all other lending activity, this exposes Citigroup to several risks, including credit, liquidity and interest rate risks. For on-balance sheet exposures, these risks are measured and monitored as described in the Credit Risk, Liquidity and Funding, and Interest Rate Exposure sections. To minimize credit and liquidity risk, Citigroup sells most of the mortgage loans it originates, but retains the servicing rights. These sale transactions create an intangible asset referred to as MSRs. The fair value of this asset is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. The fair value of MSRs declines with increased prepayments, and lower interest rates are generally one factor that tends to lead to increased prepayments. Thus, by continuing to service sold mortgage loans, Citigroup is exposed to interest rate risk.

        In managing this risk, Citigroup hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities, and purchased securities classified as trading (primarily mortgage-backed securities including principal-only strips).

        Since the change in the value of these hedging instruments does not perfectly match the change in the value of the MSRs, Citigroup is still exposed to what is commonly referred to as "basis risk." Citigroup manages this risk by reviewing the mix of the various hedging instruments referred to above on a daily basis.

        Citigroup's MSRs totaled $3.976 billion and $6.530 billion at September 30, 2010 and December 31, 2009, respectively. For additional information on Citi's MSRs, see Notes 11 and 14 to the Consolidated Financial Statements.

        As part of the mortgage lending activity, Citigroup commonly enters into purchase commitments to fund residential mortgage loans at specific interest rates within a given period of time, generally up to 60 days after the rate has been set. If the resulting loans from these commitments will be classified as loans held-for-sale, Citigroup accounts for the commitments as derivatives. Accordingly, the initial and subsequent changes in the fair value of these commitments, which are driven by changes in mortgage interest rates, are recognized in current earnings after taking into consideration the likelihood that the commitment will be funded.

        Citigroup hedges its exposure to the change in the value of these commitments by utilizing hedging instruments similar to those referred to above.

North America Cards

Overview

        Citi's North America cards portfolio consists of its Citi-branded and Retail partner cards portfolios reported in Citicorp—Regional Consumer Banking and Citi Holdings—Local Consumer Lending, respectively. As of September 30, 2010, the Citi-branded portfolio totaled $77 billion, while the Retail partner cards portfolio was $46 billion.

        In each of its Citi-branded and Retail partner cards portfolios, Citi continues to actively eliminate riskier accounts to mitigate losses. Higher risk customers have either had their available lines of credit reduced or their accounts closed. On a net basis, end of period open accounts are down 13% in Citi-branded cards and down 10% in Retail partner cards versus prior-year levels.

        As previously disclosed, in Citi's experience to date, these portfolios have significantly different characteristics:

        As a result, loss mitigation efforts, such as stricter underwriting standards for new accounts, decreasing higher risk credit lines, closing high risk accounts and re-pricing, have tended to affect the Retail partner cards portfolio faster than the branded portfolio. (See also "Consumer Loan Modification Programs" for a discussion of modification programs for card loans.)

        Citi continues to believe that net credit losses in each of its cards portfolios will likely continue to remain at elevated levels and will continue to be highly dependent on macroeconomic conditions and industry changes, including continued implementation of the CARD Act.

Cards Quarterly Trends—Delinquencies and Net Credit Losses

        The following charts detail the quarterly trends in delinquencies and net credit losses for Citigroup's North America Citi-branded and Retail partner cards portfolios.

        During the third quarter of 2010, each of the portfolios continued to show improvement in delinquencies and net credit losses. In Citi-branded cards, delinquencies declined for the third consecutive quarter while net credit losses declined for the second consecutive quarter. In Retail partner cards, delinquencies declined for the third consecutive quarter while net credit losses declined for the fifth consecutive quarter.

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GRAPHIC

Note: Includes Puerto Rico.

GRAPHIC

Note: Includes Canada and Puerto Rico. Includes Installment Lending.

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North America Cards—FICO Information

        As set forth in the table below, approximately 75% of the Citi-branded portfolio had FICO credit scores of at least 660 on a refreshed basis as of September 30, 2010, while 66% of the Retail partner cards portfolio had scores above 660. These percentages reflect a slight improvement since the statistics on a refreshed basis as of June 30, 2010.

Balances: September 30, 2010

Refreshed
  Citi Branded   Retail Partners  

FICO ³ 660

    75 %   66 %

620 £ FICO < 660

    10 %   13 %

FICO < 620

    15 %   21 %

Note: Based on balances of $116 billion (decreased from $120 billion at June 30, 2010). Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios. Excludes balances where FICO was unavailable ($2.7 billion for Citi-branded, $2.0 billion for Retail partner cards).

        The table below provides delinquency statistics for loans 90+DPD for both the Citi-branded and Retail partner cards portfolios as of September 30, 2010. Given the economic environment, customers have generally migrated down from higher FICO score ranges, driven by their delinquencies with Citi and/or other creditors. As these customers roll through the delinquency buckets, they materially damage their credit score and may ultimately go to charge-off. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. Loans with FICO scores less than 620, which constitute 15% of the Citi-branded portfolio (down from 16% at June 30, 2010), have a 90+DPD rate of 15.0% (down from 16.3% at June 30, 2010); in the Retail partner cards portfolio, loans with FICO scores less than 620 constitute 21% (down from 22% at June 30, 2010) of the portfolio and have a 90+DPD rate of 17.3% (up from 16.7% at June 30, 2010).

90+DPD Delinquency Rate: September 30, 2010

Refreshed
  Citi Branded
90+DPD%
  Retail Partners
90+DPD%
 

FICO ³ 660

    0.1 %   0.2 %

620 £ FICO < 660

    0.6 %   0.8 %

FICO < 620

    15.0 %   17.3 %

Note: Based on balances of $116 billion (decreased from $120 billion at June 30, 2010). Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios. 90+DPD are based on balances referenced in the table above.

U.S. Installment and Other Revolving Loans

        The U.S. installment portfolio consists of consumer loans in the following businesses: Consumer Finance, Retail Banking, Auto, Student Lending and Cards. Other Revolving consists of consumer loans (Ready Credit and Checking Plus products) in the Consumer Retail Banking business. Commercial-related loans are not included.

        As of September 30, 2010, the U.S. Installment portfolio totaled approximately $27 billion, while the U.S. Other Revolving portfolio was approximately $0.9 billion. In the table below, the U.S. Installment portfolio excludes the portion of loans associated with the previously-announced sale of The Student Loan Corporation, currently expected to close in the fourth quarter of 2010.

        While substantially all of the U.S. Installment portfolio is reported in LCL within Citi Holdings, it does include $0.4 billion of Consumer Retail Banking loans which is reported in Citicorp. The U.S. Other Revolving portfolio is managed under Citicorp. Approximately 48% of the Installment portfolio had FICO credit scores less than 620 on a refreshed basis. Approximately 28% of the Other Revolving portfolio is composed of loans having FICO less than 620.

Balances: September 30, 2010

Refreshed
  Installment   Other Revolving  

FICO ³ 660

    37 %   57 %

620 £ FICO < 660

    16 %   15 %

FICO < 620

    48 %   28 %

Note: Based on balances of $26 billion for Installment and $0.9 billion for Other Revolving. Excludes Canada and Puerto Rico. Excludes balances where FICO was unavailable ($1.2 billion for Installment).

        The table below provides delinquency statistics for loans 90+DPD for both the Installment and Other Revolving portfolios. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. On a refreshed basis, loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band and will drive the majority of the losses.

90+DPD Delinquency Rate: September 30, 2010

Refreshed
  Installment 90+DPD%   Other Revolving 90+DPD%  

FICO ³ 660

    0.2 %   0.0 %

620 £ FICO < 660

    0.5 %   0.3 %

FICO < 620

    7.4 %   8.7 %

Note: Based on balances of $26 billion for Installment and $0.9 billion for Other Revolving. Excludes Canada and Puerto Rico. 90+DPD are based on balances referenced in the table above.

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FICO and LTV Trend Information—North America Cards

Citi Branded Cards ($B)   Retail Partner Cards ($B)

GRAPHIC

 

GRAPHIC

Note: Excludes Canada, Puerto Rico and Installment and Classified portfolios. Balances include interest and fees. Balances based on refreshed FICO. Chart also excludes balances for which FICO was unavailable ($0.7 billion in 4Q09, $2.4 billion in 1Q10, $2.4 billion in 2Q10 and $2.7 billion in 3Q10).

 

Note: Excludes Canada, Puerto Rico and Installment and Classified portfolios. Balances include interest and fees. Balances based on refreshed FICO. Chart also excludes balances for which FICO was unavailable ($2.1billion in 4Q09, $2.1billion in 1Q10, $2.1billion in 2Q10 and $2.0 billion in 3Q10).

        As of September 30, 2010, the Citi-branded portfolio totaled approximately $76 billion, a reduction of $7 billion or 9% from December 2009 primarily driven by lower balances in the FICO below 660 segment. In the Citi-branded cards portfolio, loans with refreshed FICO scores below 660 were $18.6 billion as of September 30, 2010, $4 billion or 18% lower than the balance as of December 2009. Similarly, the Retail partner cards portfolio was approximately $44 billion as of September 30, 2010, a reduction of $12 billion or 21% from December 2009. In the Retail partner cards portfolio, loans with refreshed FICO scores below 660 were $14.6 billion as of September 30, 2010, $5.4 billion or 27% lower than the balance as of December 31, 2009.

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Consumer Loan Details

Consumer Loan Delinquency Amounts and Ratios

 
  Total loans(7)   90+ days past due(1)   30-89 days past due(1)  
In millions of dollars, except EOP loan amounts in billions   Sep.
2010
  Sep.
2010
  Jun.
2010
  Sep.
2009
  Sep.
2010
  Jun.
2010
  Sep.
2009
 

Citicorp(2)(3)(4)

                                           

Total

  $ 224.8   $ 3,377   $ 3,733   $ 3,899   $ 3,728   $ 3,858   $ 4,352  
 

Ratio

          1.51 %   1.71 %   1.74 %   1.66 %   1.77 %   1.94 %
                               

Retail Bank

                                           
 

Total

    113.7     787     804     695     1,185     1,131     1,013  
   

Ratio

          0.70 %   0.74 %   0.64 %   1.05 %   1.04 %   0.94 %
 

North America

    29.4     221     245     92     243     241     82  
   

Ratio

          0.77 %   0.81 %   0.27 %   0.85 %   0.80 %   0.24 %
 

EMEA

    4.7     40     50     62     142     145     230  
   

Ratio

          0.85 %   1.16 %   1.09 %   3.02 %   3.37 %   4.04 %
 

Latin America

    20.8     310     308     279     377     305     315  
   

Ratio

          1.49 %   1.57 %   1.58 %   1.81 %   1.56 %   1.78 %
 

Asia

    58.8     216     201     262     423     440     386  
   

Ratio

          0.37 %   0.37 %   0.52 %   0.72 %   0.80 %   0.77 %
                               

Citi-Branded Cards

                                           
 

Total

    111.1     2,590     2,929     3,204     2,543     2,727     3,399  
   

Ratio

          2.33 %   2.68 %   2.74 %   2.29 %   2.49 %   2.86 %
 

North America

    76.6     1,807     2,130     2,190     1,687     1,828     2,213  
   

Ratio

          2.36 %   2.76 %   2.59 %   2.20 %   2.37 %   2.61 %
 

EMEA

    2.9     69     72     90     86     90     155  
   

Ratio

          2.38 %   2.77 %   3.00 %   2.97 %   3.46 %   5.17 %
 

Latin America

    12.6     472     481     609     442     485     604  
   

Ratio

          3.75 %   4.01 %   5.03 %   3.51 %   4.04 %   4.99 %
 

Asia

    19.0     242     246     315     328     324     367  
   

Ratio

          1.27 %   1.40 %   1.85 %   1.73 %   1.84 %   2.16 %
                               

Citi Holdings—Local Consumer Lending(2)(3)(5)(6)

                                           
 

Total

    237.8     11,824     14,371     18,123     10,408     11,201     14,848  
   

Ratio

          5.23 %   5.24 %   5.72 %   4.61 %   4.08 %   4.69 %
 

International

    24.7     713     724     1,465     978     939     1,733  
   

Ratio

          2.89 %   2.94 %   4.01 %   3.96 %   3.82 %   4.75 %
 

North America Retail partner cards

    46.0     1,749     2,004     2,587     1,972     2,150     2,911  
   

Ratio

          3.80 %   3.99 %   4.23 %   4.29 %   4.28 %   4.76 %
 

North America (excluding cards)

    167.1     9,362     11,643     14,071     7,458     8,112     10,204  
   

Ratio

          6.03 %   5.84 %   6.42 %   4.81 %   4.07 %   4.66 %
                               

Total Citigroup (excluding Special Asset Pool)

  $ 462.6   $ 15,201   $ 18,104   $ 22,022   $ 14,136   $ 15,059   $ 19,200  
   

Ratio

          3.38 %   3.67 %   4.07 %   3.14 %   3.06 %   3.55 %
                               

(1)
The ratios of 90 days or more past due and 30 to 89 days past due are calculated based on end-of-period loans.

(2)
The 90 days or more past due balances for Citi-branded cards and Retail partner cards are generally still accruing interest. Citigroup's policy is generally to accrue interest on credit card loans until 180 days past due, unless notification of bankruptcy filing has been received earlier.

(3)
The above information presents consumer credit information on a managed basis. Citigroup adopted SFAS 166/167 effective January 1, 2010. As a result, beginning in the first quarter of 2010, there is no longer a difference between reported and managed delinquencies. Prior quarters' managed delinquencies are included herein for comparative purposes to the 2010 delinquencies. Managed basis reporting historically impacted the North America Regional Consumer Banking—Citi-branded cards and the Local Consumer Lending—Retail partner cards businesses. The historical disclosures reflect the impact from credit card securitizations only. See discussion of adoption of SFAS 166/167 on page 3 and in Note 1 to the Consolidated Financial Statements.

(4)
The 90 days or more and 30 to 89 days past due and related ratios for North America Regional Consumer Banking excludes U.S. mortgage loans that are guaranteed by U.S. government sponsored agencies since the potential loss predominantly resides within the U.S. agencies. The amounts excluded for loans 90 days or more past due and (end-of-period loans) are $188 million ($0.8 billion) as of September 30, 2010. The amount excluded for loans 30 to 89 days past due (end-of-period loans have the same adjustment as above) is $15 million.

(5)
The 90 days or more and 30 to 89 days past due and related ratios for North America LCL excludes U.S. mortgage loans that are guaranteed by U.S. government sponsored agencies since the potential loss predominantly resides within the U.S. agencies. The amounts excluded for loans 90 days or more past due and (end-of-period loans) for each period are: $5.0 billion ($9.5 billion), $5.0 billion ($9.4 billion), and $4.9 billion ($8.3 billion) as of September 30, 2010, June 30, 2010 and September 30, 2009, respectively. The amounts excluded for loans 30 to 89 days past due (end-of-period loans have the same adjustment as above) for each period are: $1.7 billion, $1.6 billion, and $0.8 billion, as of September 30, 2010, June 30, 2010 and September 30, 2009, respectively.

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(6)
The September 30, 2010 and June 30, 2010 loans 90 days or more past due and 30-89 days past due and related ratios for North America excludes $2.4 billion and $2.6 billion, respectively, of loans that are carried at fair value.

(7)
Total loans include interest and fees on credit cards.


Consumer Loan Net Credit Losses and Ratios

 
  Average
loans(1)
  Net credit losses(2)  
In millions of dollars, except average loan amounts in billions   3Q10   3Q10   2Q10   3Q09  

Citicorp

                         

Total

  $ 221.0   $ 2,731   $ 2,922   $ 1,442  
 

Add: impact of credit card securitizations(3)

                  1,876  
 

Managed NCL

        $ 2,731   $ 2,922   $ 3,318  
 

Ratio

          4.90 %   5.38 %   5.97 %
                   

Retail Bank

                         
 

Total

    111.5     333     304     395  
   

Ratio

          1.18 %   1.12 %   1.48 %
 

North America

    29.7     90     79     78  
   

Ratio

          1.20 %   1.03 %   0.90 %
 

EMEA

    4.5     34     46     84  
   

Ratio

          3.00 %   4.10 %   5.85 %
 

Latin America

    20.3     128     96     114  
   

Ratio

          2.50 %   1.98 %   2.68 %
 

Asia

    57.0     81     83     119  
   

Ratio

          0.56 %   0.61 %   0.96 %
                   

Citi-Branded Cards

                         
 

Total

    109.5     2,398     2,618     1,047  
   

Add: impact of credit card securitizations(3)

                  1,876  
   

Managed NCL

          2,398     2,618     2,923  
   

Ratio

          8.69 %   9.68 %   10.14 %
 

North America

    76.0     1,881     2,047     201  
   

Add: impact of credit card securitizations(3)

                  1,876  
   

Managed NCL

          1,881     2,047     2,077  
   

Ratio

          9.82 %   10.77 %   9.98 %
 

EMEA

    2.8     31     39     55  
   

Ratio

          4.39 %   5.79 %   7.27 %
 

Latin America

    12.3     322     361     543  
   

Ratio

          10.39 %   12.07 %   17.80 %
 

Asia

    18.4     164     171     248  
   

Ratio

          3.54 %   3.90 %   5.89 %
                   

Citi Holdings—Local Consumer Lending

                         
 

Total

    248.4     3,949     4,535     4,912  
   

Add: impact of credit card securitizations(3)

                  1,137  
   

Managed NCL

          3,949     4,535     6,049  
   

Ratio

          6.31 %   6.03 %   7.21 %
 

International

    25.0     444     495     957  
   

Ratio

          7.05 %   7.61 %   9.79 %
 

North America Retail partner cards

    48.8     1,505     1,775     867  
   

Add: impact of credit card securitizations(3)

                  1,137  
   

Managed NCL

          1,505     1,775     2,004  
   

Ratio

          12.24 %   13.41 %   12.76 %
 

North America (excluding cards)

    174.6     2,000     2,265     3,088  
   

Ratio

          4.54 %   4.08 %   5.29 %
                   

Total Citigroup (excluding Special Asset Pool)

  $ 469.4   $ 6,680   $ 7,457   $ 6,354  
   

Add: impact of credit card securitizations(3)

                  3,013  
   

Managed NCL

          6,680     7,457     9,367  
   

Ratio

          5.65 %   5.76 %   6.72 %
                   

(1)
Average loans include interest and fees on credit cards.

(2)
The ratios of net credit losses are calculated based on average loans, net of unearned income.

(3)
See page 3 and Note 1 to the Consolidated Financial Statements for a discussion of the impact of SFAS 166/167.

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Consumer Loan Modification Programs

        Citigroup has instituted a variety of modification programs to assist borrowers with financial difficulties. These programs, as described below, include modifying the original loan terms, reducing interest rates, extending the remaining loan duration and/or waiving a portion of the remaining principal balance. At September 30, 2010, Citi's significant modification programs consisted of the U.S. Treasury's Home Affordable Modification Program (HAMP), as well as short-term and long-term modification programs in the U.S., each as summarized below.

        The policy for re-aging modified U.S. consumer loans to current status varies by product. Generally, one of the conditions to qualify for these modifications is that a minimum number of payments (typically ranging from one to three) be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For such open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least three consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans are modified under those respective agencies' guidelines, and payments are not always required in order to re-age a modified loan to current.

        In the determination of the allowance for loan losses for troubled debt restructurings (TDRs), Citigroup considers a combination of historical re-default rates, the current economic environment, and the nature of the modification program in forecasting expected cash flows.

HAMP and Other Long-Term Programs.

        Long-term modification programs or TDRs occur when the terms of a loan have been modified due to the borrowers' financial difficulties and a long-term concession has been granted to the borrower. Substantially all long-term programs in place provide interest rate reductions. See "Loan Accounting Policies" in Citi's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 for a discussion of the allowance for loan losses for such modified loans.

        The following table presents Citigroup's consumer loan TDRs as of September 30, 2010 and December 31, 2009. As discussed below under "HAMP," HAMP loans whose terms are contractually modified after successful completion of the trial period are included in the balances below:

 
  Accrual   Non-accrual  
In millions of dollars   Sept. 30,
2010
  Dec. 31,
2009
  Sept. 30,
2010
  Dec. 31,
2009
 

Mortgage and real estate

  $ 14,119   $ 8,654   $ 1,949   $ 1,413  

Cards(1)

    5,265     2,303     33     150  

Installment and other

    3,408     3,128     350     250  
                   

(1)
2010 balances reflect the adoption of SFAS 166/167.

        These TDRs are predominately concentrated in the U.S. Citi's significant long-term U.S. modification programs include:

Mortgages

        HAMP.    The HAMP is designed to reduce monthly first mortgage payments to a 31% housing debt ratio (monthly mortgage payment, including property taxes, insurance and homeowner dues, divided by monthly gross income) by lowering the interest rate, extending the term of the loan and deferring or forgiving principal of certain eligible borrowers who have defaulted on their mortgages or who are at risk of imminent default due to economic hardship. The interest rate reduction for first mortgages under HAMP is in effect for five years and the rate then increases up to 1% per year until the interest rate cap (the lower of the original rate or the Freddie Mac Weekly Primary Mortgage Market Survey rate for a 30-year fixed rate conforming loan as of the date of the modification) is reached.

        In order to be entitled to loan modifications, borrowers must complete a three- to five-month trial period, make the agreed payments and provide the required documentation. Beginning March 1, 2010, documentation is required to be provided prior to beginning the trial period, whereas prior to that date, it was required before the end of the trial period. This change generally means that Citi is able to verify income up front for potential HAMP participants before they begin making lower monthly payments. Early signs indicate that this change will increase the percentage of borrowers who will successfully complete the trial period.

        During the trial period, Citi requires that the original terms of the loans remain in effect pending completion of the modification. From inception through September 30, 2010, approximately $9.1 billion of first mortgages were enrolled in the HAMP trial period, while $3.1 billion have successfully completed the trial period. Upon completion of the trial period, the terms of the loan are contractually modified, and it is accounted for as a TDR.

        Citi has also agreed to participate in the U.S. Treasury's HAMP second mortgage program (2MP) beginning October 1, 2010. 2MP requires Citi to either: (1) modify the borrower's second mortgage according to a defined protocol; or (2) accept a lump sum payment from the U.S. Treasury in exchange for full extinguishment of the second mortgage. For a borrower to qualify, the borrower must have successfully modified his/her first mortgage under the HAMP and met other criteria. Under the 2MP program, if the first mortgage is modified under HAMP and receives a principal forgiveness, the same percentage of principal forgiveness is required on the second mortgage.

        Loans included in the HAMP trial period are not classified as modified under short-term or long-term programs, and the allowance for loan losses for these loans is calculated under ASC 450-20.

        As of September 30, 2010, excluding the number of loans that are still in the trial period, 33% of the loans were successfully modified under HAMP, 13% were modified under the Citi Supplemental program (see below), 17% received HAMP Re-age (see below), and 37% have not received any modification from Citi to date.

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        Citi Supplemental.    The Citi Supplemental (CSM) program was designed by Citi to assist borrowers ineligible for HAMP or who become ineligible through the HAMP trial period process. If the borrower already has less than a 31% housing debt ratio, the modification offered is an interest rate reduction (up to 2.5% with a floor rate of 4%) which is in effect for two years, and the rate then increases up to 1% per year until the interest rate is at the pre-modified contractual rate. If the borrower's housing debt ratio is greater than 31%, specific treatment steps for HAMP, including an interest rate reduction, will be followed to achieve a 31% housing debt ratio. The modified interest rate is in effect for two years, and then increases up to 1% per year until the interest rate is at the pre-modified contractual rate. If income documentation was not supplied previously for HAMP, it is required for CSM. Three or more trial payments are required prior to modification. These payments can be made during the HAMP and/or CSM trial period.

        HAMP Re-Age.    As previously disclosed, loans in the HAMP trial period are aged according to their original contractual terms, rather than the modified HAMP terms. This results in the receivable being reported as delinquent even if the reduced payments agreed to under the program are made by the borrower. Upon conclusion of the trial period, loans that do not qualify for a long-term modification are returned to the delinquency status in which they began their trial period. However, that delinquency status would be further deteriorated for each trial payment not made (HAMP Re-age). HAMP Re-age establishes a non-interest-bearing deferral based on the difference between the original contractual amounts due and the HAMP trial payments made. Citigroup considers this re-age and deferral process to constitute a concession to a borrower in financial difficulty and therefore records the loans as TDRs upon re-age.

        2nd FDIC.    The 2nd FDIC modification program guidelines were created by the FDIC for delinquent or current borrowers where default is reasonably foreseeable. The program is designed for second mortgages and uses various concessions, including interest rate reductions, non-interest-bearing principal deferral, principal forgiveness, extending maturity dates, and forgiving accrued interest and late fees. These potential concessions are applied in a series of steps (similar to HAMP) that provides an affordable payment to the borrower (generally a combined housing payment ratio of 42%). The first step generally reduces the borrower's interest rate to 2% for fixed-rate home equity loans and 0.5% for home equity lines of credit. The interest rate reduction is in effect for the remaining term of the loan.

        FHA/VA.    Loans guaranteed by the FHA or VA are modified through the normal modification process required by those respective agencies. Borrowers must be delinquent and concessions include interest rate reductions, principal forgiveness, extending maturity dates, and forgiving accrued interest and late fees. The interest rate reduction is in effect for the remaining loan term. Losses on FHA loans are borne by the sponsoring agency provided that the insurance has not been breached as a result of an origination defect. The VA establishes a loan-level loss cap, beyond which Citi is liable for loss. Historically, Citi's losses on FHA and VA loans have been negligible.

        CFNA Adjustment of Terms (AOT).    This program is targeted to Consumer Finance customers with a permanent hardship. Payment reduction is provided through the re-amortization of the remaining loan balance, typically at a lower interest rate. Modified loan tenors may not exceed a period of 480 months. Generally, the rescheduled payment cannot be less than 50% of the original payment amount unless the AOT is a result of participation in the CitiFinancial Home Affordability Modification Program (CHAMP) or military service member's Credit Relief Act Program (SCRA), or as a result of settlement, court order, judgment, or bankruptcy. Customers must make a qualifying payment at the reduced payment amount in order to qualify for the modification. In addition, customers must provide income verification (pay stubs and/or tax returns) and monthly obligations are validated through an updated credit report.

        Other.    Prior to the implementation of the HAMP, CSM and 2nd FDIC programs, Citigroup's U.S. mortgage business offered certain borrowers various tailored modifications, which included reducing interest rates, extending the remaining loan duration and/or waiving a portion of the remaining principal balance. Citigroup currently believes that substantially all of its future long-term U.S. mortgage modifications, at least in the near term, will be included in the programs mentioned above.

Impact of Mortgage Modification Programs

        Citi considers various metrics in analyzing the success of U.S. mortgage loan modifications. Payment behavior of customers during the modification (both short-term and long-term) is monitored. For short-term modifications, performance is also measured for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are important metrics that are monitored. Based on actual experience, program terms, including eligibility criteria, interest charged and loan tenor, may be refined.

        The main objective of the mortgage modification programs is to reduce the payment burden for the borrower and improve the net present value of Citi's expected cash flows. The total balance reduction for modifications in the Other category (noted above and in the table below) after 24 months is approximately 34% (as a percentage of the balance at the time of modification), consisting of approximately 19% of paydowns and 15% of net credit losses. At 18 months after modifying an account, in Citi's experience to date, credit loss rates are estimated to be reduced by approximately one-third compared to accounts that were not modified. The HAMP and CSM programs have less vintage history and limited loss data. However, performance of the HAMP and CSM programs are currently tracking to Citi's expectations and are currently expected to perform better than the pre-HAMP modifications discussed above.

        The total balance reduction for long-term CFNA Real Estate AOTs after 24 months is approximately 14% (as a percentage of the balance at the time of modification), consisting of approximately 5% of paydowns and 9% of net credit losses. The U.S. Consumer Mortgage Temporary AOT program (described under Short-Term Programs) has less vintage history and limited loss data.

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North America Cards

        Paydown.    The Paydown program is designed to liquidate a customer's balance within 60 months. It is available to customers who indicate a long-term hardship (e.g., long-term disability, medical issues or a non-temporary income reduction, such as an occupation change). Payment requirements are decreased by reducing interest rates charged to either 9.9% or 0%, depending upon the customer situation, and designed to amortize at least 1.67% of the balance each month. Under this program, fees are discontinued, and charging privileges are permanently rescinded.

        CCG.    The CCG program handles proposals received via external consumer credit counselors on the customer's behalf. In order to qualify, customers work with a credit counseling agency to develop a plan to handle their overall budget, including money owed to Citi. A copy of the counseling agency's proposal letter is required. The annual percentage rate (APR) is reduced to 9.9%. The account fully amortizes in 60 months. Under this program, fees are discontinued, and charging privileges are permanently rescinded.

        Interest Reversal Paydown.    The Interest Reversal Paydown program is also designed to liquidate a customer's balance within 60 months. It is available to customers who indicate a long-term hardship. Accumulated interest and fees owed to Citi are reversed upon enrollment, and future interest and fees are discontinued. Payment requirements are reduced and are designed to amortize at least 1.67% of the balance each month. Under this program, like the programs discussed above, fees are discontinued, and charging privileges are permanently rescinded.

Impact of Cards Modification Programs

        Citi considers various metrics in analyzing the success of North America credit card loan modifications. Payment behavior of customers during the modification (both short-term and long-term modifications) is monitored. For short-term modifications, performance is also measured for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are important metrics that are monitored. Based on actual experience, program terms, including eligibility criteria, interest charged and loan tenor, may be refined.

        The main objective of the credit card modification programs is to reduce the payment burden for the borrower and improve the net present value of Citi's expected cash flows. Total balance reduction for long-term modifications after 24 months is approximately 60-70% (as a percentage of the balance at the time of modification), consisting of approximately 30-40% of paydowns and 30% of net credit losses. It is Citi's experience that these credit losses are approximately one-third lower, depending upon the individual program and vintage, than those of similar accounts that were not modified.

        Twenty-four months after starting a short-term modification, balances are reduced by approximately 60-70% (as a percentage of the balance at the time of modification), consisting of approximately 20-30% of paydowns and 40% of net credit losses. It is Citi's experience that these credit losses are approximately one-sixth lower, depending upon the individual program and vintage, than those of similar accounts that were not modified.

        Based on Citi's experience to date and after consideration of the continuing challenging economic environment, Citigroup will be implementing certain changes to its credit card modification programs beginning in the fourth quarter of 2010, including revisions to the eligibility criteria for modification programs. As a result of these changes, Citi expects the overall volume of new entrants to these modification programs to decrease, particularly for short-term programs. While Citi also expects these changes to negatively impact net credit losses beginning in 2011, Citi believes overall that net credit losses will continue to improve in 2011 for each of the North America Cards businesses. Citi has considered these changes to the modification programs and their effect on net credit losses in determining the loan loss reserve as of September 30, 2010.

U.S. Installment Loans

        CFNA AOT.    This program is targeted to Consumer Finance customers with a permanent hardship. Payment reduction is provided through the re-amortization of the remaining loan balance, typically at a lower interest rate. Loan payments may be rescheduled over a period not to exceed 120 months. Generally, the rescheduled payment cannot be less than 50% of the original payment amount, unless the AOT is a result of a military service member's SCRA, or as a result of settlement, court order, judgment or bankruptcy. The interest rate generally cannot be reduced below 9% (except in the instances listed above). Customers must make a qualifying payment at the reduced payment amount in order to qualify for the modification. In addition, customers must provide proof of income and monthly obligations are validated through an updated credit report.

Impact of Installment Loan Modification Programs

        Citi considers various metrics in analyzing the success of U.S. installment loan modifications. Payment behavior of customers during the modification (both short-term and long-term modifications) is monitored. For short-term modifications, performance is also measured for an additional period of time after the expiration of the concession. Balance reductions and annualized loss rates are important metrics that are monitored. Based on actual experience, program terms, including eligibility criteria, interest charged and loan tenor, may be refined.

        The main objective of the installment loan modification programs is to reduce the payment burden for the borrower and improve the net present value of Citi's expected cash flows. The total balance reduction for CFNA AOT modifications after 24 months is approximately 50% (as a percentage of the balance at the time of modification), consisting of approximately 10-15% of paydowns and 35-40% of net credit losses. The Temporary AOT program (described under Short-term Programs) has less vintage history and limited loss data.

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Long Term Modification Programs—Summary

        The following table sets forth, as of September 30, 2010, information relating to Citi's significant long-term U.S. mortgage, card and installment loan modification programs:

In millions of dollars   Program
balance
  Program
start date(1)
  Average
interest rate
reduction
  Average %
payment relief
  Average
tenor of
modified loans
  Deferred
principal
  Principal
forgiveness
 

U.S. Consumer Mortgage Lending

                                         
 

HAMP

  $ 2,868     3Q09     4 %   41 % 32 years   $ 373   $ 2  
 

Citi Supplemental

    1,197     4Q09     3 %   25 % 28 years     61     1  
 

HAMP Re-age(2)

    354     1Q10     N/A     N/A   24 years     7      
 

2nd FDIC

    368     2Q09     6 %   47 % 21 years     25     6  
 

FHA/VA(3)

    3,140           2 %   20 % 28 years          
 

Adjustment of Terms (AOTs)

    3,829           3 %   23 % 29 years              
 

Other

    3,541           4 %   41 % 27 years     43     47  

North America Cards

                                         
 

Paydown

    2,308           15 %     5 years              
 

CCG

    1,790           9 %     5 years              
 

Interest Reversal Paydown

    255           20 %     5 years              

U.S. Installment

                                         
 

CFNA AOTs

    1,000           8 %   35 % 9 years              
                               

(1)
Provided if program was introduced within the last 18 months.

(2)
Approximately $30 million reported at June 30, 2010 were modified in a Citi Supplemental program and approximately $85 million were sold.

(3)
Approximately $1 billion reported at June 30, 2010 were transferred to Held for Sale in the third quarter.

        Short-term Programs.    Citigroup has also instituted short-term programs (primarily in the U.S.) to assist borrowers experiencing temporary hardships. These programs include short-term (12 months or less) interest rate reductions and deferrals of past due payments. The loan volume under these short-term programs has increased significantly over the past 18 months, and loan loss reserves for these loans have been enhanced, giving consideration to the higher risk associated with those borrowers and reflecting the estimated future credit losses for those loans. See "Loan Accounting Policies" in Citi's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 for a discussion of the allowance for loan losses for such modified loans.

        The following table presents the amounts of gross loans modified under short-term interest rate reduction programs in the U.S. as of September 30, 2010:

 
  September 30, 2010  
In millions of dollars   Accrual   Non-accrual  

Cards

  $ 3,497      

Mortgage and real estate

    1,775   $ 67  

Installment and other

    1,393     97  
           

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        Significant short-term U.S. programs include:

North America Cards

        Universal Payment Program (UPP).    The North America cards business provides short-term interest rate reductions to assist borrowers experiencing temporary hardships through the UPP. Under this program, a participant's APR is reduced by at least 500 basis points for a period of up to 12 months. The minimum payment is established based upon the customer's specific circumstances and is designed to amortize at least 1% of the principal balance each month. The participant's APR returns to its original rate at the end of the program or earlier if they fail to make the required payments.

        As a result of the changes to be made to the credit card modification programs, as mentioned above, Citi expects the volume of new entrants to be lower for UPP. The impact will be closely monitored.

Mortgages

        Temporary AOT.    This program is targeted to Consumer Finance customers with a temporary hardship. Examples of temporary hardships would include a short-term medical disability or a temporary reduction of pay. Under this program, which can include both an interest rate reduction and a term extension, the interest rate is reduced for either a five- or an eleven-month period. At the end of the temporary modification period, the interest rate reverts to the pre-modification rate. If the customer is still undergoing hardship at the conclusion of the temporary payment reduction, a second extension of the temporary terms can be considered in either of the time period increments above. In cases where the account is severely past due (over 60 days past due) at the expiration of the temporary modification period, the terms of the modification are made permanent and the payment is kept at the reduced amount for the remaining life of the loan.

U.S Installment Loans

        Temporary AOT.    This program is targeted to Consumer Finance customers with a temporary hardship. Under this program, which can include both an interest rate reduction and a term extension, the interest rate is reduced for either a five- or an eleven-month period. At the end of the temporary modification period, the interest rate reverts to the pre-modification rate. If the customer is still undergoing hardship at the conclusion of the temporary payment reduction, a second extension of the temporary terms can be considered in either of the time period increments above. In cases where the account is severely past due (over 90 days past due) at the expiration of the temporary modification period, the terms of the modification are made permanent and the payment is kept at the reduced amount for the remaining life of the loan.

Short Term Modification Programs—Summary

        The following table sets forth, as of September 30, 2010, information related to Citi's significant short-term U.S. cards, mortgage, and installment loan modification programs:

In millions of dollars   Program
balance
  Program
start date(1)
  Average
interest rate
reduction
  Average
time period
for
reduction

UPP

  $ 3,497           19 % 12 months

U.S. Consumer Mortgage Temporary AOT

    1,824     1Q09     3 % 8 months

U.S. Installment Temporary AOT

    1,488     1Q09     5 % 7 months
                 

(1)
Provided if program was introduced within the last 18 months.

        Payment deferrals that do not continue to accrue interest (extensions) primarily occur in the U.S. residential mortgage business. Under an extension, payments that are contractually due are deferred to a later date, thereby extending the maturity date by the number of months of payments being deferred. Extensions assist delinquent borrowers who have experienced short-term financial difficulties that have been resolved by the time the extension is granted. An extension can only be offered to borrowers who are past due on their monthly payments but have since demonstrated the ability and willingness to pay as agreed. Other payment deferrals continue to accrue interest and are not deemed to offer concessions to the customer. Other types of concessions are not material.

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Consumer Mortgage Representations and Warranties

        The majority of Citi's exposure to representation and warranty claims relates to its U.S. consumer mortgage business.

        When selling a loan, Citi (through its CitiMortgage business) makes various representations and warranties relating to, among other things, the following:

The specific representations and warranties made by Citi depend on the nature of the transaction and the requirements of the buyer. Market conditions and credit-rating agency requirements may also affect representations and warranties and the other provisions to which Citi may agree in loan sales.

        Citi's representations and warranties are generally not subject to stated limits in amount or time of coverage. However, contractual liability arises only when the representations and warranties are breached and generally only when a loss results from the breach. In the event of a breach of these representations and warranties, Citi may be required to either repurchase the mortgage loans (generally at unpaid principal balance plus accrued interest) with the identified defects or indemnify ("make-whole") the investors for their losses.

        For the nine months ended September 30, 2010 and 2009, over 75% of Citi's repurchases and make-whole payments were attributable to misrepresentation of facts by either the borrower or a third party (e.g., income, employment, debts, FICO, etc.), appraisal issues (e.g., an error or misrepresentation of value), and program requirements (e.g., a loan that does not meet investor guidelines such as contractual interest rate). For the three months ended September 30, 2010 and 2009, the comparable percentages were 79% and 65%, respectively. To date, there has not been a meaningful difference in incurred or estimated loss for each type of defect.

        In the case of a repurchase, Citi will bear any subsequent credit loss on the mortgage loan and the loan is typically considered a credit-impaired loan and accounted for under SOP 03-3, "Accounting for Certain Loans and Debt Securities, Acquired in a Transfer" (now incorporated into ASC 310-30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality). These repurchases have not had a material impact on Citi's non-performing loan statistics because credit-impaired purchased SOP 03-3 loans are not included in non-accrual loans, since they generally continue to accrue interest until write off.

        As evidenced by the tables below, to date, Citi's repurchases have primarily been from the government sponsored entities (GSEs).

        The unpaid principal balance of loans repurchased due to representation and warranty claims for the three months ended September 30, 2010 and September 30, 2009 was as follows:

 
  Three months ended September 30,  
 
  2010   2009  
In millions of dollars   Unpaid Principal
Balance
  Unpaid Principal
Balance
 

GSEs

  $ 53   $ 82  

Private investors

    11     4  
           

Total

  $ 64   $ 86  
           

        The unpaid principal balance of loans repurchased due to representation and warranty claims for the nine months ended September 30, 2010 and September 30, 2009 was as follows:

 
  Nine months ended September 30,  
 
  2010   2009  
In millions of dollars   Unpaid Principal
Balance
  Unpaid Principal
Balance
 

GSEs

  $ 203   $ 238  

Private investors

    23     14  
           

Total

  $ 226   $ 252  
           

        In addition, Citi recorded make-whole payments of $73 million and $6 million for the three months ended September 30, 2010 and September 30, 2009, respectively, and $139 million and $30 million for the nine months ended September 30, 2010 and September 30, 2009, respectively.

        Citi has recorded a reserve for its exposure to losses from the obligation to repurchase previously sold loans (repurchase reserve) that is included in Other liabilities in the Consolidated Balance Sheet. The repurchase reserve considers reimbursements estimated to be received by Citi from third-party correspondent lenders and indemnification agreements relating to previous acquisitions of mortgage servicing rights. In the case of a repurchase of a credit-impaired SOP 03-3 loan, the difference between the loan's fair value and unpaid principal balance at the time of the repurchase is recorded as a utilization of the repurchase reserve. Make-whole payments to the investor are also treated as utilizations and charged directly against the reserve. The repurchase reserve is estimated when Citi sells loans (recorded as an adjustment to the gain on sale, which is included in Other revenue in the Consolidated Statement of Income) and is updated quarterly. Any change in estimate is recorded in Other revenue.

        The repurchase reserve is calculated separately by sales vintage (i.e., the year the loans were sold) based on various assumptions. While substantially all of Citi's current loan sales are with GSEs with which Citi has considerable historical experience, these assumptions contain a level of uncertainty and risk that, if different from actual results, could have a material impact on the reserve amounts. The most significant assumptions used to calculate the reserve levels are as follows:

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        As stated above, the request for loan documentation packages is an early indicator of a potential claim. During 2009, loan documentation package requests and the level of outstanding claims increased. In addition, Citi's loss severity estimates increased during 2009 due to the impact of macroeconomic factors and its experience with actual losses at such time. As set forth in the tables below, these factors contributed to change in estimates for the repurchase reserve amounting to $33 million and $280 million for the three and nine months ended September 30, 2009, respectively.

        During the third quarter of 2010, loan documentation package requests, the loss per loan and the level of outstanding claims further increased. In addition, there was an overall deterioration in the other key assumptions due to the impact of macroeconomic factors and Citi's continued experience with actual losses. These factors contributed to the $322 million change in estimate for the repurchase reserve in the current quarter.

        As discussed above, the repurchase reserve is calculated by sales vintage. The majority of the repurchases in 2010 were from the 2006 through 2008 sales vintages and, in 2009, were from the 2006 and 2007 vintages, which also represent the vintages with the largest loss-given-repurchase. An insignificant percentage of 2010 and 2009 repurchases were from vintages prior to 2006, and Citi currently anticipates that this percentage will decrease, as those vintages are later in the credit cycle. Although early in the credit cycle, Citi has experienced improved repurchase and loss-given-repurchase statistics from the 2009 and 2010 vintages.

        As of September 30, 2010, Citi services loans previously sold as follows:

 
  September 30, 2010  
In millions   Number of
Loans
  Unpaid
Principal Balance
 

Vintage Sold:

             

2005 and Prior

    1.1   $ 120,109  

2006

    0.3     45,631  

2007

    0.3     57,017  

2008

    0.4     65,544  

2009

    0.3     65,077  

2010

    0.2     38,748  

Indemnifications(1)

    0.9     112,161  
           
 

Total

    3.5   $ 504,287  
           

(1)
Represents loans serviced by CitiMortgage that are covered by indemnification agreements relating to previous acquisitions of mortgage servicing rights.

        Since 2000, Citi has sold $93 billion of loans to private investors, of which $49 billion were sold through securitizations. As of September 30, 2010, $41 billion of these loans (including $17 billion sold through securitizations) continue to be serviced by Citi and is included in the $504 billion of serviced loans above.

        The activity in the repurchase reserve for the three months ended September 30, 2010 and September 30, 2009 was as follows:

 
  Three months ended
September 30,
 
In millions of dollars   2010   2009  

Balance, beginning of period

  $ 727   $ 279  

Additions for new sales

    3     10  

Change in estimate

    322     33  

Utilizations

    (100 )   (27 )
           

Balance, end of period

  $ 952   $ 295  
           

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        The activity in the repurchase reserve for the nine months ended September 30, 2010 and September 30, 2009 was as follows:

 
  Nine months ended
September 30,
 
In millions of dollars   2010   2009  

Balance, beginning of period

  $ 482   $ 75  

Additions for new sales

    12     29  

Change in estimate

    669     280  

Utilizations

    (211 )   (89 )
           

Balance, end of period

  $ 952   $ 295  
           

        Citi does not believe a meaningful range of reasonably possible loss related to its repurchase reserve can be determined.

        Projected future repurchases are calculated, in part, based on the level of unresolved claims at quarter-end as well as trends in claims being made by investors. For GSEs, the response to the repurchase claim is required within 90 days of the claim receipt. If Citi did not respond within 90 days, the claim would then be discussed between Citi and the GSE. For private investors, the time period for responding is governed by the individual sale agreement. If the specified timeframe is exceeded, the investor may choose to initiate legal action.

        As would be expected, as the trend in claims and inventory increases, Citi's reserve for repurchases typically increases. Included in Citi's current reserve estimate is an assumption that repurchase claims will remain at elevated levels for the foreseeable future, although the actual number of claims may differ and is subject to uncertainty. Furthermore, approximately half of the repurchase claims in Citi's recent experience have been successfully appealed and have resulted in no loss to Citi.

        The representation and warranty claims by claimant for the three months ended September 30, 2010 and September 30, 2009 were as follows:

 
  Three months ended September 30,  
 
  2010   2009  
Dollars in millions   Number of
Claims
  Original
Principal
Balance
  Number of
Claims
  Original
Principal
Balance
 

GSEs

    1,887   $ 408     1,514   $ 325  

Private Investors

    103     24     109     18  

Mortgage insurers(1)

    64     14     156     30  
                   

Total

    2,054   $ 446     1,779   $ 373  
                   

(1)
Represents the insurer's rejection of a claim for loss reimbursement that has yet to be resolved. To the extent that mortgage insurance will not cover the claim on a loan, Citi may have to make the GSE or private investor whole.

        The representation and warranty claims for the nine months ended September 30, 2010 and September 30, 2009 were as follows:

 
  Nine months ended September 30,  
 
  2010   2009  
Dollars in millions   Number of
Claims
  Original
Principal
Balance
  Number of
Claims
  Original
Principal
Balance
 

GSEs

    6,720   $ 1,444     4,478   $ 933  

Private Investors

    259     58     358     58  

Mortgage insurers

    190     41     242     49  
                   

Total

    7,169   $ 1,543     5,078   $ 1,040  
                   

        The number of unresolved claims by type of claimant as of September 30, 2010 and December 31, 2009, were as follows:

 
  September 30, 2010   December 31, 2009  
Dollars in millions   Number of
Claims
  Original
Principal
Balance
  Number of
Claims
  Original
Principal
Balance
 

GSEs

    4,349   $ 954     2,600   $ 572  

Private Investors

    196     32     311     40  

Mortgage insurers

    128     27     204     42  
                   

Total

    4,673   $ 1,013     3,115   $ 654  
                   

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Securities and Banking-Sponsored Private Label Residential Mortgage Securitizations—Representations and Warranties

        Over the years, S&B has been a sponsor of private-label mortgage-backed securitizations. Mortgage securitizations sponsored by Citi's S&B business represent a much smaller portion of Citi's mortgage business than Citi's consumer business discussed above.

        During the period 2005 through 2008, S&B sponsored approximately $65 billion in private-label mortgage-backed securitization transactions, of which approximately $29 billion remained outstanding at September 30, 2010. These outstanding transactions are backed by loan collateral composed of approximately $7.8 billion prime, $6.2 billion Alt-A and $14.8 billion subprime residential mortgage loans. Citi estimates that actual cumulative losses to date incurred by the issuing trusts on these transactions have been approximately $6.3 billion.

        The mortgages included in these securitizations were purchased from parties outside of S&B, and fewer than 3% of the mortgages currently outstanding were originated by Citi. In addition, fewer than 10% of the currently outstanding mortgage loans underlying these securitization transactions are serviced by Citi. The loans serviced by Citi are included in the $504 billion of residential mortgage loans referenced under "Consumer Mortgage Representations and Warranties" above. (Citi acts as master servicer for certain of the transactions.)

        In connection with such transactions, representations and warranties (representations) relating to the mortgage loans included in each trust issuing the securities were made either by (1) Citi, or (2) in a relatively small number of cases, third-party sellers (Selling Entities, which were also often the originator of the loans). These representations were generally made or assigned to the issuing trust.

        The representations in these securitization transactions generally related to, among other things, the following:

The specific representations relating to the mortgage loans in each securitization may vary, however, depending on various factors such as the Selling Entity, rating agency requirements and whether the mortgage loans were considered prime, Alt-A or subprime in credit quality.

        In the event of a breach of its representations, Citi may be required either to repurchase the mortgage loans with the identified defects (generally at unpaid principal balance plus accrued interest) or indemnify the investors for their losses.

        For securitizations in which Citi made representations, these representations typically were similar to those provided to Citi by the Selling Entities, with the exception of certain limited representations required by rating agencies. These latter representations overlapped in some cases with the representations described above.

        In cases where Citi made representations and also received those representations from the Selling Entity for that loan, if Citi is the subject of a claim based on breach of those representations in respect of that loan, it may have a contractual right to pursue a similar (back-to-back) claim against the Selling Entity. If only the Selling Entity made representations, then only the Selling Entity should be responsible for a claim based on breach of these representations in respect of that loan. (This discussion only relates to contractual claims based on breaches of representations.)

        However, in some cases where Citi made representations and received similar representations from Selling Entities, including a majority of such cases involving subprime and Alt-A collateral, Citi believes that those Selling Entities appear to be in bankruptcy, liquidation or financial distress. In those cases, in the event that claims for breaches of representations were to be made against Citi, the Selling Entities' financial condition may effectively preclude Citi from obtaining back-to-back recoveries against them.

        To date, S&B has received only a very small number of claims based on breaches of representations relating to the mortgage loans in these securitization transactions. Citi continues to monitor this claim activity relating to its S&B mortgage securitizations closely.

        In addition to sponsoring residential mortgage securitization transactions as described above, S&B engages in other residential mortgage-related activities, including underwriting of residential mortgage-backed securities. S&B participated in the underwriting of these S&B-sponsored securitizations, as well as underwritings of other residential mortgage-backed securities sponsored and issued by third parties. For additional information on these activities, see "Legal Proceedings" below.

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CORPORATE CREDIT PORTFOLIO

        The following table presents credit data for Citigroup's corporate loans and unfunded lending commitments at September 30, 2010. The ratings scale is based on Citi's internal risk ratings, which generally correspond to the ratings as defined by S&P and Moody's.

 
  At September 30, 2010  
Corporate loans(1)
in millions of dollars
  Recorded investment
in loans(2)
  % of total(3)   Unfunded
lending commitments
  % of total(3)  

Investment grade(4)

  $ 123,384     70 % $ 237,959     85 %

Non-investment grade(4)

                         
 

Noncriticized

    22,956     13     22,168     8  
 

Criticized performing(5)

    19,513     11     15,993     6  
   

Commercial real estate (CRE)

    5,295     3     1,684     1  
   

Commercial and industrial and other

    14,218     8     14,309     5  
 

Non-accrual (criticized)(5)

    9,947     6     2,278     1  
   

CRE

    2,138     1     903      
   

Commercial and industrial and other

    7,809     5     1,375     1  
                   

Total non-investment grade

  $ 52,416     30 % $ 40,439     15 %

Private Banking loans managed on a delinquency basis(4)

    13,784           2,166        

Loans at fair value

    2,755                  
                   

Total corporate loans

  $ 192,339     100 % $ 280,564     100 %

Unearned income

    (1,132 )                
                   

Corporate loans, net of unearned income

  $ 191,207         $ 280,564        
                   

(1)
Includes $791 million of TDRs for which concessions, such as the reduction of interest rates or the deferral of interest or principal payments, have been granted as a result of deterioration in the borrowers' financial condition. Each of the borrowers is current under the restructured terms.

(2)
Recorded investment in a loan includes accrued interest, net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs.

(3)
Percentages exclude Private Banking loans managed on a delinquency basis and loans at fair value.

(4)
Held-for-investment loans accounted for on an amortized cost basis.

(5)
Criticized exposures correspond to the "Special Mention," "Substandard" and "Doubtful" asset categories defined by banking regulatory authorities.

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        The following tables represent the corporate credit portfolio (excluding Private Banking), before consideration of collateral, by maturity at September 30, 2010. The corporate portfolio is broken out by direct outstandings that include drawn loans, overdrafts, interbank placements, bankers' acceptances, certain investment securities and leases and unfunded commitments that include unused commitments to lend, letters of credit and financial guarantees.

 
  At September 30, 2010  
In billions of dollars   Due
within
1 year
  Greater
than 1 year
but within
5 years
  Greater
than
5 years
  Total
exposure
 

Direct outstandings

  $ 197   $ 41   $ 9   $ 247  

Unfunded lending commitments

    172     93     10     275  
                   

Total

  $ 369   $ 134   $ 19   $ 522  
                   

 

 
  At December 31, 2009  
In billions of dollars   Due
within
1 year
  Greater
than 1 year
but within
5 years
  Greater
than
5 years
  Total
exposure
 

Direct outstandings

  $ 213   $ 66   $ 7   $ 286  

Unfunded lending commitments

    182     120     10     312  
                   

Total

  $ 395   $ 186   $ 17   $ 598  
                   

Portfolio Mix

        The corporate credit portfolio is diverse across counterparty, industry and geography. The following table shows direct outstandings and unfunded commitments by region:

 
  September 30,
2010
  December 31,
2009
 

North America

    46 %   51 %

EMEA

    31     27  

Latin America

    7     9  

Asia

    16     13  
           

Total

    100 %   100 %
           

        The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products.

        Obligor risk ratings reflect an estimated probability of default for an obligor and are derived primarily through the use of statistical models (which are validated periodically), external rating agencies (under defined circumstances) or approved scoring methodologies. Facility risk ratings are assigned, using the obligor risk rating, and then factors that affect the loss given default of the facility, such as support or collateral, are taken into account. With regard to climate change risk, factors evaluated include consideration of the business impact, impact of regulatory requirements or lack thereof, and impact of physical effects on obligors and their assets.

        These factors may adversely affect the ability of some obligors to perform and thus increase the risk of lending activities to these obligors. Citigroup also has incorporated climate risk assessment criteria for certain obligors, as necessary. Internal obligor ratings equivalent to BBB and above are considered investment grade. Ratings below the equivalent of the BBB category are considered non-investment grade.

        As described in Citi's Form 10-Q for the quarter ended June 30, 2010, Citi seeks performance on guarantee arrangements in the normal course of business. Seeking performance entails obtaining satisfactory cooperation from the guarantor or borrower to achieve Citi's strategy in the specific situation. This regular cooperation is indicative of pursuit and successful enforcement of the guarantee: the exposure is reduced without the expense and burden of pursuing a legal remedy. Enforcing a guarantee via legal action against the guarantor is not the primary means of resolving a troubled loan situation and rarely occurs.

        The following table presents the corporate credit portfolio by facility risk rating at September 30, 2010 and December 31, 2009, as a percentage of the total portfolio:

 
  Direct outstandings and
unfunded commitments
 
 
  September 30,
2010
  December 31,
2009
 

AAA/AA/A

    55 %   58 %

BBB

    25     24  

BB/B

    13     11  

CCC or below

    6     7  

Unrated

    1      
           

Total

    100 %   100 %
           

        The corporate credit portfolio is diversified by industry, with a concentration only in the financial sector, including banks, other financial institutions, insurance companies, investment banks, and government and central banks. The following table shows the allocation of direct outstandings and unfunded commitments to industries as a percentage of the total corporate portfolio:

 
  Direct outstandings and
unfunded commitments
 
 
  September 30,
2010
  December 31,
2009
 

Government and central banks

    12 %   12 %

Banks

    9     9  

Investment banks

    7     5  

Petroleum

    5     4  

Other financial institutions

    4     12  

Utilities

    4     4  

Insurance

    4     4  

Agriculture and food preparation

    4     4  

Telephone and cable

    3     3  

Real estate

    3     3  

Industrial machinery and equipment

    2     2  

Global information technology

    2     2  

Chemicals

    2     2  

Other industries(1)

    39     34  
           

Total

    100 %   100 %
           

(1)
Includes all other industries, none of which exceeds 2% of total outstandings.

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Credit Risk Mitigation

        As part of its overall risk management activities, Citigroup uses credit derivatives and other risk mitigants to hedge portions of the credit risk in its portfolio, in addition to outright asset sales. The purpose of these transactions is to reduce Citigroup's credit risk. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected the current period's income.

        At September 30, 2010 and December 31, 2009, $56.8 billion and $59.6 billion, respectively, of credit risk exposure were economically hedged. Citigroup's loss model used in the calculation of its loan loss reserve does not include the favorable impact of credit derivatives and other risk mitigants. In addition, the reported amounts of direct outstandings and unfunded commitments in this report do not reflect the impact of these hedging transactions. At September 30, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following risk rating distribution, respectively:

Rating of Hedged Exposure

 
  September 30,
2010
  December 31,
2009
 

AAA/AA/A

    52 %   45 %

BBB

    32     37  

BB/B

    12     11  

CCC or below

    4     7  
           

Total

    100 %   100 %
           

        At September 30, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following industry distribution:

Industry of Hedged Exposure

 
  September 30,
2010
  December 31,
2009
 

Government

    11 %   0 %

Other financial institutions

    6     4  

Telephone and cable

    7     9  

Agriculture and food preparation

    7     8  

Chemicals

    6     8  

Petroleum

    6     6  

Utilities

    6     9  

Industrial machinery and equipment

    3     6  

Autos

    6     6  

Retail

    4     4  

Insurance

    4     4  

Pharmaceuticals

    3     5  

Natural gas distribution

    4     3  

Metals

    5     4  

Global information technology

    2     3  

Other industries(1)

    20     21  
           

Total

    100 %   100 %
           

(1)
Includes all other industries, none of which is greater than 2% of the total hedged amount.

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MARKET RISK

        Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that an entity may be unable to meet a financial commitment to a customer, creditor, or investor when due. Liquidity risk is discussed in "Capital Resources and Liquidity" above. Price risk is the earnings risk from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in non-trading portfolios, as well as in trading portfolios.

Interest Rate Exposure (IRE) for Non-Trading Portfolios

        The exposures in the following table represent the approximate annualized risk to net interest revenue (NIR), assuming an unanticipated parallel instantaneous 100 basis points change, as well as a more gradual 100 basis points (25 basis points per quarter) parallel change in rates compared with the market forward interest rates in selected currencies.

 
  September 30, 2010   June 30, 2010   September 30, 2009  
In millions of dollars   Increase   Decrease   Increase   Decrease   Increase   Decrease  

U.S. dollar

                                 

Instantaneous change

  $ (302 ) NM   $ (264 ) NM   $ (727 )   NM  

Gradual change

  $ (189 ) NM   $ (179 ) NM   $ (427 )   NM  
                           

Mexican peso

                                 

Instantaneous change

  $ 88   $(88)   $ 60   $(60)   $ 25   $ (25 )

Gradual change

  $ 50   $(50)   $ 33   $(33)   $ 11   $ (11 )
                           

Euro

                                 

Instantaneous change

  $ 38   NM   $ 13   NM   $ 47     NM  

Gradual change

  $ 20   NM   $ 3   NM   $ 10     NM  
                           

Japanese yen

                                 

Instantaneous change

  $ 85   NM   $ 133   NM   $ 211     NM  

Gradual change

  $ 58   NM   $ 89   NM   $ 120     NM  
                           

Pound sterling

                                 

Instantaneous change

  $ 24   NM   $ 16   NM   $ (9 )   NM  

Gradual change

  $ 14   NM   $ 8   NM   $ (10 )   NM  
                           

NM    Not meaningful. A 100 basis point decrease in interest rates would imply negative rates for the yield curve.

        The changes in the U.S. dollar IRE from the previous quarter reflect changes in the customer-related asset and liability mix, asset sales, the expected impact of market rates on customer behavior and purchases in the liquidity portfolio. The changes from the prior-year quarter primarily reflected modeling of mortgages and deposits based on lower rates, pricing changes due to the CARD Act, debt issuance and swapping activities, offset by repositioning of the liquidity portfolio.

        Certain trading-oriented businesses within Citi have accrual-accounted positions. The U.S. dollar IRE associated with these businesses is ($106) million for a 100 basis point instantaneous increase in interest rates.

        The following table shows the risk to NIR from six different changes in the implied-forward rates. Each scenario assumes that the rate change will occur on a gradual basis every three months over the course of one year.

 
  Scenario 1   Scenario 2   Scenario 3   Scenario 4   Scenario 5   Scenario 6  

Overnight rate change (bps)

    0     100     200     (200 )   (100 )   0  

10-year rate change (bps)

    (100 )   0     100     (100 )   0     100  
                           

Impact to net interest revenue
(in millions of dollars)

 
$

(102

)

$

(195

)

$

(496

)
 
NM
   
NM
 
$

102
 
                           

NM    Not meaningful. A 100 basis point or more decrease in the overnight rate would imply negative rates for the yield curve.

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Value at Risk for Trading Portfolios

        For Citigroup's major trading centers, the aggregate pretax value at risk (VAR) in the trading portfolios was $226 million, $214 million, $172 million, and $273 million at September 30, 2010, June 30, 2010, March 31, 2010, and September 30, 2009, respectively. Daily Citigroup trading VAR averaged $213 million and ranged from $192 million to $237 million during the third quarter of 2010.

        The following table summarizes VAR for Citigroup trading portfolios at September 30, 2010, June 30, 2010, and September 30, 2009, including the total VAR, the specific risk-only component of VAR, the isolated general market factor VARs, along with the quarterly averages.

In millions of dollars   September 30,
2010
  Third
Quarter
2010
Average
  June 30,
2010(2)
  Second
Quarter
2010
Average
  September 30,
2009
  Third
Quarter
2009
Average
 

Interest rate

  $ 274   $ 252   $ 244   $ 224   $ 240   $ 237  

Foreign exchange

    68     72     57     57     98     90  

Equity

    33     53     71     64     51     62  

Commodity

    30     26     24     21     41     38  

Diversification benefit

    (179 )   (190 )   (182 )   (178 )   (157 )   (146 )
                           

Total—All market risk factors, including general and specific risk

  $ 226   $ 213   $ 214   $ 188   $ 273   $ 281  
                           

Specific risk-only component(1)

  $ 29   $ 19   $ 17   $ 16   $ 12   $ 17  
                           

Total—General market factors only

  $ 197   $ 194   $ 197   $ 172   $ 261   $ 264  
                           

(1)
The specific risk-only component represents the level of equity and debt issuer-specific risk embedded in VAR.

(2)
On April 30, 2010, Citigroup concluded its implementation of exponentially weighted market factor volatilities for interest rate and FX positions to the VAR calculation. This methodology uses the higher of short- and long-term annualized volatilities. This enhancement resulted in a 31% increase in S&B VAR, and a 24% increase in Citigroup consolidated VAR, reported at June 30, 2010.

        The table below provides the range of market factor VARs, inclusive of specific risk, across the quarters ended:

 
  September 30,
2010
  June 30,
2010
  September 30,
2009
 
In millions of dollars   Low   High   Low   High   Low   High  

Interest rate

  $ 231   $ 285   $ 198   $ 270   $ 218   $ 260  

Foreign exchange

    55     90     36     94     55     110  

Equity

    32     86     48     89     51     95  

Commodity

    22     33     15     27     32     45  
                           

        The following table provides the VAR for S&B for the third quarter of 2010 and the second quarter of 2010:

In millions of dollars   September 30,
2010
  June 30,
2010
 

Total—All market risk factors, including general and specific risk

  $ 155   $ 176  
           

Average—during quarter

  $ 161   $ 139  

High—during quarter

    187     180  

Low—during quarter

    141     100  
           

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Table of Contents

INTEREST REVENUE/EXPENSE AND YIELDS

Average Rates—Interest Revenue, Interest Expense, and Net Interest Margin

GRAPHIC

In millions of dollars   3rd Qtr.
2010
  2nd Qtr.
2010
  3rd Qtr.
2009(1)
  Change
3Q10 vs. 3Q09
 

Interest revenue(2)

  $ 19,371   $ 20,418   $ 18,678     4 %

Interest expense(3)

    6,125     6,379     6,680     (8 )%
                   

Net interest revenue(2)(3)

  $ 13,246   $ 14,039   $ 11,998     10 %
                   

Interest revenue—average rate

    4.48 %   4.57 %   4.59 %   (11 ) bps

Interest expense—average rate

    1.60 %   1.60 %   1.83 %   (23 ) bps

Net interest margin

    3.07 %   3.15 %   2.95 %   12 bps
                   

Interest-rate benchmarks:

                         

Federal Funds rate—end of period

    0.00-0.25 %   0.00-0.25 %   0.00-0.25 %    

Federal Funds rate—average rate

    0.00-0.25 %   0.00-0.25 %   0.00-0.25 %    
                   

Two-year U.S. Treasury note—average rate

    0.54 %   0.87 %   1.03 %   (49 ) bps

10-year U.S. Treasury note—average rate

    2.78 %   3.49 %   3.52 %   (74 ) bps
                   

10-year vs. two-year spread

    224 bps   262 bps   249 bps      
                   

(1)
Reclassified to conform to the current period's presentation and to exclude discontinued operations.

(2)
Excludes taxable equivalent adjustments (based on the U.S. federal statutory tax rate of 35%) of $149 million, $149 million, and $387 million for the third quarter of 2010, the second quarter of 2010, and the third quarter of 2009, respectively.

(3)
Excludes expenses associated with hybrid financial instruments and beneficial interest in consolidated VIEs. These obligations are classified as Long-term debt and accounted for at fair value with changes recorded in Principal transactions. In addition, the funding provided by Treasury to SLC is excluded from this line for the third quarter of 2010.

        Significant portion of Citi's business activities are based upon gathering deposits and borrowing money and then lending or investing those funds, including market-making activities in tradable securities. Net interest margin (NIM) is calculated by dividing annualized gross interest revenue less gross interest expense by average interest earning assets.

        NIM decreased by 8 basis points during the third quarter of 2010 due to the continued run-off and sales of higher-yielding assets in Citi Holdings, investing the proceeds in lower-yielding securities with a shorter duration and deposit-taking that resulted in purchases of AFS securities. NIM is expected to remain under pressure throughout the remainder of 2010.

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Table of Contents

AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)

 
  Average Volume   Interest Revenue   % Average Rate  
In millions of dollars   3rd Qtr.
2010
  2nd Qtr.
2010
  3rd Qtr.
2009
  3rd Qtr.
2010
  2nd Qtr.
2010
  3rd Qtr.
2009
  3rd Qtr.
2010
  2nd Qtr.
2010
  3rd Qtr.
2009
 

Assets

                                                       

Deposits with banks(5)

  $ 160,541   $ 168,330   $ 190,269   $ 318   $ 291   $ 313     0.79 %   0.69 %   0.65 %
                                       

Federal funds sold and securities borrowed or purchased under agreements to resell(6)

                                                       

In U.S. offices

  $ 155,053   $ 186,283   $ 140,756   $ 441   $ 452   $ 476     1.13 %   0.97 %   1.34 %

In offices outside the U.S.(5)

    91,891     83,055     70,790     366     329     252     1.58     1.59     1.41  
                                       

Total

  $ 246,944   $ 269,338   $ 211,546   $ 807   $ 781   $ 728     1.30 %   1.16 %   1.37 %
                                       

Trading account assets(7)(8)

                                                       

In U.S. offices

  $ 122,799   $ 130,475   $ 138,781   $ 1,035   $ 1,019   $ 1,668     3.34 %   3.13 %   4.77 %

In offices outside the U.S.(5)

    150,503     149,628     129,135     991     992     986     2.61     2.66     3.03  
                                       

Total

  $ 273,302   $ 280,103   $ 267,916   $ 2,026   $ 2,011   $ 2,654     2.94 %   2.88 %   3.93 %
                                       

Investments(1)

                                                       

In U.S. offices

                                                       
 

Taxable

  $ 181,513   $ 157,621   $ 122,608   $ 1,102   $ 1,301   $ 1,568     2.41 %   3.31 %   5.07 %
 

Exempt from U.S. income tax

    14,780     15,305     18,666     185     197     226     4.97     5.16     4.80  

In offices outside the U.S.(5)

    131,275     138,477     121,950     1,324     1,488     1,489     4.00     4.31     4.84  
                                       

Total

  $ 327,568   $ 311,403   $ 263,224   $ 2,611   $ 2,986   $ 3,283     3.16 %   3.85 %   4.95 %
                                       

Loans (net of unearned income)(9)

                                                       

In U.S. offices

  $ 396,518   $ 460,147   $ 370,470   $ 8,245   $ 9,153   $ 5,939     8.25 %   7.98 %   6.36 %

In offices outside the U.S.(5)

    253,016     249,353     268,211     5,087     5,074     5,662     7.98     8.16     8.38  
                                       

Total

  $ 649,534   $ 709,500   $ 638,681   $ 13,332   $ 14,227   $ 11,601     8.14 %   8.04 %   7.21 %
                                       

Other interest-earning Assets

  $ 56,542   $ 51,519   $ 43,869   $ 277   $ 122   $ 99     1.94 %   0.95 %   0.90 %
                                       

Total interest-earning Assets

  $ 1,714,431   $ 1,790,193   $ 1,615,505   $ 19,371   $ 20,418   $ 18,678     4.48 %   4.57 %   4.59 %
                                             

Non-interest-earning assets(7)

    219,977     226,902     253,316                                      
                                                   

Total Assets from discontinued operations

    44,671         21,418                                      
                                                   

Total assets

  $ 1,979,079   $ 2,017,095   $ 1,890,239                                      
                                       

(1)
Interest revenue excludes the taxable equivalent adjustments (based on the U.S. federal statutory tax rate of 35%) of $149 million, $149 million, and $387 million for the third quarter of 2010, the second quarter of 2010, and the third quarter of 2009, respectively.

(2)
Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories.

(3)
Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.

(4)
Detailed average volume, interest revenue and interest expense exclude discontinued operations.

(5)
Average rates reflect prevailing local interest rates, including inflationary effects and monetary correction in certain countries.

(6)
Average volumes of securities borrowed or purchased under agreements to resell are reported net pursuant to (ASC 210-20-45) FIN 41 and Interest revenue excludes the impact of (ASC 210-20-45) FIN 41.

(7)
The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest-earning assets and other non-interest-bearing liabilities.

(8)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.

(9)
Includes cash-basis loans.

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AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)

 
  Average Volume   Interest Expense   % Average Rate  
In millions of dollars   3rd Qtr.
2010
  2nd Qtr.
2010
  3rd Qtr.
2009
  3rd Qtr.
2010
  2nd Qtr.
2010
  3rd Qtr.
2009
  3rd Qtr.
2010
  2nd Qtr.
2010
  3rd Qtr.
2009
 

Liabilities

                                                       

Deposits

                                                       

In U. S. offices

                                                       
 

Savings deposits(5)

  $ 196,724   $ 186,070   $ 173,999   $ 444   $ 461   $ 613     0.90 %   0.99 %   1.40 %
 

Other time deposits

    44,103     48,171     62,256     98     100     224     0.88     0.83     1.43  

In offices outside the U.S.(6)

    487,128     475,562     459,142     1,588     1,475     1,461     1.29     1.24     1.26  
                                       

Total

  $ 727,955   $ 709,803   $ 695,397   $ 2,130   $ 2,036   $ 2,298     1.16 %   1.15 %   1.31 %
                                       

Federal funds purchased and securities loaned or sold under agreements to repurchase(7)

                                                       

In U.S. offices

  $ 115,961   $ 137,610   $ 131,641   $ 188   $ 237   $ 248     0.64 %   0.69 %   0.75 %

In offices outside the U.S.(6)

    89,454     100,759     72,302     483     560     524     2.14     2.23     2.88  
                                       

Total

  $ 205,415   $ 238,369   $ 203,943   $ 671   $ 797   $ 772     1.30 %   1.34 %   1.50 %
                                       

Trading account liabilities(8)(9)

                                                       

In U.S. offices

  $ 35,725   $ 39,709   $ 21,204   $ 79   $ 88   $ 28     0.88 %   0.89 %   0.52 %

In offices outside the U.S.(6)

    39,740     43,528     39,431     29     18     15     0.29     0.17     0.15  
                                       

Total

  $ 75,465   $ 83,237   $ 60,635   $ 108   $ 106   $ 43     0.57 %   0.51 %   0.28 %
                                       

Short-term borrowings

                                                       

In U.S. offices

  $ 103,866   $ 122,260   $ 108,474   $ 153   $ 181   $ 259     0.58 %   0.59 %   0.95 %

In offices outside the U.S.(6)

    41,052     33,630     30,985     60     34     91     0.58     0.41     1.17  
                                       

Total

  $ 144,918   $ 155,890   $ 139,459   $ 213   $ 215   $ 350     0.58 %   0.55 %   1.00 %
                                       

Long-term debt(10)

                                                       

In U.S. offices

  $ 344,375   $ 391,524   $ 318,610   $ 2,779   $ 3,011   $ 2,952     3.20 %   3.08 %   3.68 %

In offices outside the U.S.(6)

    19,558     23,369     27,447     224     214     265     4.54     3.67     3.83  
                                       

Total

  $ 363,933   $ 414,893   $ 346,057   $ 3,003   $ 3,225   $ 3,217     3.27 %   3.12 %   3.69 %
                                       

Total interest-bearing liabilities

  $ 1,517,686   $ 1,602,192   $ 1,445,491   $ 6,125   $ 6,379   $ 6,680     1.60 %   1.60 %   1.83 %
                                             

Demand deposits in U.S. offices

    15,046     14,986     34,592                                      

Other non-interest-bearing liabilities(8)

    240,974     243,892     250,768                                      

Total liabilities from discontinued operations

    44,385         14,189                                      
                                                   

Total liabilities

  $ 1,818,091   $ 1,861,070   $ 1,745,040                                      
                                                   

Citigroup equity(11)

  $ 158,416   $ 153,798   $ 143,547                                      
                                                   

Noncontrolling Interest

  $ 2,572   $ 2,227   $ 1,652                                      
                                                   

Total Equity

  $ 160,988   $ 156,025   $ 145,199                                      
                                                   

Total Liabilities and Equity

  $ 1,979,079   $ 2,017,095   $ 1,890,239                                      
                                       

Net interest revenue as a percentage of average interest-earning assets(12)

                                                       

In U.S. offices

    1,006,417   $ 1,087,675   $ 947,414     7,475   $ 8,136   $ 5,694     2.95 %   3.00 %   2.38 %

In offices outside the U.S.(6)

    708,014     702,518     668,091     5,771     5,903     6,304     3.23     3.37     3.74  
                                       

Total

    1,714,431   $ 1,790,193   $ 1,615,505     13,246   $ 14,039   $ 11,998     3.07 %   3.15 %   2.95 %
                                       

(1)
Interest revenue excludes the taxable equivalent adjustments (based on the U.S. federal statutory tax rate of 35%) $149 million, $149 million, and $387 million for the third quarter of 2010, the second quarter of 2010, and the third quarter of 2009, respectively.

(2)
Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories.

(3)
Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.

(4)
Detailed average volume, interest revenue and interest expense exclude discontinued operations.

(5)
Savings deposits consist of Insured Money Market Rate accounts, NOW accounts, and other savings deposits. The interest expense includes FDIC deposit fees and charges of $226 million, $242 million and $285 million for the three months ended September 30, 2010, June 30, 2010 and September 30, 2009, respectively.

(6)
Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.

(7)
Average volumes of securities loaned or sold under agreements to repurchase are reported net pursuant to (ASC 210-20-45) FIN 41and Interest expense excludes the impact of (ASC 210-20-45) FIN 41.

(8)
The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest-earning assets and other non-interest-bearing liabilities.

(9)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.

(10)
Excludes hybrid financial instruments and beneficial interests in consolidated VIEs that are classified as Long-term debt as these obligations are accounted for at fair value with changes recorded in Principal Transactions. Includes stockholders' equity of discontinued operations.

(11)
Includes allocations for capital and funding costs based on the location of the asset. In addition the funding provided by Treasury to SLC is excluded from this line for the third quarter of 2010.

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AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)

 
  Average Volume   Interest Revenue   % Average Rate  
In millions of dollars   Nine Months
2010
  Nine Months
2009
  Nine Months
2010
  Nine Months
2009
  Nine Months
2010
  Nine Months
2009
 

Assets

                                     

Deposits with banks(5)

  $ 165,083   $ 176,014   $ 899   $ 1,126     0.73 %   0.86 %
                           

Federal funds sold and securities borrowed or purchased under agreements to resell(6)

                                     

In U.S. offices

  $ 167,123   $ 133,427   $ 1,364   $ 1,541     1.09 %   1.54 %

In offices outside the U.S.(5)

    84,333     61,534     976     866     1.55     1.88  
                           

Total

  $ 251,456   $ 194,961   $ 2,340   $ 2,407     1.24 %   1.65 %
                           

Trading account assets(7)(8)

                                     

In U.S. offices

  $ 128,350   $ 140,210   $ 3,123   $ 5,437     3.25 %   5.18 %

In offices outside the U.S.(5)

    150,845     119,351     2,786     3,089     2.47     3.46  
                           

Total

  $ 279,195   $ 259,561   $ 5,909   $ 8,526     2.83 %   4.39 %
                           

Investments(1)

                                     

In U.S. offices

                                     
 

Taxable

  $ 163,331   $ 122,563   $ 3,792   $ 4,722     3.10 %   5.15 %
 

Exempt from U.S. income tax

    15,218     16,511     555     591     4.88     4.79  

In offices outside the U.S.(5)

    138,215     115,930     4,359     4,581     4.22     5.28  
                           

Total

  $ 316,764   $ 255,004   $ 8,706   $ 9,894     3.67 %   5.19 %
                           

Loans (net of unearned income)(9)

                                     

In U.S. offices

  $ 445,349   $ 386,429   $ 26,909   $ 19,024     8.08 %   6.58 %

In offices outside the U.S.(5)

    252,286     269,017     15,323     17,361     8.12     8.63  
                           

Total

  $ 697,635   $ 655,446   $ 42,232   $ 36,385     8.09 %   7.42 %
                           

Other interest-earning assets

  $ 51,318   $ 50,972   $ 555   $ 594     1.45 %   1.56 %
                           

Total interest-earning assets

  $ 1,761,451   $ 1,591,958   $ 60,641   $ 58,932     4.60 %   4.95 %
                               

Non-interest-earning assets(7)

    226,741     277,243                          

Total assets from discontinued operations

    14,890     20,183                          
                                   

Total assets

  $ 2,003,082   $ 1,889,384                          
                           

(1)
Interest revenue excludes the taxable equivalent adjustments (based on the U.S. federal statutory tax rate of 35%) of $434 million and $566 million for the first nine months of 2010 and 2009, respectively.

(2)
Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories.

(3)
Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.

(4)
Detailed average volume, interest revenue and interest expense exclude discontinued operations.

(5)
Average rates reflect prevailing local interest rates, including inflationary effects and monetary correction in certain countries.

(6)
Average volumes of securities borrowed or purchased under agreements to resell are reported net pursuant to (ASC 210-20-45) FIN 41 and interest revenue excludes the impact of (ASC 210-20-45) FIN 41.

(7)
The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest-earning assets and other non-interest bearing liabilities.

(8)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.

(9)
Includes cash-basis loans.

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AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)

 
  Average Volume   Interest Expense   % Average Rate  
In millions of dollars   Nine Months
2010
  Nine Months
2009
  Nine Months
2010
  Nine Months
2009
  Nine Months
2010
  Nine Months
2009
 

Liabilities

                                     

Deposits

                                     

In U. S. offices

                                     
 

Savings deposits(5)

  $ 187,020   $ 170,715   $ 1,363   $ 2,245     0.97 %   1.76 %
 

Other time deposits

    48,888     60,469     341     918     0.93     2.03  

In offices outside the U.S.(6)

    481,231     432,057     4,542     4,823     1.26     1.49  
                           

Total

  $ 717,139   $ 663,241   $ 6,246   $ 7,986     1.16 %   1.61 %
                           

Federal funds purchased and securities loaned or sold under agreements to repurchase(7)

                                     

In U.S. offices

  $ 124,755   $ 139,232   $ 604   $ 852     0.65 %   0.82 %

In offices outside the U.S.(6)

    89,887     71,611     1,518     1,955     2.26     3.65  
                           

Total

  $ 214,642   $ 210,893   $ 2,122   $ 2,807     1.32 %   1.78 %
                           

Trading account liabilities(8)(9)

                                     

In U.S. offices

  $ 36,025   $ 20,503   $ 211   $ 171     0.78 %   1.12 %

In offices outside the U.S.(6)

    43,391     35,728     66     49     0.20     0.18  
                           

Total

  $ 79,416   $ 56,231   $ 277   $ 220     0.47 %   0.52 %
                           

Short-term borrowings

                                     

In U.S. offices

  $ 126,304   $ 131,116   $ 538   $ 835     0.57 %   0.85 %

In offices outside the U.S.(6)

    34,114     33,833     166     293     0.65     1.16  
                           

Total

  $ 160,418   $ 164,949   $ 704   $ 1,128     0.59 %   0.91 %
                           

Long-term debt(10)

                                     

In U.S. offices

  $ 377,671   $ 308,201   $ 8,795   $ 8,199     3.11 %   3.56 %

In offices outside the U.S.(6)

    22,961     30,274     651     839     3.79     3.71  
                           

Total

  $ 400,632   $ 338,475   $ 9,446   $ 9,038     3.15 %   3.57 %
                           

Total interest-bearing liabilities

  $ 1,572,247   $ 1,433,789   $ 18,795   $ 21,179     1.60 %   1.97 %
                               

Demand deposits in U.S. offices

    15,569     23,186                          

Other non-interest bearing liabilities(8)

    244,077     272,809                          

Total liabilities from discontinued operations

    14,795     12,670                          
                                   

Total liabilities

  $ 1,846,688   $ 1,742,454                          
                                   

Total Citigroup equity(11)

  $ 154,069   $ 145,097                          

Noncontrolling interest

  $ 2,325   $ 1,833                          
                                   

Total Equity

  $ 156,394   $ 146,930                          
                                   

Total liabilities and stockholders' equity

  $ 2,003,082   $ 1,889,384                          
                           

Net interest revenue as a percentage of average interest-earning assets(12)

                                     

In U.S. offices

    1,058,255   $ 954,220     24,271   $ 18,789     3.07 %   2.63 %

In offices outside the U.S.(6)

    703,196     637,738     17,575     18,964     3.34     3.98  
                           

Total

    1,761,451   $ 1,591,958     41,846   $ 37,753     3.18 %   3.17 %
                           

(1)
Interest revenue excludes the taxable equivalent adjustments (based on the U.S. federal statutory tax rate of 35%) of $434 million and $566 million for the first nine months of 2010 and 2009, respectively.

(2)
Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories.

(3)
Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.

(4)
Detailed average volume, interest revenue and interest expense exclude discontinued operations.

(5)
Savings deposits consist of Insured Money Market Rate accounts, NOW accounts, and other savings deposits. The interest expense includes FDIC deposit fees and charges of $691 million and $1,254 million for the nine months ended September 30, 2010 and September 30, 2009, respectively. Additionally, the second quarter of 2009 includes the one-time FDIC special assessment of $333 million.

(6)
Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.

(7)
Average volumes of securities loaned or sold under agreements to repurchase are reported net pursuant to (ASC 210-20-45) FIN 41 and interest expense excludes the impact of (ASC 210-20-45) FIN 41.

(8)
The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest-earning assets and other non-interest bearing liabilities.

(9)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.

(10)
Excludes hybrid financial instruments and beneficial interests in consolidated VIEs that are classified as Long-term debt as these obligations are accounted for at fair value with changes recorded in Principal Transactions. In addition, the funding provided by Treasury to SLC is excluded from this line.

(11)
Includes stockholders' equity of discontinued operations.

(12)
Includes allocations for capital and funding costs based on the location of the asset.

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ANALYSIS OF CHANGES IN INTEREST REVENUE(1)(2)(3)

 
  3rd Qtr. 2010 vs. 2nd Qtr. 2010   3rd Qtr. 2010 vs. 3rd Qtr. 2009  
 
  Increase (Decrease)
Due to Change in:
   
  Increase (Decrease)
Due to Change in:
   
 
In millions of dollars   Average
Volume
  Average
Rate
  Net
Change
  Average
Volume
  Average
Rate
  Net
Change
 

Deposits with banks(4)

    (14 )   41     27     (53 )   58     5  
                           

Federal funds sold and securities borrowed or purchased under agreements to resell

                                     

In U.S. offices

    (82 )   71     (11 )   45     (80 )   (35 )

In offices outside the U.S.(4)

    35     2     37     81     33     114  
                           

Total

    (47 )   73     26     126     (47 )   79  
                           

Trading account assets(5)

                                     

In U.S. offices

    (62 )   78     16     (176 )   (457 )   (633 )

In offices outside the U.S.(4)

    6     (7 )   (1 )   151     (146 )   5  
                           

Total

    (56 )   71     15     (25 )   (603 )   (628 )
                           

Investments(1)

                                     

In U.S. offices

    185     (396 )   (211 )   548     (1,055 )   (507 )

In offices outside the U.S.(4)

    (75 )   (89 )   (164 )   108     (273 )   (165 )
                           

Total

    110     (485 )   (375 )   656     (1,328 )   (672 )
                           

Loans (net of unearned income)(6)

                                     

In U.S. offices

    (1,309 )   401     (908 )   441     1,865     2,306  

In offices outside the U.S.(4)

    74     (61 )   13     (312 )   (263 )   (575 )
                           

Total

    (1,235 )   340     (895 )   129     1,602     1,731  
                           

Other interest-earning assets

    13     142     155     35     143     178  
                           

Total interest revenue

    (1,229 )   182     (1,047 )   868     (175 )   693  
                           

(1)
The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35% and is excluded from this presentation.

(2)
Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change.

(3)
Detailed average volume, interest revenue and interest expense exclude discontinued operations.

(4)
Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.

(5)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.

(6)
Includes cash-basis loans.

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ANALYSIS OF CHANGES IN INTEREST EXPENSE AND NET INTEREST REVENUE(1)(2)(3)

 
  3rd Qtr. 2010 vs. 2nd Qtr. 2010   3rd Qtr. 2010 vs. 3rd Qtr. 2009  
 
  Increase (Decrease)
Due to Change in:
   
  Increase (Decrease)
Due to Change in:
   
 
In millions of dollars   Average
Volume
  Average
Rate
  Net
Change
  Average
Volume
  Average
Rate
  Net
Change
 

Deposits

                                     

In U.S. offices

    15     (34 )   (19 )   16     (311 )   (295 )

In offices outside the U.S.(4)

    36     77     113     91     36     127  
                           

Total

    51     43     94     107     (275 )   (168 )
                           

Federal funds purchased and securities loaned or sold under agreements to repurchase

                                     

In U.S. offices

    (36 )   (13 )   (49 )   (28 )   (32 )   (60 )

In offices outside the U.S.(4)

    (61 )   (16 )   (77 )   109     (150 )   (41 )
                           

Total

    (97 )   (29 )   (126 )   81     (182 )   (101 )
                           

Trading account liabilities(5)

                                     

In U.S. offices

    (9 )       (9 )   26     25     51  

In offices outside the U.S.(4)

    (2 )   13     11         14     14  
                           

Total

    (11 )   13     2     26     39     65  
                           

Short-term borrowings

                                     

In U.S. offices

    (27 )   (1 )   (28 )   (11 )   (95 )   (106 )

In offices outside the U.S.(4)

    9     17     26     24     (55 )   (31 )
                           

Total

    (18 )   16     (2 )   13     (150 )   (137 )
                           

Long-term debt

                                     

In U.S. offices

    (375 )   143     (232 )   227     (400 )   (173 )

In offices outside the U.S.(4)

    (38 )   48     10     (85 )   44     (41 )
                           

Total

    (413 )   191     (222 )   142     (356 )   (214 )
                           

Total interest expense

    (488 )   234     (254 )   369     (924 )   (555 )
                           

Net interest revenue

    (741 )   (52 )   (793 )   499     749     1,248  
                           

(1)
The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35% and is excluded from this presentation.

(2)
Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change.

(3)
Detailed average volume, interest revenue and interest expense exclude discontinued operations.

(4)
Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.

(5)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.

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ANALYSIS OF CHANGES IN INTEREST REVENUE, INTEREST EXPENSE, AND NET INTEREST REVENUE(1)(2)(3)

 
  Nine Months 2010 vs. Nine Months 2009  
 
  Increase (Decrease)
Due to Change in:
   
 
In millions of dollars   Average
Volume
  Average
Rate
  Net
Change(2)
 

Deposits at interest with banks(4)

    (67 )   (160 )   (227 )
               

Federal funds sold and securities borrowed or purchased under agreements to resell

                   

In U.S. offices

    336     (513 )   (177 )

In offices outside the U.S.(4)

    282     (172 )   110  
               

Total

    618     (685 )   (67 )
               

Trading account assets(5)

                   

In U.S. offices

    (428 )   (1,886 )   (2,314 )

In offices outside the U.S.(4)

    703     (1,006 )   (303 )
               

Total

    275     (2,892 )   (2,617 )
               

Investments(1)

                   

In U.S. offices

    1,268     (2,234 )   (966 )

In offices outside the U.S.(4)

    794     (1,016 )   (222 )
               

Total

    2,062     (3,250 )   (1,188 )
               

Loans (net of unearned income)(6)

                   

In U.S. offices

    3,165     4,720     7,885  

In offices outside the U.S.(4)

    (1,047 )   (991 )   (2,038 )
               

Total

    2,118     3,729     5,847  
               

Other interest-earning assets

    4     (43 )   (39 )
               

Total interest revenue

    5,010     (3,301 )   1,709  
               

Deposits

                   

In U.S. offices

    63     (1,522 )   (1,459 )

In offices outside the U.S.(4)

    513     (794 )   (281 )
               

Total

    576     (2,316 )   (1,740 )
               

Federal funds purchased and securities loaned or sold under agreements to repurchase

                   

In U.S. offices

    (83 )   (165 )   (248 )

In offices outside the U.S.(4)

    423     (860 )   (437 )
               

Total

    340     (1,025 )   (685 )
               

Trading account liabilities(5)

                   

In U.S. offices

    102     (62 )   40  

In offices outside the U.S.(4)

    11     6     17  
               

Total

    113     (56 )   57  
               

Short-term borrowings

                   

In U.S. offices

    (30 )   (267 )   (297 )

In offices outside the U.S.(4)

    2     (129 )   (127 )
               

Total

    (28 )   (396 )   (424 )
               

Long-term debt

                   

In U.S. offices

    1,700     (1,104 )   596  

In offices outside the U.S.(4)

    (207 )   19     (188 )
               

Total

    1,493     (1,085 )   408  
               

Total interest expense

    2,494     (4,878 )   (2,384 )
               

Net interest revenue

    2,516     1,577     4,093  
               

(1)
The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35% and is excluded from this presentation.

(2)
Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change.

(3)
Detailed average volume, interest revenue and interest expense exclude discontinued operations.

(4)
Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.

(5)
Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.

(6)
Includes cash-basis loans.

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CROSS BORDER RISK AND SOVEREIGN EXPOSURE

Cross Border Risk

        Total exposure is defined as cross border claims outstanding plus net foreign office claims on local residents and cross border claims outstanding from derivative products.

        Net foreign office claims on local residents equals total foreign office claims on local residents less foreign office liabilities. If the difference is negative then the exposure is zero. For example, if Country A branch has deposits from Country A residents of 150 and the Country A branch invests in Country A government securities of 100 then the net foreign exposure would be zero, calculated as follows:100 total local country assets less 150 local country liabilities equals (50), negative exposure defaults to zero.

        The countries included in the Cross Border Risk table below are those countries whose total exposure exceeds 0.75% of total Citigroup assets. Total exposure includes bank and private exposure in addition to public (government) exposure.

 
  Cross-Border Claims on Third Parties   September 30, 2010   December 31, 2009  
In billions of U.S. dollars   Banks   Public   Private   Total   Trading and
Short-Term
Claims
  Investments
in and
Funding of
Local
Franchises
  Total
Cross-Border
Outstanding
  Commitments   Total
Cross-Border
Outstandings
  Commitments  

France

  $ 12.6   $ 12.0   $ 10.2   $ 34.8   $ 26.0   $ 2.5   $ 37.3   $ 51.2   $ 33.0   $ 68.5  

Germany

    15.9     7.4     4.8     28.1     23.1     6.4     34.5     42.0     30.2     53.1  

India

    2.1     0.5     7.0     9.6     7.0     19.2     28.8     2.2     24.9     1.8  

United Kingdom

    12.9     1.8     9.1     23.8     21.1         23.8     96.4     17.1     138.5  

Italy

    2.2     12.6     1.4     16.2     15.2     1.0     17.2     19.2     21.7     21.2  

Cayman Islands

    0.2         16.9     17.1     16.1         17.1     3.6     18.0     6.1  

South Korea

    1.7     1.6     3.0     6.3     6.1     10.7     17.0     16.6     17.4     14.4  

Brazil

    1.7     0.9     6.3     8.9     6.7     7.5     16.4     16.9     10.3     13.9  

Netherlands

    5.8     2.7     6.8     15.3     9.9         15.3     48.8     20.3     65.5  

Mexico

        1.8     3.4     5.2     2.8     9.6     14.8     26.3     12.8     21.2  
                                           

Sovereign Exposure

        Total exposure is defined as of loans net of hedges, unfunded lending commitments, available for sale securities, trading securities, and securities purchased under agreements to resell, in which the direct obligor is a foreign government. Trading account assets consist of foreign government securities and other mark-to-market gains on derivative and other trading account positions.

        Foreign office liabilities are not considered in the calculation of sovereign exposure as they are for cross border exposure (the Country A example above).

General summary:

        At September 30, 2010, Citi's total sovereign exposure approximated $285 billion and consisted of approximately 94% investment grade countries and approximately 6% non-investment grade countries.

Venezuelan Operations

        In 2003, the Venezuelan government enacted currency restrictions that have restricted Citigroup's ability to obtain U.S. dollars in Venezuela at the official foreign currency rate. In May 2010, the government enacted new laws that have closed the parallel foreign exchange market and established a new foreign exchange market. Citigroup does not have access to U.S. dollars in this new market. Citigroup uses the official rate to re-measure the foreign currency transactions in the financial statements of its Venezuelan operations, which have U.S. dollar functional currencies, into U.S. dollars. At September 30, 2010, Citigroup had net monetary assets in its Venezuelan operations denominated in bolivars of approximately $155 million.

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DERIVATIVES

        See Note 15 to the Consolidated Financial Statements for a discussion and disclosures related to Citigroup's derivative activities. The following discussions relate to the Fair Valuation Adjustments for Derivatives and Credit Derivatives activities.

Fair Valuation Adjustments for Derivatives

        The table below summarizes the CVA applied to the fair value of derivative instruments as of September 30, 2010 and December 31, 2009.

 
  Credit valuation adjustment
Contra-liability (contra-asset)
 
In millions of dollars   September 30,
2010
  December 31,
2009
 

Non-monoline counterparties

  $ (3,642 ) $ (3,010 )

Citigroup (own)

    1,497     1,401  
           

Net non-monoline CVA

  $ (2,145 ) $ (1,609 )

Monoline counterparties

    (1,576 )   (5,580 )
           

Total CVA—derivative instruments

  $ (3,721 ) $ (7,189 )
           

        The table below summarizes pretax gains (losses) related to changes in credit valuation adjustments on derivative instruments, net of hedges:

 
  Credit valuation
adjustment gain (loss)
 
In millions of dollars   Third Quarter
2010
  Third Quarter
2009
  Nine months
ended Sept 30,
2010
  Nine months
ended Sept 30,
2009
 

CVA on derivatives, excluding monolines

  $ 348   $ (864 ) $ 415   $ 2,351  

CVA related to monoline counterparties

    61     (61 )   494     (994 )
                   

Total CVA—derivative instruments

  $ 409   $ (925 ) $ 909   $ 1,357  
                   

        The CVA amounts shown above relate solely to the derivative portfolio, and do not include:

Credit Derivatives

        Citigroup makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts Citigroup either purchases or writes protection on either a single-name or portfolio basis. Citi primarily uses credit derivatives to help mitigate credit risk in its corporate loan portfolio and other cash positions, and to facilitate client transactions.

        Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined events (settlement triggers). These settlement triggers, which are defined by the form of the derivative and the referenced credit, are generally limited to the market standard of failure to pay on indebtedness and bankruptcy (or comparable events) of the reference credit and, in a more limited range of transactions, debt restructuring.

        Credit derivative transactions referring to emerging market reference credits will also typically include additional settlement triggers to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions on a portfolio of referenced credits or asset-backed securities, the seller of protection may not be required to make payment until a specified amount of losses has occurred with respect to the portfolio and/or may only be required to pay for losses up to a specified amount.

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        The following tables summarize the key characteristics of Citi's credit derivatives portfolio by counterparty and derivative form as of September 30, 2010 and December 31, 2009:

September 30, 2010:

 
  Fair values   Notionals  
In millions of dollars   Receivable   Payable   Beneficiary   Guarantor  

By industry/counterparty

                         

Bank

  $ 44,250   $ 41,271   $ 878,776   $ 824,452  

Broker-dealer

    16,948     17,057     324,807     321,330  

Monoline

    2,044         4,400      

Non-financial

    105     98     1,629     1,690  

Insurance and other financial institutions

    10,068     9,053     172,004     116,398  
                   

Total by industry/counterparty

  $ 73,415   $ 67,479   $ 1,381,616   $ 1,263,870  
                   

By instrument

                         

Credit default swaps and options

  $ 72,910   $ 65,696   $ 1,357,410   $ 1,262,408  

Total return swaps and other

    505     1,783     24,206     1,462  
                   

Total by instrument

  $ 73,415   $ 67,479   $ 1,381,616   $ 1,263,870  
                   

By rating:

                         

Investment grade

  $ 21,267   $ 17,113   $ 604,594   $ 535,545  

Non-investment grade(1)

    52,148     50,366     777,022     728,325  
                   

Total by Rating

  $ 73,415   $ 67,479   $ 1,381,616   $ 1,263,870  
                   

By maturity:

                         

Within 1 year

  $ 1,961   $ 2,229   $ 161,369   $ 154,308  

From 1 to 5 years

    43,744     37,835     962,211     871,926  

After 5 years

    27,710     27,415     258,036     237,636  
                   

Total by maturity

  $ 73,415   $ 67,479   $ 1,381,616   $ 1,263,870  
                   

December 31, 2009:

 
  Fair values   Notionals  
In millions of dollars   Receivable   Payable   Beneficiary   Guarantor  

By industry/counterparty

                         

Bank

  $ 52,383   $ 50,778   $ 872,523   $ 807,484  

Broker-dealer

    23,241     22,932     338,829     340,949  

Monoline

    5,860         10,018     33  

Non-financial

    339     371     1,781     623  

Insurance and other financial institutions

    10,969     8,343     109,811     64,964  
                   

Total by industry/counterparty

  $ 92,792   $ 82,424   $ 1,332,962   $ 1,214,053  
                   

By instrument

                         

Credit default swaps and options

  $ 91,625   $ 81,174   $ 1,305,724   $ 1,213,208  

Total return swaps and other

    1,167     1,250     27,238     845  
                   

Total by instrument

  $ 92,792   $ 82,424   $ 1,332,962   $ 1,214,053  
                   

By rating:

                         

Investment grade

  $ 26,666   $ 22,469   $ 656,876   $ 576,930  

Non-investment grade(1)

    66,126     59,995     676,086     637,123  
                   

Total by Rating

  $ 92,792   $ 82,424   $ 1,332,962   $ 1,214,053  
                   

By maturity:

                         

Within 1 year

  $ 2,167   $ 2,067   $ 173,880   $ 165,056  

From 1 to 5 years

    54,079     47,350     877,573     806,143  

After 5 years

    36,546     33,007     281,509     242,854  
                   

Total by maturity

  $ 92,792   $ 82,424   $ 1,332,962   $ 1,214,053  
                   

(1)
Also includes not rated credit derivative instruments.

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        The fair values shown are prior to the application of any netting agreements, cash collateral, and market or credit value adjustments.

        Citigroup actively participates in trading a variety of credit derivatives products as both an active two-way market-maker for clients and to manage credit risk. The majority of this activity was transacted with other financial intermediaries, including both banks and broker-dealers. Citigroup generally has a mismatch between the total notional amounts of protection purchased and sold and it may hold the reference assets directly, rather than entering into offsetting credit derivative contracts as and when desired. The open risk exposures from credit derivative contracts are largely matched after certain cash positions in reference assets are considered and after notional amounts are adjusted, either to a duration-based equivalent basis or to reflect the level of subordination in tranched structures.

        Citi actively monitors its counterparty credit risk in credit derivative contracts. Approximately 89% and 85% of the gross receivables are from counterparties with which Citi maintains collateral agreements as of September 30, 2010 and December 31, 2009, respectively. A majority of Citi's top 15 counterparties (by receivable balance owed to the company) are banks, financial institutions or other dealers. Contracts with these counterparties do not include ratings-based termination events. However, counterparty ratings downgrades may have an incremental effect by lowering the threshold at which Citigroup may call for additional collateral. A number of the remaining significant counterparties are monolines (which have CVA as shown above).


INCOME TAXES

Deferred Tax Assets

        Deferred tax assets (DTAs) are recorded for the future consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. DTAs are recognized subject to management's judgment that realization is more likely than not. For additional information, see "Significant Accounting Policies and Significant Estimates—Income Taxes" in Citi's 2009 Annual Report on Form 10-K.

        As of September 30, 2010, Citigroup had recorded net DTAs of approximately $50.8 billion, an increase of $0.9 billion from $49.9 billion at June 30, 2010 and an increase of $4.7 billion from $46.1 billion at December 31, 2009. Excluding the impact of the adoption of SFAS 166/167, the DTAs decreased $0.2 billion during the first nine months of 2010. The adoption of SFAS 166/167 on January 1, 2010 resulted in an increase to the DTAs of approximately $4.9 billion related to the allowance for loan losses recorded upon consolidation of credit card trusts.

        Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $50.8 billion at September 30, 2010 is more likely than not based on expectations as to future taxable income in the jurisdictions in which the DTAs arise and, based on available tax planning strategies as defined in ASC 740, Income Taxes, that could be implemented if necessary to prevent a carry-forward from expiring.

        Approximately $21.4 billion of Citigroup's DTAs at September 30, 2010 is represented by U.S. federal, foreign, state and local tax return carry-forwards subject to expiration substantially beginning in 2017 and continuing through 2029. Also included in Citi's overall net DTAs of $50.8 billion is approximately $29.4 billion of future tax deductions and credits that arose largely due to timing differences between the recognition of income for GAAP and tax purposes and represent net deductions and credits that have not yet been taken on a tax return. The most significant source of these timing differences is the loan loss reserve build, which accounts for approximately $17 billion of the net DTAs. In general, Citi would need to recognize approximately $103 billion of taxable income, primarily in U.S. taxable jurisdictions, during the respective carry-forward periods to fully realize its U.S. federal, state and local DTAs.

        The U.S. Federal net operating loss (NOL) carry-forward component of the DTAs was approximately $2.3 billion at September 30, 2010, down from $5.1 billion at December 31, 2009. As Citi continues to generate U.S. federal taxable income, the domestic portion of the NOL carry-forward component of the DTAs will continue to decrease. Under U.S. tax law, NOL carry-forwards are used against taxable income before foreign tax credits (FTCs) or general business credits (GBCs) are utilized. The FTC component of the DTA was approximately $13.9 billion at September 30, 2010, and the GBC component of the DTA was approximately $1.5 billion. Moreover, until the U.S. Federal NOL carry-forward is fully utilized, the FTCs and GBCs will likely continue to increase. Based on Citi's current expectations of future taxable income, Citi expects the U.S. federal NOL carry-forward to be utilized in 2011. Citi's net DTA will decline as additional domestic GAAP taxable income is generated.

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        The utilization of Citi's DTAs is necessarily subject to Citi's estimates of future taxable income in the jurisdictions in which it operates during the respective carry-forward periods which is in turn subject to overall market and global economic conditions.

        In addition, Citi's ability to utilize its DTAs to offset future taxable income may be significantly limited if Citi experiences an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended ("Code"). In general, an ownership change will occur if there is a cumulative change in Citi's ownership by "5% shareholders" (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on its pre-ownership change DTAs equal to the value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments); provided that the annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. The limitation arising from an ownership change under Section 382 on Citigroup's ability to utilize its DTAs will depend on the value of Citigroup's stock at the time of the ownership change.

        Under IRS Notice 2010-2, Citigroup will not experience an ownership change within the meaning of Section 382 as a result of the sales of its common stock held by the U.S. Treasury.

        Approximately $14 billion of the net DTAs is included in Citigroup's Tier 1 Capital and Tier 1 Common regulatory capital.

Other

        As previously disclosed in Citi's 2009 Annual Report on Form 10-K, Citi's tax provision has historically been reduced because active financing income earned and indefinitely reinvested outside the U.S. is taxed at lower local tax rates rather than at the higher U.S. tax rate. Such reduction has been dependent upon a provision of the U.S. tax law that defers the imposition of U.S. taxes on certain active financial services income until that income is repatriated to the U.S. as a dividend. This "active financing exception" expired for taxable years beginning after December 31, 2009. The expiration of this exception has moderately increased Citi's 2010 tax provision. To date, the U.S. Congress has not extended the active financing exception. In the event this exception is not extended, the U.S. tax imposed on Citi's active financing income earned outside the U.S. would increase, which would result in Citi's tax expense increasing significantly and, accordingly, adversely impact Citi's future earnings.


RECLASSIFICATION OF HTM SECURITIES TO AFS

        In March 2010, the FASB issued ASU 2010-11, Scope Exception Related to Embedded Credit Derivatives. The ASU clarifies that certain embedded derivatives, such as those contained in certain securitizations, CDOs and structured notes, should be considered embedded credit derivatives subject to potential bifurcation and separate fair value accounting. The ASU allows any beneficial interest issued by a securitization vehicle to be accounted for under the fair value option at transition on July 1, 2010.

        Citi elected to account for beneficial interests issued by securitization vehicles, with a total fair value of $12.0 billion, under the fair value option on July 1, 2010. Beneficial interests previously classified as HTM were reclassified to AFS on June 30, 2010, because as of that reporting date, Citi did not have the intent to hold the beneficial interests until maturity.

        All reclassified debt securities with gross unrealized losses were assessed for other-than-temporary impairment as of June 30, 2010, including an assessment of whether Citi intends to sell the security. For securities that Citi intends to sell, impairment charges of $176 million (pretax) were recorded in earnings in the second quarter of 2010.

        On July 1, 2010, Citi recorded a cumulative-effect adjustment to retained earnings for reclassified beneficial interests, consisting of gross unrealized losses recognized in Accumulated other comprehensive income (AOCI) of $420 million and gross unrealized gains recognized in AOCI of $359 million, for a net pretax charge to Retained earnings of $61 million ($41 million after tax).

        See Notes 1 and 10 to the Consolidated Financial Statements for details of this reclassification.

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EXPOSURE TO COMMERCIAL REAL ESTATE

        ICG and the SAP, through their business activities and as capital markets participants, incur exposures that are directly or indirectly tied to the commercial real estate (CRE) market, and LCL and RCB hold loans that are collateralized by CRE. These exposures are represented primarily by the following three categories:

        (1)   Assets held at fair value include approximately $6.7 billion, of which approximately $4.5 billion are securities, loans and other items linked to CRE that are carried at fair value as trading account assets, of which approximately $1.2 billion are securities backed by CRE carried at fair value as AFS investments, and $1.0 billion are loans held-for-sale. Changes in fair value for these trading account assets are reported in current earnings, while AFS investments are reported in Accumulated other comprehensive income with other-than-temporary impairments reported in current earnings.

        The majority of these exposures are classified as Level 3 in the fair value hierarchy. Weakening activity in the trading markets for some of these instruments resulted in reduced liquidity, thereby decreasing the observable inputs for such valuations, and could have an adverse impact on how these instruments are valued in the future if such conditions persist. See Note 16 to the Consolidated Financial Statements.

        (2)   Assets held at amortized cost include approximately $1.7 billion of securities classified as HTM and $32.6 billion of loans and commitments. The HTM securities were classified as such during the fourth quarter of 2008 and were previously classified as either trading or AFS. They are accounted for at amortized cost, subject to other-than-temporary impairment. Loans and commitments are recorded at amortized cost, less loan loss reserves. The impact from changes in credit is reflected in the calculation of the allowance for loan losses and in net credit losses.

        (3)   Equity and other investments include approximately $3.5 billion of equity and other investments, such as limited partner fund investments, that are accounted for under the equity method, which recognizes gains or losses based on the investor's share of the net income of the investee.

        The following table provides a summary of Citigroup's Global CRE funded and unfunded exposures at September 30, 2010:

In billions of dollars   September 30,
2010
 

Institutional Clients Group

       
 

CRE exposures carried at fair value (including AFS securities)

  $ 4.0  
 

Loans and unfunded commitments

    15.9  
 

HTM securities

    1.6  
 

Equity method investments

    3.3  
       
 

Total ICG

  $ 24.8  
       

Special Asset Pool

       
 

CRE exposures carried at fair value (including AFS)

  $ 2.2  
 

Loans and unfunded commitments

    8.0  
 

HTM securities

    0.1  
 

Equity method investments

    0.2  
       
 

Total SAP

  $ 10.5  
       

Regional Consumer Banking

       
 

Loans and unfunded commitments

  $ 2.7  
       

Local Consumer Lending

       
 

Loans and unfunded commitments

  $ 6.0  
       

Brokerage and Asset Management

       
 

CRE exposures carried at fair value

  $ 0.5  
       

Total Citigroup

  $ 44.5  
       

        On August 10, 2010, LCL sold a $3.5 billion portfolio of performing multifamily and CRE loans to JP Morgan Chase. Citi recorded a pretax loss of approximately $295 million on this sale in the third quarter of 2010.

        The above CRE exposure represents the vast majority of Citi's exposure to commercial real estate. There may be other exposures that have indirect exposures to CRE that are not reflected in the table above.

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CONTRACTUAL OBLIGATIONS

        See Citi's 2009 Annual Report on Form 10-K and Note 12 to the Consolidated Financial Statements in this Form 10-Q for a discussion of contractual obligations.


CONTROLS AND PROCEDURES

Disclosure

        Citigroup's disclosure controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including without limitation that information required to be disclosed by Citi in its SEC filings is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow for timely decisions regarding required disclosure.

        Citigroup's Disclosure Committee assists the CEO and CFO in their responsibilities to design, establish, maintain and evaluate the effectiveness of Citi's disclosure controls and procedures. The Disclosure Committee is responsible for, among other things, the oversight, maintenance and implementation of the disclosure controls and procedures, subject to the supervision and oversight of the CEO and CFO.

        Citigroup's management, with the participation of its CEO and CFO, has evaluated the effectiveness of Citigroup's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2010 and, based on that evaluation, the CEO and CFO have concluded that at that date Citigroup's disclosure controls and procedures were effective.

Financial Reporting

        There were no changes in Citigroup's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2010 that materially affected, or are reasonably likely to materially affect, Citi's internal control over financial reporting.

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FORWARD-LOOKING STATEMENTS

        Certain statements in this Form 10-Q, including but not limited to statements included within the Management's Discussion and Analysis of Financial Condition and Results of Operations, are "forward-looking statements" within the meaning of the rules and regulations of the SEC. Generally, forward-looking statements are not based on historical facts but instead represent only Citigroup's and management's beliefs regarding future events. Such statements may be identified by words such as believe, expect, anticipate, intend, estimate, may increase, may fluctuate, and similar expressions, or future or conditional verbs such as will, should, would and could.

        Such statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, including without limitation the precautionary statements included in this Form 10-Q and the Forms 10-Q for the first and second quarters of 2010, the factors listed and described under "Risk Factors" in Citi's 2009 Annual Report on Form 10-K, and the factors described below:

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FINANCIAL STATEMENTS AND NOTES

TABLE OF CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS

   
 

Consolidated Statement of Income (Unaudited)— For the Three and Nine Months Ended September 30, 2010 and 2009

 
96
 

Consolidated Balance Sheet—September 30, 2010 (Unaudited) and December 31, 2009

 
97
 

Consolidated Statement of Changes in Stockholders' Equity (Unaudited)—Nine Months Ended September 30, 2010 and 2009

 
99
 

Consolidated Statement of Cash Flows (Unaudited)—Nine Months Ended September 30, 2010 and 2009

 
101
 

Citibank Consolidated Balance Sheet—Citibank, N.A. and Subsidiaries—September 30, 2010 (Unaudited) and December 31, 2009

 
103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   
 

Note 1—Basis of Presentation

 
105
 

Note 2—Discontinued Operations

 
111
 

Note 3—Business Segments

 
114
 

Note 4—Interest Revenue and Expense

 
115
 

Note 5—Commissions and Fees

 
116
 

Note 6—Principal Transactions

 
117
 

Note 7—Retirement Benefits and Incentive Plans

 
118
 

Note 8—Earnings per Share

 
120
 

Note 9—Trading Account Assets and Liabilities

 
121
 

Note 10—Investments

 
122
 

Note 11—Goodwill and Intangible Assets

 
133
 

Note 12—Debt

 
135
 

Note 13—Changes in Accumulated Other Comprehensive Income (Loss)

 
137
 

Note 14—Securitizations and Variable Interest Entities

 
138
 

Note 15—Derivatives Activities

 
158
 

Note 16—Fair Value Measurement

 
167
 

Note 17—Fair Value Elections

 
182
 

Note 18—Fair Value of Financial Instruments

 
187
 

Note 19—Guarantees

 
188
 

Note 20—Contingencies

 
193
 

Note 21—Citibank, N.A. Stockholder's Equity

 
194
 

Note 22—Subsequent Events

 
195
 

Note 23—Condensed Consolidating Financial Statement Schedules

 
195

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CONSOLIDATED FINANCIAL STATEMENTS

CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

Citigroup Inc. and Subsidiaries

 
  Three months ended September 30,   Nine months ended September 30,  
In millions of dollars, except per-share amounts   2010   2009   2010   2009  

Revenues

                         

Interest revenue

  $ 19,371   $ 18,678   $ 60,641   $ 58,932  

Interest expense

    6,125     6,680     18,795     21,179  
                   

Net interest revenue

  $ 13,246   $ 11,998   $ 41,846   $ 37,753  
                   

Commissions and fees

  $ 3,248   $ 3,698   $ 10,122   $ 11,766  

Principal transactions

    1,528     1,343     7,898     7,044  

Administration and other fiduciary fees

    976     1,085     2,908     4,163  

Realized gains (losses) on sales of investments

    962     427     2,023     1,719  

Other than temporary impairment losses on investments

                         
 

Gross impairment losses

    (230 )   (2,453 )   (1,237 )   (6,161 )
 

Less: Impairments recognized in Other comprehensive income (OCI)

    10     1,741     56     4,006  
                   
 

Net impairment losses recognized in earnings

  $ (220 ) $ (712 ) $ (1,181 ) $ (2,155 )
                   

Insurance premiums

  $ 655   $ 763   $ 2,039   $ 2,263  

Other revenue

    343     1,788     2,575     12,327  
                   

Total non-interest revenues

  $ 7,492   $ 8,392   $ 26,384   $ 37,127  
                   

Total revenues, net of interest expense

  $ 20,738   $ 20,390   $ 68,230   $ 74,880  
                   

Provisions for credit losses and for benefits and claims

                         

Provision for loan losses

  $ 5,666   $ 8,771   $ 20,555   $ 30,919  

Policyholder benefits and claims

    227     324     727     964  

Provision for unfunded lending commitments

    26         (80 )   195  
                   

Total provisions for credit losses and for benefits and claims

  $ 5,919   $ 9,095   $ 21,202   $ 32,078  
                   

Operating expenses

                         

Compensation and benefits

  $ 6,117   $ 6,136   $ 18,240   $ 18,730  

Premises and equipment

    964     1,035     2,865     3,209  

Technology/communication

    1,131     1,114     3,278     3,410  

Advertising and marketing

    458     317     1,127     1,002  

Restructuring

        (34 )   (3 )   (79 )

Other operating

    2,850     3,256     9,397     9,236  
                   

Total operating expenses

  $ 11,520   $ 11,824   $ 34,904   $ 35,508  
                   

Income from continuing operations before income taxes

  $ 3,299   $ (529 ) $ 12,124   $ 7,294  

Provision for income taxes

    698     (1,122 )   2,546     620  
                   

Income from continuing operations

  $ 2,601   $ 593   $ 9,578   $ 6,674  
                   

Discontinued operations

                         

Income (loss) from discontinued operations

  $ 8   $ (204 ) $   $ (635 )

Gain (loss) on sale

    (784 )       (690 )   2  

Provision (benefit) for income taxes

    (402 )   214     (524 )   44  
                   

Income (loss) from discontinued operations, net of taxes

  $ (374 ) $ (418 ) $ (166 ) $ (677 )
                   

Net income before attribution of noncontrolling interests

  $ 2,227   $ 175   $ 9,412   $ 5,997  

Net income attributable to noncontrolling interests

    59     74     119     24  
                   

Citigroup's net income

  $ 2,168   $ 101   $ 9,293   $ 5,973  
                   

Basic earnings per share

                         

Income (loss) from continuing operations

  $ 0.09   $ (0.23 ) $ 0.32   $ (0.10 )

Income (loss) from discontinued operations, net of taxes

    (0.02 )   (0.04 )       (0.09 )
                   

Net income

  $ 0.07   $ (0.27 ) $ 0.32   $ (0.19 )
                   

Weighted average common shares outstanding

    28,877.5     12,104.3     28,723.7     7,629.6  
                   

Diluted earnings per share

                         

Income (loss) from continuing operations

  $ 0.08   $ (0.23 ) $ 0.32   $ (0.10 )

Income (loss) from discontinued operations, net of taxes

    (0.01 )   (0.04 )   (0.01 )   (0.09 )
                   

Net income

  $ 0.07   $ (0.27 ) $ 0.31   $ (0.19 )
                   

Adjusted weighted average common shares outstanding

    29,778.3     12,216.0     29,621.5     8,045.7  
                   

See Notes to the Consolidated Financial Statements.

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CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

Citigroup Inc. and Subsidiaries

In millions of dollars, except shares   September 30,
2010
  December 31,
2009
 
 
  (Unaudited)
   
 

Assets

             

Cash and due from banks (including segregated cash and other deposits)

  $ 26,342   $ 25,472  

Deposits with banks

    150,071     167,414  

Federal funds sold and securities borrowed or purchased under agreements to resell (including $94,190 and $87,812 as of September 30, 2010 and December 31, 2009, respectively, at fair value)

    240,057     222,022  

Brokerage receivables

    37,138     33,634  

Trading account assets (including $122,318 and $111,219 pledged to creditors at September 30, 2010 and December 31, 2009, respectively)

    337,098     342,773  

Investments (including $12,835 and $15,154 pledged to creditors at September 30, 2010 and December 31, 2009, respectively and $302,109 and $246,429 at September 30, 2010 and December 31, 2009, respectively, at fair value)

    340,250     306,119  

Loans, net of unearned income

             
 

Consumer (including $2,400 and $34 at September 30, 2010 and December 31, 2009, respectively, at fair value)

    463,104     424,057  
 

Corporate (including $2,755 and $1,405 at September 30, 2010 and December 31, 2009, respectively, at fair value)

    191,207     167,447  
           

Loans, net of unearned income

  $ 654,311   $ 591,504  
 

Allowance for loan losses

    (43,674 )   (36,033 )
           

Total loans, net

  $ 610,637   $ 555,471  

Goodwill

    25,797     25,392  

Intangible assets (other than MSRs)

    7,705     8,714  

Mortgage servicing rights (MSRs)

    3,976     6,530  

Other assets (including $22,918 and $12,664 as of September 30, 2010 and December 31, 2009, respectively, at fair value)

    172,800     163,105  

Assets of discontinued operations held for sale

    31,409      
           

Total assets

  $ 1,983,280   $ 1,856,646  
           

        The following table presents certain assets of consolidated variable interest entities (VIEs), which are included in the Consolidated Balance Sheet above. The assets in the table below include only those assets that can be used to settle obligations of consolidated VIEs on the following page, and are in excess of those obligations.

 
  September 30, 2010  

Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs

       

Cash and due from banks (including segregated cash and other deposits)

  $ 2,316  

Trading account assets

    4,959  

Investments

    9,476  

Loans, net of unearned income

       
 

Consumer (including $2,372 at fair value)

    112,988  
 

Corporate (including $648 at fair value)

    23,536  
       

Loans, net of unearned income

  $ 136,524  
 

Allowance for loan losses

    (12,007 )
       

Total loans, net

  $ 124,517  

Other assets(1)

    33,112  
       

Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs

  $ 174,380  
       

(1)
Other assets includes Assets of discontinued operations held for sale of $31.4 billion relating to the announced sale of The Student Loan Corporation.

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CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(Continued)

Citigroup Inc. and Subsidiaries

In millions of dollars, except shares   September 30,
2010
  December 31,
2009
 
 
  (Unaudited)
   
 

Liabilities

             

Non-interest-bearing deposits in U.S. offices

  $ 64,442   $ 71,325  

Interest-bearing deposits in U.S. offices (including $614 and $700 at September 30, 2010 and December 31, 2009, respectively, at fair value)

    237,626     232,093  

Non-interest-bearing deposits in offices outside the U.S. 

    52,080     44,904  

Interest-bearing deposits in offices outside the U.S. (including $556 and $845 at September 30, 2010 and December 31, 2009, respectively, at fair value)

    495,947     487,581  
           

Total deposits

  $ 850,095   $ 835,903  

Federal funds purchased and securities loaned or sold under agreements to repurchase (including $119,984 and $104,030 as of September 30, 2010 and December 31, 2009, respectively, at fair value)

    192,065     154,281  

Brokerage payables

    51,517     60,846  

Trading account liabilities

    142,005     137,512  

Short-term borrowings (including $2,494 and $639 at September 30, 2010 and December 31, 2009, respectively, at fair value)

    87,013     68,879  

Long-term debt (including $26,640 and $25,942 at September 30, 2010 and December 31, 2009, respectively, at fair value)

    387,330     364,019  

Other liabilities (including $11,287 and $11,542 as of September 30, 2010 and December 31, 2009, respectively, at fair value)

    78,198     80,233  

Liabilities of discontinued operations held for sale

    29,874      
           

Total liabilities

  $ 1,818,097   $ 1,701,673  
           

Stockholders' equity

             

Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: 12,038 at September 30, 2010, at aggregate liquidation value

  $ 312   $ 312  

Common stock ($0.01 par value; authorized shares: 60 billion), issued shares: 29,223,928,169 at September 30, 2010 and 28,626,100,389 at December 31, 2009

    292     286  

Additional paid-in capital

    100,898     98,142  

Retained earnings

    78,260     77,440  

Treasury stock, at cost: September 30, 2010—174,327,274 shares and December 31, 2009—142,833,099 shares

    (1,540 )   (4,543 )

Accumulated other comprehensive income (loss)

    (15,309 )   (18,937 )
           

Total Citigroup stockholders' equity

  $ 162,913   $ 152,700  

Noncontrolling interest

    2,270     2,273  
           

Total equity

  $ 165,183   $ 154,973  
           

Total liabilities and equity

  $ 1,983,280   $ 1,856,646  
           

See Notes to the Consolidated Financial Statements.


        The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third-party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.

 
  September 30, 2010  

Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup:

       

Short-term borrowings

  $ 32,162  

Long-term debt (including $4,793 at fair value)

    69,639  

Other liabilities(1)

    31,908  
       

Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup

  $ 133,709  
       

(1)
Other liabilities includes Liabilities of discontinued operations held for sale of $29.9 billion, relating to the announced sale of The Student Loan Corporation.

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CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

Citigroup Inc. and Subsidiaries

 
  Nine Months Ended September 30,  
In millions of dollars, except shares in thousands   2010   2009  

Preferred stock at aggregate liquidation value

             

Balance, beginning of period

  $ 312   $ 70,664  

Issuance of new preferred stock

        3,653  

Conversion of preferred stock

        (74,005 )
           

Balance, end of period

  $ 312   $ 312  
           

Common stock and additional paid-in capital

             

Balance, beginning of period

  $ 98,428   $ 19,222  

Employee benefit plans(1)

    (834 )   (3,508 )

Issuance of Common Stock

        173  

Issuance of TARP-related warrants

        88  

Reset of convertible preferred stock conversion price

        1,285  

Conversion of preferred stock to common stock

        61,790  

ADIA Upper Decs Equity Units Purchase Contract

    3,750      

Other

    (154 )   (18 )
           

Balance, end of period

  $ 101,190   $ 79,032  
           

Retained earnings

             

Balance, beginning of period

  $ 77,440   $ 86,521  

Adjustment to opening balance, net of taxes(2)(3)

    (8,483 )   413  
           

Adjusted balance, beginning of period

  $ 68,957   $ 86,934  

Citigroup's net income

    9,293     5,973  

Common dividends(4)

    10     (34 )

Preferred dividends

        (3,201 )

Preferred stock Series H discount accretion

        (124 )

Reset of convertible preferred stock conversion price

        (1,285 )

Convestion of preferred stock

          (3,055 )
           

Balance, end of period

  $ 78,260   $ 85,208  
           

Treasury stock, at cost

             

Balance, beginning of period

  $ (4,543 ) $ (9,582 )

Issuance of shares pursuant to employee benefit plans

    3,007     3,505  

Treasury stock acquired(5)

    (5 )   (3 )

Other

    1     21  
           

Balance, end of period

  $ (1,540 ) $ (6,059 )
           

Accumulated other comprehensive income (loss)

             

Balance, beginning of period

  $ (18,937 ) $ (25,195 )

Adjustment to opening balance, net of taxes(2)

        (413 )
           

Adjusted balance, beginning of period

  $ (18,937 ) $ (25,608 )

Net change in unrealized gains and losses on investment securities, net of taxes

    3,350     5,818  

Net change in cash flow hedges, net of taxes

    (123 )   1,012  

Net change in foreign currency translation adjustment, net of taxes

    440     1,131  

Pension liability adjustment, net of taxes

    (39 )   (4 )
           

Net change in Accumulated other comprehensive income (loss)

  $ 3,628   $ 7,957  
           

Balance, end of period

  $ (15,309 ) $ (17,651 )
           

Total Citigroup common stockholders' equity (shares outstanding: 29,049,601 at September 30, 2010 and 28,483,267 at December 31, 2009)

  $ 162,601   $ 140,530  
           

Total Citigroup stockholders' equity

  $ 162,913   $ 140,842  
           

[Statement continues on the following page, including notes to table]

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CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(Continued)

Citigroup Inc. and Subsidiaries

 
  Nine Months Ended September 30,  
In millions of dollars, except shares in thousands   2010   2009  

Noncontrolling interest

             

Balance, beginning of period

  $ 2,273   $ 2,392  
 

Origination of a noncontrolling interest

    287     124  
 

Transactions between noncontrolling interest shareholders and the related consolidating subsidiary

        (134 )
 

Transactions between Citigroup and the noncontrolling-interest shareholders

    (308 )   (350 )
 

Net income attributable to noncontrolling-interest shareholders

    119     24  
 

Dividends paid to noncontrolling—interest shareholders

    (99 )   (16 )
 

Accumulated other comprehensive income—net change in unrealized gains and losses on investment securities, net of tax

    6     7  
 

Accumulated other comprehensive income—net change in FX translation adjustment, net of tax

    (20 )   31  
 

All other

    12     29  
           

Net change in noncontrolling interests

  $ (3 ) $ (285 )
           

Balance, end of period

  $ 2,270   $ 2,107  
           

Total equity

  $ 165,183   $ 142,949  
           

Comprehensive income (loss)

             

Net income before attribution of noncontrolling interests

  $ 9,412   $ 5,997  

Net change in Accumulated other comprehensive income (loss)

    3,614     7,995  
           

Total comprehensive income

  $ 13,026   $ 13,992  
           

Comprehensive income (loss) attributable to the noncontrolling interests

  $ 105   $ 62  
           

Comprehensive income attributable to Citigroup

  $ 12,921   $ 13,930  
           

(1)
Includes unearned compensation on stock awards as well as the issuance in the second quarter of 2010 stock related to the "Common Stock Equivalents" (CSEs). For more information on the CSEs, see Note 7 to the Consolidated Financial Statements.

(2)
The adjustment to the opening balances for Retained earnings and Accumulated other comprehensive income (loss) in 2009 represents the cumulative effect of initially adopting ASC 320-10-35-34, Investments—Debt and Equity securities: Recognition of an Other-Than-Temporary Impairment (formerly FSP FAS 115-2 and FAS 124-2).

(3)
The adjustment to the opening balance for Retained earnings in 2010 represents the cumulative effect of adopting SFAS 167 on January 1, 2010, now incorporated into ASC 810, Consolidation as well as the adoption of ASU 2010-11 on July 1, 2010. The cumulative effect of these adjustments on retained earnings was $8.4 billion and $41 million respectively.

(4)
Common dividends in 2010 represent a reversal of dividends accrued on forfeitures of previously issued but unvested employee stock awards related to employees who have left Citigroup. Common dividends declared were as follows: $0.01 per share in the first quarter of 2009.

(5)
All open market repurchases were transacted under an existing authorized share repurchase plan and relate to customer fails/errors.

See Notes to the Consolidated Financial Statements

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CITIGROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

 
  Nine Months Ended September 30,  
In millions of dollars   2010   2009  

Cash flows from operating activities of continuing operations

             

Net income before attribution of noncontrolling interests

  $ 9,412   $ 5,997  

Net income attributable to noncontrolling interests

    119     24  
           

Citigroup's net income

  $ 9,293   $ 5,973  
 

Income (loss) from discontinued operations, net of taxes

    148     (679 )
 

(Loss) gain on sale, net of taxes

    (314 )   2  
           
 

Income from continuing operations—excluding noncontrolling interests

  $ 9,459   $ 6,650  

Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations—excluding noncontrolling interests

             
 

Amortization of deferred policy acquisition costs and present value of future profits

    229     298  
 

Additions to deferred policy acquisition costs

    1,925     (354 )
 

Depreciation and amortization

    1,379     1,290  
 

Provision for credit losses

    20,475     31,114  
 

Change in trading account assets

    (4,225 )   28,355  
 

Change in trading account liabilities

    4,493     (32,437 )
 

Change in federal funds sold and securities borrowed or purchased under agreements to resell

    (18,035 )   (19,061 )
 

Change in federal funds purchased and securities loaned or sold under agreements to repurchase

    37,784     (24,008 )
 

Change in brokerage receivables net of brokerage payables

    (12,833 )   (2,360 )
 

Net gains from sales of investments

    (2,023 )   (1,719 )
 

Change in loans held-for-sale

    (3,331 )   (1,605 )
 

Other, net

    (11,016 )   315  
           

Total adjustments

  $ 14,822   $ (20,172 )
           

Net cash provided by (used in) operating activities of continuing operations—excluding noncontrolling interests

  $ 24,281   $ (13,522 )
           

Cash flows from investing activities of continuing operations

             

Change in deposits with banks

  $ 17,343   $ (47,797 )

Change in loans

    56,415     (127,661 )

Proceeds from sales and securitizations of loans

    7,270     185,442  

Purchases of investments

    (334,368 )   (167,115 )

Proceeds from sales of investments

    129,471     66,890  

Proceeds from maturities of investments

    153,669     90,218  

Capital expenditures on premises and equipment

    (805 )   (859 )

Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets

    1,656     5,590  
           

Net cash provided by investing activities of continuing operations

  $ 30,651   $ 4,708  
           

Cash flows from financing activities of continuing operations

             

Dividends paid

  $   $ (3,235 )

Issuance of ADIA Upper Decs equity units purchase contract

    3,750      

Treasury stock acquired

    (5 )   (3 )

Stock tendered for payment of withholding taxes

    (786 )   (116 )

Issuance of long-term debt

    22,072     90,464  

Payments and redemptions of long-term debt

    (56,839 )   (83,850 )

Change in deposits

    14,192     58,418  

Change in short-term borrowings

    (37,121 )   (56,143 )
           

Net cash (used in) provided by financing activities of continuing operations

  $ (54,737 ) $ 5,535  
           

Effect of exchange rate changes on cash and cash equivalents

    624     582  
           

Net cash from discontinued operations

    51     (74 )
           

Change in cash and due from banks

  $ 870   $ (2,771 )

Cash and due from banks at beginning of period

    25,472     29,253  
           

Cash and due from banks at end of period

  $ 26,342   $ 26,482  
           

Supplemental disclosure of cash flow information for continuing operations

             

Cash paid during the period for income taxes

  $ 3,392   $ (1,251 )

Cash paid during the period for interest

  $ 17,289   $ 21,338  
           

Non-cash investing activities

             

Transfers to repossessed assets

  $ 2,058   $ 2,149  
           

See Notes to the Unaudited Consolidated Financial Statements.

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CITIBANK, N.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 
  Citibank, N.A. and Subsidiaries
 
In millions of dollars, except shares   September 30,
2010
  December 31,
2009
 
 
  (Unaudited)
   
 

Assets

             

Cash and due from banks

  $ 21,533   $ 20,246  

Deposits with banks

    137,194     154,372  

Federal funds sold and securities borrowed or purchased under agreements to resell

    40,526     31,434  

Trading account assets (including $504 and $914 pledged to creditors at September 30, 2010 and December 31, 2009, respectively)

    164,408     156,380  

Investments (including $3,625 and $3,849 pledged to creditors at September 30, 2010 and December 31, 2009, respectively)

    272,081     233,086  

Loans, net of unearned income

    446,325     477,974  

Allowance for loan losses

    (19,951 )   (22,685 )
           

Total loans, net

  $ 426,374   $ 455,289  

Goodwill

    10,212     10,200  

Intangible assets, including MSRs

    5,310     8,243  

Premises and equipment, net

    4,580     4,832  

Interest and fees receivable

    6,510     6,840  

Other assets

    89,084     80,439  

Assets of discontinued operations held for sale

    31,409      
           

Total assets

  $ 1,209,221   $ 1,161,361  
           

        The following table presents certain assets of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The assets in the table below include only those assets that can be used to settle obligations of consolidated VIEs on the following page, and are in excess of those obligations.

 
  September 30, 2010  

Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs

       

Cash and due from banks (including segregated cash and other deposits)

  $ 1,828  

Trading account assets

    96  

Investments

    8,695  

Loans, net of unearned income

       
 

Consumer (including $2,372 at fair value)

    9,891  
 

Corporate (including $362 at fair value)

    22,977  
       

Loans, net of unearned income

  $ 32,868  
 

Allowance for loan losses

    (86 )
       

Total loans, net

  $ 32,782  

Other assets(1)

    32,004  
       

Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs

  $ 75,405  
       

[Statement continues on the following page]

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CITIBANK, N.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(Continued)

 
  Citibank, N.A. and Subsidiaries
 
In millions of dollars, except shares   September 30,
2010
  December 31,
2009
 
 
  (Unaudited)
   
 

Liabilities

             

Non-interest-bearing deposits in U.S. offices

  $ 72,577   $ 76,729  

Interest-bearing deposits in U.S. offices

    183,823     176,149  

Non-interest-bearing deposits in offices outside the U.S. 

    47,550     39,414  

Interest-bearing deposits in offices outside the U.S. 

    493,401     479,350  
           

Total deposits

  $ 797,351   $ 771,642  

Trading account liabilities

    66,922     52,010  

Purchased funds and other borrowings

    72,984     89,503  

Accrued taxes and other expenses

    8,942     9,046  

Long-term debt and subordinated notes

    60,596     82,086  

Other liabilities

    45,224     39,181  

Liabilities of discontinued operations held for sale

    29,874      
           

Total liabilities

  $ 1,081,893   $ 1,043,468  
           

Citibank stockholder's equity

             

Capital stock ($20 par value) outstanding shares: 37,534,553 in each period

  $ 751   $ 751  

Surplus

    109,166     107,923  

Retained earnings

    25,597     19,457  

Accumulated other comprehensive income (loss)(1)

    (9,255 )   (11,532 )
           

Total Citibank stockholder's equity

  $ 126,259   $ 116,599  

Noncontrolling interest

    1,069     1,294  
           

Total equity

  $ 127,328   $ 117,893  
           

Total liabilities and equity

  $ 1,209,221   $ 1,161,361  
           

(1)
Amounts at September 30, 2010 and December 31, 2009 include the after-tax amounts for net unrealized gains (losses) on investment securities of $(2.498) billion and $(4.735) billion, respectively, for foreign currency translation of $(3.389) billion and $(3.255) billion, respectively, for cash flow hedges of $(2.224) billion and $(2.367) billion, respectively, and for pension liability adjustments of $(1.144) billion and $(1.175) billion, respectively.

See Notes to the Consolidated Financial Statements.


        The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third-party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.

 
  September 30, 2010  

Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup:

       

Short-term borrowings

  $ 29,313  

Long-term debt (including $2,557 at fair value)

    5,901  

Other liabilities(1)

    31,148  
       

Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup

  $ 66,362  
       

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CITIGROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.    BASIS OF PRESENTATION

        The accompanying unaudited Consolidated Financial Statements as of September 30, 2010 and for the three- and nine-month period ended September 30, 2010 include the accounts of Citigroup Inc. (Citigroup) and its subsidiaries (collectively, the Company). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been reflected. The accompanying Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in Citigroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, Citigroup's updated 2009 historical financial statements and notes filed on Form 8-K with the Securities and Exchange Commission (SEC) on June 25, 2010 and Citigroup's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.

        Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles, but is not required for interim reporting purposes, has been condensed or omitted.

        Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related footnote disclosures. While management makes its best judgment, actual results could differ from those estimates. Current market conditions increase the risk and complexity of the judgments in these estimates.

        Certain reclassifications have been made to the prior-period's financial statements to conform to the current period's presentation.

        As noted above, the Notes to Consolidated Financial Statements are unaudited.

Citibank, N.A.

        Citibank, N.A. is a commercial bank and wholly owned subsidiary of Citigroup Inc. Citibank's principal offerings include consumer finance, mortgage lending, and retail banking products and services; investment banking, commercial banking, cash management, trade finance and e-commerce products and services; and private banking products and services.

        The Company includes a balance sheet and statement of changes in stockholder's equity for Citibank, N.A. to provide information about this entity to shareholders of Citigroup and international regulatory agencies (see Note 21 to the Consolidated Financial Statements for further information).

Significant Accounting Policies

        The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified six policies as being significant because they require management to make subjective and/or complex judgments about matters that are inherently uncertain. These policies relate to Valuations of Financial Instruments, Allowance for Credit Losses, Securitizations, Goodwill, Income Taxes and Legal Reserves. The Company, in consultation with the Audit Committee of the Board of Directors, has reviewed and approved these significant accounting policies, which are further described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

        A detailed discussion of the Company's accounting policies is included in Citigroup's updated 2009 historical financial statements and notes filed on Form 8-K with the SEC on June 25, 2010.

Principles of Consolidation

        The Consolidated Financial Statements include the accounts of the Company. The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of the voting rights or where it exercises control. Entities where the Company holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence, other than investments of designated venture capital subsidiaries, or investments accounted for at fair value under the fair value option, are accounted for under the equity method, and the pro rata share of their income (loss) is included in Other revenue. Income from investments in less than 20%-owned companies is recognized when dividends are received. As discussed below, Citigroup consolidates entities deemed to be variable interest entities when Citigroup is determined to be the primary beneficiary. Gains and losses on the disposition of branches, subsidiaries, affiliates, buildings, and other investments and charges for management's estimate of impairment in their value that is other than temporary, such that recovery of the carrying amount is deemed unlikely, are included in Other revenue.

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ACCOUNTING CHANGES

Change in Accounting for Embedded Credit Derivatives

        In March 2010, the FASB issued ASU 2010-11, Scope Exception Related to Embedded Credit Derivatives. The ASU clarifies that certain embedded derivatives, such as those contained in certain securitizations, CDOs and structured notes, should be considered embedded credit derivatives subject to potential bifurcation and separate fair value accounting. The ASU allows any beneficial interest issued by a securitization vehicle to be accounted for under the fair value option at transition on July 1, 2010.

        The Company has elected to account for the following beneficial interests issued by securitization vehicles under the fair value option. Beneficial interests previously classified as held-to-maturity (HTM) were reclassified to available-for-sale (AFS) on June 30, 2010, because as of that reporting date, the Company did not have the intent to hold the beneficial interests until maturity.

        The following table also shows the gross gains and gross losses that make up the pre-tax cumulative-effect adjustment to retained earnings for reclassified beneficial interests, recorded on July 1, 2010:

 
   
  July 1, 2010    
 
 
   
  Pre-tax Cumulative effect adjustment to Retained earnings    
 
In millions of dollars at June 30, 2010   Amortized cost   Gross unrealized losses
recognized in AOCI(1)
  Gross unrealized gains
recognized in AOCI
  Fair Value  

Mortgage-backed securities

                         
 

Prime

  $ 390   $   $ 49   $ 439  
 

Alt-A

    550         54     604  
 

Subprime

    221         6     227  
 

Non-U.S. residential

    2,249         38     2,287  
                   
 

Total mortgage-backed securities

  $ 3,410   $   $ 147   $ 3,557  
                   

Asset-backed securities

                         
 

Auction rate securities

  $ 4,463   $ 401   $ 48   $ 4,110  
 

Other asset-backed

    4,189     19     164     4,334  
                   

Total asset-backed securities

  $ 8,652   $ 420   $ 212   $ 8,444  
                   

Total reclassified debt securities

  $ 12,062   $ 420   $ 359   $ 12,001  
                   

(1)
All reclassified debt securities with gross unrealized losses were assessed for other-than-temporary-impairment as of June 30, 2010, including an assessment of whether the Company intends to sell the security. For securities that the Company intends to sell, impairment charges of $176 million were recorded in earnings in the second quarter of 2010.

        Beginning July 1, 2010, the Company elected to account for these beneficial interests under the fair value option for various reasons, including:

Additional Disclosures Regarding Fair Value Measurements

        In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. The ASU requires disclosing the amounts of significant transfers in and out of Levels 1 and 2 of the fair value hierarchy and describing the reasons for the transfers. The disclosures are effective for reporting periods beginning after December 15, 2009. The Company adopted ASU 2010-06 as of January 1, 2010. The required disclosures are included in Note 16. Additionally, disclosures of the gross purchases, sales, issuances and settlements activity in Level 3 of the fair value measurement hierarchy will be required for fiscal years beginning after December 15, 2010.

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Elimination of Qualifying Special Purpose Entities (QSPEs) and Changes in the Consolidation Model for VIEs

        In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166, now incorporated into ASC Topic 860) and SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167, now incorporated into ASC Topic 810). Citigroup adopted both standards on January 1, 2010. Citigroup has elected to apply SFAS 166 and SFAS 167 prospectively. Accordingly, prior periods have not been restated.

        SFAS 166 eliminates QSPEs. SFAS 167 details three key changes to the consolidation model. First, former QSPEs are now included in the scope of SFAS 167. Second, the FASB has changed the method of analyzing which party to a VIE should consolidate the VIE (known as the primary beneficiary) to a qualitative determination of which party to the VIE has "power," combined with potentially significant benefits or losses, instead of the previous quantitative risks and rewards model. The party that has "power" has the ability to direct the activities of the VIE that most significantly impact the VIE's economic performance. Third, the new standard requires that the primary beneficiary analysis be re-evaluated whenever circumstances change. The previous rules required reconsideration of the primary beneficiary only when specified reconsideration events occurred.

        As a result of implementing these new accounting standards, Citigroup consolidated certain of the VIEs and former QSPEs with which it currently has involvement. Further, certain asset transfers, including transfers of portions of assets, that would have been considered sales under SFAS 140, are considered secured borrowings under the new standards.

        In accordance with SFAS 167, Citigroup employed three approaches for newly consolidating certain VIEs and former QSPEs as of January 1, 2010. The first approach requires initially measuring the assets, liabilities, and noncontrolling interests of the VIEs and former QSPEs at their carrying values (the amounts at which the assets, liabilities, and noncontrolling interests would have been carried in the Consolidated Financial Statements, if Citigroup had always consolidated these VIEs and former QSPEs). The second approach measures assets at their unpaid principal amount, and is applied where using carrying values is not practicable. The third approach is to elect the fair value option, in which all of the financial assets and liabilities of certain designated VIEs and former QSPEs are recorded at fair value upon adoption of SFAS 167 and continue to be marked-to-market thereafter, with changes in fair value reported in earnings.

        Citigroup consolidated all required VIEs and former QSPEs, as of January 1, 2010, at carrying values or unpaid principal amounts, except for certain private label residential mortgage and mutual fund deferred sales commissions VIEs, for which the fair value option was elected. The following tables present the impact of adopting these new accounting standards applying these approaches.

        The incremental impact of these changes on GAAP assets and resulting risk-weighted assets for those VIEs and former QSPEs that were consolidated or deconsolidated for accounting purposes as of January 1, 2010 was as follows:

 
  Incremental  
In billions of dollars   GAAP
assets
  Risk-
weighted
assets(3)
 

Impact of consolidation

             

Credit cards

  $ 86.3   $ 0.8  

Commercial paper conduits

    28.3     13.0  

Student loans

    13.6     3.7  

Private label consumer mortgages

    4.4     1.3  

Municipal tender option bonds

    0.6     0.1  

Collateralized loan obligations

    0.5     0.5  

Mutual fund deferred sales commissions

    0.5     0.5  
           
 

Subtotal

  $ 134.2   $ 19.9  
           

Impact of deconsolidation

             

Collateralized debt obligations(1)

  $ 1.9   $ 3.6  

Equity-linked notes(2)

    1.2     0.5  
           

Total

  $ 137.3   $ 24.0  
           

(1)
The implementation of SFAS 167 resulted in the deconsolidation of certain synthetic and cash collateralized debt obligation (CDO) VIEs that were previously consolidated under the requirements of ASC 810 (FIN 46(R)). Due to the deconsolidation of these synthetic CDOs, Citigroup's Consolidated Balance Sheet now reflects the recognition of current receivables and payables related to purchased and written credit default swaps entered into with these VIEs, which had previously been eliminated in consolidation. The deconsolidation of certain cash CDOs has a minimal impact on GAAP assets, but causes a sizable increase in risk-weighted assets. The impact on risk-weighted assets results from replacing, in Citigroup's trading account, largely investment grade securities owned by these VIEs when consolidated, with Citigroup's holdings of non-investment grade or unrated securities issued by these VIEs when deconsolidated.

(2)
Certain equity-linked note client intermediation transactions that had previously been consolidated under the requirements of ASC 810 (FIN 46 (R)) because Citigroup had repurchased and held a majority of the notes issued by the VIE were deconsolidated with the implementation of SFAS 167, because Citigroup does not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. Upon deconsolidation, Citigroup's Consolidated Balance Sheet reflects both the equity-linked notes issued by the VIEs and held by Citigroup as trading assets, as well as related trading liabilities in the form of prepaid equity derivatives. These trading assets and trading liabilities were formerly eliminated in consolidation.

(3)
The net increase in risk-weighted assets (RWA) was $10 billion, principally reflecting the deduction from gross RWA of $13 billion of loan loss reserves (LLR) recognized from the adoption of SFAS 166/167, which exceeded the 1.25% limitation on LLRs includable in Tier 2 Capital.

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        The following table reflects the incremental impact of adopting SFAS 166/167 on Citigroup's GAAP assets, liabilities, and stockholders' equity.

In billions of dollars   January 1,
2010
 

Assets

       

Trading account assets

  $ (9.9 )

Investments

    (0.6 )

Loans

    159.4  
 

Allowance for loan losses

    (13.4 )

Other assets

    1.8  
       

Total assets

  $ 137.3  
       

Liabilities

       

Short-term borrowings

  $ 58.3  

Long-term debt

    86.1  

Other liabilities

    1.3  
       

Total liabilities

  $ 145.7  
       

Stockholders' equity

       

Retained earnings

  $ (8.4 )
       

Total stockholders' equity

    (8.4 )
       

Total liabilities and stockholders' equity

  $ 137.3  
       

        The preceding tables reflect: (i) the portion of the assets of former QSPEs to which Citigroup, acting as principal, had transferred assets and received sales treatment prior to January 1, 2010 (totaling approximately $712.0 billion), and (ii) the assets of significant VIEs as of January 1, 2010 with which Citigroup is involved (totaling approximately $219.2 billion) that were previously unconsolidated and are required to be consolidated under the new accounting standards. Due to the variety of transaction structures and the level of Citigroup involvement in individual former QSPEs and VIEs, only a portion of the former QSPEs and VIEs with which the Company is involved were required to be consolidated.

        In addition, the cumulative effect of adopting these new accounting standards as of January 1, 2010 resulted in an aggregate after-tax charge to Retained earnings of $8.4 billion, reflecting the net effect of an overall pretax charge to Retained earnings (primarily relating to the establishment of loan loss reserves and the reversal of residual interests held) of $13.4 billion and the recognition of related deferred tax assets amounting to $5.0 billion.

        The impact on certain of Citigroup's regulatory capital ratios of adopting these new accounting standards, reflecting immediate implementation of the recently issued final risk-based capital rules regarding SFAS 166/167, was as follows:

 
  As of January 1, 2010  
 
  Impact  

Tier 1 Capital

    (141) bps  

Total Capital

    (142) bps  
       

Non-consolidation of Certain Investment Funds

        The FASB issued Accounting Standards Update No. 2010-10, Consolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10) in the first quarter of 2010. ASU 2010-10 provides a deferral to the requirements of SFAS 167 where the following criteria are met:

The Company has determined that a majority of the investment vehicles managed by Citigroup are provided a deferral from the requirements of SFAS 167, because they meet these criteria. These vehicles continue to be evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R)).

        Where the Company has determined that certain investment vehicles are subject to the consolidation requirements of SFAS 167, the consolidation conclusions reached upon initial application of SFAS 167 are consistent with the consolidation conclusions reached under the requirements of ASC 810-10, prior to the implementation of SFAS 167.

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Investments in Certain Entities that Calculate Net Asset Value per Share

        As of December 31, 2009, the Company adopted Accounting Standards Update (ASU) No. 2009-12, Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent), which provides guidance on measuring the fair value of certain alternative investments. The ASU permits entities to use net asset value as a practical expedient to measure the fair value of their investments in certain investment funds. The ASU also requires additional disclosures regarding the nature and risks of such investments and provides guidance on the classification of such investments as Level 2 or Level 3 of the fair value hierarchy. This ASU did not have a material impact on the Company's accounting for its investments in alternative investment funds.

Multiple Foreign Exchange Rates

        In May 2010, the FASB issued ASU 2010-19, Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The ASU requires certain disclosure in situations when an entity's reported balances in U.S. dollar monetary assets held by its foreign entities differ from the actual U.S. dollar-denominated balances due to different foreign exchange rates used in remeasurement and translation. The ASU also clarifies the reporting for the difference between the reported balances and the U.S. dollar-denominated balances upon the initial adoption of highly inflationary accounting. The ASU does not have a material impact on the Company's accounting.

Effect of a Loan Modification When the Loan is Part of a Pool Accounted for as a Single Asset (ASU No. 2010-18)

        In April 2010, the FASB issued ASU No. 2010-18, Effect of a Loan Modification When the Loan is Part of a Pool Accounted for as a Single Asset. As a result of the amendments in this ASU, modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool, even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The ASU was effective for reporting periods ending on or after July 15, 2010. The ASU had no material effect on the Company's financial statements.

FUTURE APPLICATIONS OF ACCOUNTING STANDARDS

Loss-Contingency Disclosures

        In July 2010, the FASB issued a second exposure draft proposing expanded disclosures regarding loss contingencies. This proposal increases the number of loss contingencies subject to disclosure and requires substantial quantitative and qualitative information to be provided about those loss contingencies. The proposal will have no impact on the Company's accounting for loss contingencies.

Credit Quality and Allowance for Credit Losses Disclosures

        In July 2010, the FASB issued ASU No. 2010-20, Disclosures about Credit Quality of Financing Receivables and Allowance for Credit Losses. The ASU requires a greater level of disaggregated information about the allowance for credit losses and the credit quality of financing receivables. The period-end balance disclosure requirements for loans and the allowance for loans losses will be effective for reporting periods ending on or after December 15, 2010, while disclosures for activity during a reporting period that occurs in the loan and allowance for loan losses accounts will be effective for reporting periods beginning on or after December 15, 2010.

Potential Amendments to Current Accounting Standards

        The FASB is currently working on amendments to existing accounting standards governing financial instruments and lease accounting. Upon completion of the standards, the Company will need to re-evaluate its accounting and disclosures. The FASB is proposing sweeping changes to the classification and measurement of financial instruments, hedging and impairment guidance. The FASB is also working on a project that would require all leases to be capitalized on the balance sheet. These projects will have significant impacts for the Company. However, due to ongoing deliberations of the standard-setters, the Company is currently unable to determine the effect of future amendments or proposals at this time. The FASB and IASB are currently working on several joint projects aimed at converging the two sets of accounting standards. However, the two Boards have proposed very different models for the Financial Instruments project. Due to certain differences between the FASB and IASB models, Citi believes achieving convergence will be challenging.

Investment Company Audit Guide (SOP 07-1)

        In July 2007, the AICPA issued Statement of Position 07-1, "Clarification of the Scope of the Audit and Accounting Guide for Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies" (SOP 07-1) (now incorporated into ASC 946-10, Financial Services-Investment Companies), which was expected to be effective for fiscal years beginning on or after December 15, 2007. However, in February 2008, the FASB delayed the effective date indefinitely by issuing an FSP SOP 07-1-1, "Effective Date of AICPA Statement of Position 07-1." This statement sets forth more stringent

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criteria for qualifying as an investment company than does the predecessor Audit Guide. In addition, ASC 946-10 (SOP 07-1) establishes new criteria for a parent company or equity method investor to retain investment company accounting in their consolidated financial statements. Investment companies record all their investments at fair value with changes in value reflected in earnings. The Company is currently evaluating the potential impact of adopting the SOP.

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2.    DISCONTINUED OPERATIONS

Sale of The Student Loan Corporation

        On September 17, 2010, the Company announced that The Student Loan Corporation (SLC), an indirect subsidiary that is 80% owned by Citibank and 20% owned by public shareholders which is part of the CitiHolding segment, had entered into definitive agreements that will result in the divestiture of Citi's private student loan business and approximately $31 billion of its approximately $41 billion in assets to Discover Financial Services (Discover) and SLM Corporation (Sallie Mae). The sale is currently expected to close in the fourth quarter of 2010.

        This sale is reported as discontinued operations for the third quarter of 2010 only. Prior periods were not reclassified due to the immateriality of the impact in those periods. The total third quarter of 2010 loss on the sale of The Student Loan Corporation of ($454) million is composed of ($63) million in Continuing Operations and, ($447) million in Discontinued Operations, partially offset by $56 million in Noncontrolling Interests (Minority Interests).

        Total assets and total liabilities (after impairment) of $31 billion and $30 billion, respectively associated with the sale of SLC are included in Assets of discontinued operations held for sale and Liabilities of discontinued operations held for sale on the Consolidated Balance Sheet.

        Additionally, as part of the transactions, Citibank, N.A. will purchase approximately $8.7 billion of assets from SLC. Prior to the sale of SLC, sold $4.7 billion in FFELP loans were sold to the Department of Education, as previously disclosed by SLC.

        The following is a summary as of September 30, 2010 of the assets and liabilities of Discontinued operations held for sale on the Consolidated Balance Sheet for the operations related to the SLC business to be sold:

In millions of dollars   September 30,
2010
 

Assets

       

Loans, net of unearned income

  $ 30,284  

Allowance for loan losses

    (54 )
       
 

Total loans, net

    30,230  

Other assets

    1,179  
       

Total assets

  $ 31,409  
       

Liabilities

       

Long-term debt

  $ 29,556  

Other liabilities

    318  
       

Total liabilities

  $ 29,874  
       

        Summarized financial information for discontinued operations, including cash flows, related to the sale of SLC follows:

In millions of dollars   Three and Nine Months
Ended Sept. 30,
2010
 

Total revenues, net of interest expense

  $ (670 )
       

Income (loss) from discontinued operations

  $ 20  

Loss on sale

    (820 )

Benefit for income taxes

    (365 )
       

Loss from discontinued operations, net of taxes

  $ (435 )
       

 

In millions of dollars   Nine Months
Ended Sept. 30,
2010
 

Cash flows from operating activities

  $ 4,839  

Cash flows from investing activities

    694  

Cash flows from financing activities

    (5,533 )
       

Net cash provided by discontinued operations

  $  
       

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Sale of Nikko Cordial

        On October 1, 2009, the Company announced the successful completion of the sale of Nikko Cordial Securities to Sumitomo Mitsui Banking Corporation. The transaction had a total cash value to Citi of 776 billion yen (U.S. $8.7 billion at an exchange rate of 89.60 yen to U.S. $1.00 as of September 30, 2009). The cash value is composed of the purchase price for the transferred business of 545 billion yen, the purchase price for certain Japanese-listed equity securities held by Nikko Cordial Securities of 30 billion yen, and 201 billion yen of excess cash derived through the repayment of outstanding indebtedness to Citi. After considering the impact of foreign exchange hedges of the proceeds of the transaction, the sale resulted in an immaterial gain in 2009. A total of about 7,800 employees are included in the transaction.

        The Nikko Cordial operations had total assets and total liabilities of approximately $24 billion and $16 billion, respectively, at the time of sale, which were reflected in Citi Holdings prior to the sale.

        Results for all of the Nikko Cordial businesses sold are reported as Discontinued operations for all periods presented.

        Summarized financial information for Discontinued operations, including cash flows, related to the sale of Nikko Cordial is as follows:

 
  Three Months
Ended Sept. 30,
  Nine Months
Ended Sept. 30,
 
In millions of dollars   2010   2009   2010   2009  

Total revenues, net of interest expense

  $   $ 173   $ 92   $ 553  
                   

Loss from discontinued operations

  $   $ (221 ) $ (7 ) $ (603 )

Gain on sale

            94      

Provision (benefit) for income taxes

      $ 208     (122 ) $ 75  
                   

Income (loss) from discontinued operations, net of taxes

  $   $ (429 ) $ 209   $ (678 )
                   

 

 
  Nine Months
Ended Sept. 30,
 
In millions of dollars   2010   2009  

Cash flows from operating activities

  $ (134 ) $ (1,830 )

Cash flows from investing activities

    185     1,727  

Cash flows from financing activities

         
           

Net cash provided by (used in) discontinued operations

  $ 51   $ (103 )
           

Combined Results for Discontinued Operations

        The following is summarized financial information for the SLC business, Nikko Cordial business, German retail banking operations and CitiCapital business. The German retail banking operation, which was sold on December 5, 2008, and the Citi Capital business, which was sold on July 31, 2008, continue to have minimal residual costs associated with the sales. However, during the third quarter of 2010, the Company completed an income tax audit in Germany related to the business sold in 2008. As a result of completing this audit, the Company has released reserves approximately $68 million. Additionally, contingency consideration payments received during the first quarter of 2009 of $29 million pretax ($19 million after-tax) related to the sale of Citigroup's Asset Management business, which was sold in December 2005, is also included in these balances.

 
  Three Months
Ended Sept. 30,
  Nine Months
Ended Sept. 30,
 
In millions of dollars   2010   2009   2010   2009  

Total revenues, net of interest expense

  $ (629 ) $ 205   $ (494 ) $ 651  
                   

Income (loss) from discontinued operations

  $ 8   $ (204 ) $   $ (635 )

Loss on sale

    (784 )       (690 )   2  

(Benefit) provision for income taxes

    (402 )   214     (524 )   44  
                   

Loss from discontinued operations, net of taxes

  $ (374 ) $ (418 ) $ (166 ) $ (677 )
                   

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Cash flows from discontinued operations

 
  Nine Months
Ended Sept. 30,
 
In millions of dollars   2010   2009  

Cash flows from operating activities

  $ 4,707   $ (1,824 )

Cash flows from investing activities

    880     1,757  

Cash flows from financing activities

    (5,536 )   (7 )
           

Net cash provided by discontinued operations

  $ 51   $ (74 )
           

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3.    BUSINESS SEGMENTS

        The following table presents certain information regarding the Company's operations by segment:

 
  Revenues, net
of interest expense(1)
  Provision (benefit)
for income taxes
  Income (loss) from
continuing operations(1)(2)
  Identifiable assets  
 
  Three Months Ended September 30,    
   
 
In millions of dollars, except
identifiable assets in billions
  Sep. 30,
2010
  Dec. 31,
2009
 
  2010   2009   2010   2009   2010   2009  

Regional Consumer Banking

  $ 8,161   $ 6,120   $ 476   $ (203 ) $ 1,232   $ 704   $ 320   $ 257  

Institutional Clients Group

    8,128     7,348     734     460     2,332     1,786     963     882  
                                   
 

Subtotal Citicorp

    16,289     13,468     1,210     257     3,564     2,490     1,283     1,139  

Citi Holdings

    3,853     6,250     (590 )   (1,513 )   (1,054 )   (1,994 )   421     487  

Corporate/Other

    596     672     78     134     91     97     279     231  
                                   

Total

  $ 20,738   $ 20,390   $ 698   $ (1,122 ) $ 2,601   $ 593   $ 1,983   $ 1,857  
                                   

 

 
  Revenues, net
of interest expense(1)
  Provision (benefit)
for income taxes
  Income (loss) from
continuing operations(1)(2)
 
 
  Nine Months Ended September 30,  
 
  2010   2009   2010   2009   2010   2009  

Regional Consumer Banking

  $ 24,275   $ 18,674   $ 1,039   $ (40 ) $ 3,423   $ 1,919  

Institutional Clients Group

    27,025     31,106     3,504     4,821     9,098     11,638  
                           
 

Subtotal Citicorp

    51,300     49,780     4,543     4,781     12,521     13,557  

Citi Holdings

    15,322     24,669     (2,182 )   (4,312 )   (3,127 )   (6,297 )

Corporate/Other

    1,608     431     185     151     184     (586 )
                           

Total

  $ 68,230   $ 74,880   $ 2,546   $ 620   $ 9,578   $ 6,674  
                           

(1)
Includes Citicorp total revenues, net of interest expense, in North America of $6.6 billion and $4.0 billion; in EMEA of $2.9 billion and $3.5 billion; in Latin America of $3.3 billion and $3.0 billion; and in Asia of $3.5 billion and $3.0 billion for the three months ended September 30, 2010 and 2009, respectively. Includes Citicorp total revenues, net of interest expense, in North America of $21.5 billion and $16.6 billion; in EMEA of $9.7 billion and $12.7 billion; in Latin America of $9.3 billion and $9.4 billion; and in Asia of $10.8 billion and $11.1 billion for the nine months ended September 30, 2010 and 2009, respectively. Regional numbers exclude Citi Holdings and Corporate/Other, which largely operate within the U.S.

(2)
Includes pretax provisions (credits) for credit losses and for benefits and claims in the Regional Consumer Banking results of $2.4 billion and $1.8 billion; in the ICG results of $266 million and $458 million; and in the Citi Holdings results of $3.3 billion and $6.8 billion for the three months ended September 30, 2010 and 2009, respectively. Includes pretax provisions (credits) for credit losses and for benefits and claims in the Regional Consumer Banking results of $7.8 billion and $5.8 billion; in the ICG results of $(29) million and $1.7 billion; and in the Citi Holdings results of $13.4 billion and $24.5 billion for the nine months ended September 30, 2010 and 2009, respectively.

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4.    INTEREST REVENUE AND EXPENSE

        For the three- and nine-month periods ended September 30, 2010 and 2009, interest revenue and expense consisted of the following:

 
  Three Months
Ended September 30,
  Nine Months
Ended September 30,
 
In millions of dollars   2010   2009   2010   2009  

Interest revenue

                         

Loan interest, including fees

  $ 13,332   $ 11,601   $ 42,232   $ 36,385  

Deposits with banks

    318     313     899     1,126  

Federal funds sold and securities purchased under agreements to resell

    807     728     2,340     2,407  

Investments, including dividends

    2,611     3,283     8,706     9,894  

Trading account assets(1)

    2,026     2,654     5,909     8,526  

Other interest

    277     99     555     594  
                   

Total interest revenue

  $ 19,371   $ 18,678   $ 60,641   $ 58,932  
                   

Interest expense

                         

Deposits(2)

  $ 2,130   $ 2,298   $ 6,246   $ 7,986  

Federal funds purchased and securities loaned or sold under agreements to repurchase

    671     772     2,122     2,807  

Trading account liabilities(1)

    108     43     277     220  

Short-term borrowings

    213     350     704     1,128  

Long-term debt

    3,003     3,217     9,446     9,038  
                   

Total interest expense

  $ 6,125   $ 6,680   $ 18,795   $ 21,179  
                   

Net interest revenue

  $ 13,246   $ 11,998   $ 41,846   $ 37,753  

Provision for loan losses

    5,666     8,771     20,555     30,919  
                   

Net interest revenue after provision for loan losses

  $ 7,580   $ 3,227   $ 21,291   $ 6,834  
                   

(1)
Interest expense on Trading account liabilities of ICG is reported as a reduction of interest revenue from Trading account assets.

(2)
Includes FDIC deposit insurance fees and charges of $226 million and $285 million for the three months ended September 30, 2010 and September 30, 2009, and $691 million and $1,254 million for the nine months ended September 30, 2010 and September 30, 2009, respectively. The nine months ended September 30, 2009 FDIC insurance fees include the one-time FDIC special assessment of $333 million

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5.    COMMISSIONS AND FEES

        Commissions and fees revenue includes charges to customers for credit and bank cards, including transaction-processing fees and annual fees; advisory and equity and debt underwriting services; lending and deposit-related transactions, such as loan commitments, standby letters of credit and other deposit and loan servicing activities; investment management-related fees, including brokerage services and custody and trust services; and insurance fees and commissions.

        The following table presents commissions and fees revenue for the three and nine months ended September 30:

 
  Three Months
Ended September 30,
  Nine Months
Ended September 30,
 
In millions of dollars   2010   2009   2010   2009  

Credit cards and bank cards

  $ 1,013   $ 1,048   $ 2,977   $ 3,025  

Investment banking

    683     784     2,001     2,659  

Smith Barney

        1         837  

ICG trading-related

    429     502     1,431     1,400  

Transaction services

    374     336     1,085     980  

Other consumer

    303     324     933     935  

Checking-related

    256     261     789     773  

Other ICG

    79     93     256     281  

Primerica-related (prior to March 2010)

        78     91     227  

Loan servicing(1)

    (29 )   141     253     167  

Corporate finance

    137     130     320     551  

Other

    3         (14 )   (69 )
                   

Total commissions and fees

  $ 3,248   $ 3,698   $ 10,122   $ 11,766  
                   

(1)
Beginning in the second quarter of 2010, for clarity purposes, Citigroup has reclassified the MSR mark-to-market and MSR hedging activities from multiple income statement lines together into Other revenue. All periods presented reflect this reclassification.

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6.    PRINCIPAL TRANSACTIONS

        Principal transactions revenue consists of realized and unrealized gains and losses from trading activities. Trading activities include revenues from fixed income, equities, credit and commodities products, as well as foreign exchange transactions. Not included in the table below is the impact of net interest revenue related to trading activities, which is an integral part of trading activities' profitability. The following tables present principal transactions revenue for the three- and nine-month periods ended September 30, 2010 and 2009:

 
  Three Months
Ended September 30,
  Nine Months
Ended September 30,
 
In millions of dollars   2010(1)   2009(1)   2010(1)   2009(1)  

Regional Consumer Banking

  $ 150   $ 149   $ 399   $ 1,094  

Institutional Clients Group

    982     (571 )   5,958     7,259  
                   
 

Subtotal Citicorp

  $ 1,132   $ (422 ) $ 6,357   $ 8,353  

Local Consumer Lending

    (36 )   389     (190 )   917  

Brokerage and Asset Management

    1     1     (27 )   25  

Special Asset Pool

    343     1,385     2,094     (2,863 )
                   
 

Subtotal Citi Holdings

  $ 308   $ 1,775   $ 1,877   $ (1,921 )

Corporate/Other

    88     (10 )   (336 )   612  
                   

Total Citigroup

  $ 1,528   $ 1,343   $ 7,898   $ 7,044  
                   

 

 
  Three Months
Ended September 30,
  Nine Months
Ended September 30,
 
In millions of dollars   2010(1)   2009(1)   2010(1)   2009(1)  

Interest rate contracts(2)

  $ 76   $ 166   $ 3,718   $ 6,619  

Foreign exchange contracts(3)

    992     522     1,495     2,386  

Equity contracts(4)

    468     (353 )   783     550  

Commodity and other contracts(5)

    (33 )   162     197     989  

Credit derivatives(6)

    25     846     1,705     (3,500 )
                   

Total Citigroup

  $ 1,528   $ 1,343   $ 7,898   $ 7,044  
                   

(1)
Beginning in the second quarter of 2010, for clarity purposes, Citigroup has reclassified the MSR mark-to-market and MSR hedging activities from multiple income statement lines together into Other Revenue. All periods presented reflect this reclassification.

(2)
Includes revenues from government securities and corporate debt, municipal securities, preferred stock, mortgage securities and other debt instruments. Also includes options on fixed income securities, interest rate swaps, swap options, caps and floors, financial futures, over-the-counter (OTC) options and forward contracts on fixed income securities.

(3)
Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as translation gains and losses.

(4)
Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes, and exchange-traded and OTC equity options and warrants.

(5)
Primarily includes revenues from crude oil, refined oil products, natural gas, and other commodities trades.

(6)
Includes revenues from structured credit products.

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7.    RETIREMENT BENEFITS AND INCENTIVE PLANS

        The Company has several non-contributory defined benefit pension plans covering certain U.S. employees and has various defined benefit pension and termination-indemnity plans covering employees outside the United States. Effective January 1, 2008, the U.S. qualified pension plan was frozen for most employees. Accordingly, no additional compensation-based contributions have been credited to cash balance accounts for existing plan participants after December 31, 2007. However, employees still covered under certain prior final pay formulas continue to accrue benefits. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the United States.

        The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Act") were signed into law in the U.S. in March 2010. One provision of the Act that impacts Citigroup is the elimination of the tax deductibility for benefits paid that are related to the retiree Medicare Part D subsidy starting in 2013. Citigroup is required to recognize the full accounting impact in the period in which the Act is signed, which resulted in a $45 million reduction in deferred tax assets with a corresponding charge to income from continuing operations in the first quarter of 2010. The other provisions of the Act are not expected to have a significant impact on Citigroup's pension and post-retirement plans.

        The following tables summarize the components of net (benefit) expense recognized in the Consolidated Statement of Income for the Company's U.S. qualified pension plan, post-retirement plans and plans outside the United States. The Company uses a December 31 measurement date for the U.S. plans, as well as the plans outside the United States.

Net (Benefit) Expense

 
  Three Months Ended September 30,  
 
  Pension Plans   Postretirement Benefit Plans  
 
  U.S. plans(1)   Non-U.S. plans   U.S. plans   Non-U.S. plans  
In millions of dollars   2010   2009   2010   2009   2010   2009   2010   2009  

Benefits earned during the period

  $ 4   $ 1   $ 43   $ 38   $   $ 1   $ 5   $ 7  

Interest cost on benefit obligation

    161     177     84     78     15     16     26     23  

Expected return on plan assets

    (220 )   (232 )   (94 )   (87 )   (2 )   (2 )   (24 )   (19 )

Amortization of unrecognized

                                                 
 

Net transition obligation

            (1 )   (1 )                
 

Prior service cost (benefit)

            1     1     (1 )   (1 )        
 

Net actuarial loss

    12     (1 )   14     18     3         5     4  
 

Curtailment (gain) loss

        29                          
                                   

Net (benefit) expense

  $ (43 ) $ (26 ) $ 47   $ 47   $ 15   $ 14   $ 12   $ 15  
                                   

(1)
The U.S. plans exclude nonqualified pension plans, for which the net expense was million $11 million and $12 million for the three months ended September 30, 2010 and 2009, respectively.

 
  Nine Months Ended September 30,  
 
  Pension Plans   Postretirement Benefit Plans  
 
  U.S. plans(1)   Non-U.S. plans   U.S. plans   Non-U.S. plans  
In millions of dollars   2010   2009   2010   2009   2010   2009   2010   2009  

Benefits earned during the period

  $ 13   $ 13   $ 125   $ 109   $   $ 1   $ 17   $ 20  

Interest cost on benefit obligation

    480     503     254     222     44     46     78     66  

Expected return on plan assets

    (643 )   (690 )   (281 )   (249 )   (6 )   (7 )   (74 )   (57 )

Amortization of unrecognized

                                                 
 

Net transition obligation

            (1 )   (1 )                
 

Prior service cost (benefit)

    (1 )   (1 )   3     3     1     (1 )        
 

Net actuarial loss

    34     1     42     51     5     1     15     13  
 

Curtailment (gain) loss

        29                          
                                   

Net (benefit) expense

  $ (117 ) $ (145 ) $ 142   $ 135   $ 44   $ 40   $ 36   $ 42  
                                   

(1)
The U.S. plans exclude nonqualified pension plans, for which the net expense was $33 million and $31 million for the nine months ended September 30, 2010 and 2009, respectively.

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Employer Contributions

        Citigroup's pension funding policy for U.S. and non-U.S. plans is generally to fund to applicable minimum funding requirements, rather than to the amounts of accumulated benefit obligations. For the U.S. qualified pension plan, the Company may increase its contributions above the minimum required contribution under the Employee Retirement Income Security Act of 1974, as amended, if appropriate to its tax and cash position and the plan's funded position. The Company made a discretionary cash contribution of $995 million to the U.S. qualified pension plan as of September 30, 2010. For the non-U.S. pension plans, the Company contributed $106 million as of September 30, 2010 and expects to contribute an additional $57 million in 2010. The Company also expects to contribute $33 million of benefits to be paid directly by the Company on behalf of the non-U.S. pension plans. For the non-U.S. postretirement benefit plans, expected cash contributions for 2010 are $74 million, which includes $3 million of benefits to be paid directly by the Company. These estimates are subject to change, since contribution decisions are affected by various factors, such as market performance and regulatory requirements; in addition, management has the ability to change funding policy.

Stock-Based Incentive Compensation

        The Company recognized compensation expense related to incentive plans of $641 million for the three months ended September 30, 2010, and $1,295 million for the nine months ended September 30, 2010. The Company granted 34 million shares as equity awards in the third quarter of 2010, of which 30 million shares were issued as "stock salary." Except for shares withheld by Citigroup to satisfy tax withholding obligations, shares delivered as stock salary are subject to sale restrictions. Stock salary, with respect to the first nine months of fiscal year 2010, will become transferable in nine equal monthly installments beginning on January 20, 2011. Shares with respect to any subsequent months in 2010 will become transferable approximately one year after the effective date of their delivery.

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8.    EARNINGS PER SHARE

        The following is a reconciliation of the income and share data used in the basic and diluted earnings per share (EPS) computations for the three and nine months ended September 30:

 
  Three Months
Ended September 30,
  Nine Months
Ended September 30,
 
In millions, except per-share amounts   2010   2009   2010   2009  

Income before attribution of noncontrolling interests

  $ 2,601   $ 593   $ 9,578   $ 6,674  

Noncontrolling interests from continuing operations

    110     74     170     24  
                   

Net income from continuing operations (for EPS purposes)

  $ 2,491   $ 519   $ 9,408   $ 6,650  

Income (loss) from discontinued operations, net of taxes

    (374 )   (418 )   (166 )   (677 )

Noncontrolling interests from discontinuing operations

    (51 )       (51 )    
                   

Citigroup's net income

  $ 2,168   $ 101   $ 9,293   $ 5,973  

Less:

                         
 

Preferred dividends

        272         2,988  
 

Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance

                1,285  
 

Preferred stock Series H discount accretion

        16         123  
 

Impact of the Public and Private preferred stock exchange offer

        3,055         3,055  
 

Dividends and undistributed earnings allocated to participating securities

    20         78     2  
                   

Net income (loss) allocated to unrestricted common shareholders for basic EPS

  $ 2,148   $ (3,242 ) $ 9,215   $ (1,480 )

Effect of dilutive securities

    1         2     540  
                   

Net income (loss) allocated to unrestricted common shareholders for diluted EPS

  $ 2,149   $ (3,242 ) $ 9,217   $ (940 )
                   

Weighted-average common shares outstanding applicable to basic EPS

    28,877.5     12,104.3     28,723.7     7,629.6  

Effect of dilutive securities

                         
 

TDECs

    876.2         878.4      
 

Other employee plans

    23.9         17.5      
 

Convertible securities

    0.7     111.7     0.7     416.1  
 

Options

            1.2      
                   

Adjusted weighted-average common shares outstanding applicable to diluted EPS

    29,778.3     12,216.0     29,621.5     8,045.7  
                   

Basic earnings per share

                         

Income (loss) from continuing operations

  $ 0.09   $ (0.23 ) $ 0.32   $ (0.10 )

Discontinued operations

    (0.02 )   (0.04 )       (0.09 )
                   

Net income (loss)

  $ 0.07   $ (0.27 ) $ 0.32   $ (0.19 )
                   

Diluted earnings per share

                         

Income (loss) from continuing operations

  $ 0.08   $ (0.23 ) $ 0.32   $ (0.10 )

Discontinued operations

    (0.01 )   (0.04 )   (0.01 )   (0.09 )
                   

Net income (loss)

  $ 0.07   $ (0.27 ) $ 0.31   $ (0.19 )
                   

        During the third quarters of 2010 and 2009, weighted-average options to purchase 384.7 million and 100.5 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per common share, because the weighted-average exercise prices of $9.58 and $41.29, respectively, were greater than the average market price of the Company's common stock during the quarter.

        Warrants issued to the U.S. Treasury as part of the Troubled Asset Relief Program (TARP) and the loss-sharing agreement, with exercise prices of $17.85 and $10.61 for approximately 210 million and 255 million shares of common stock, respectively, were not included in the computation of earnings per common share in 2010 and 2009, because they were anti-dilutive.

        Equity awards granted under the Management Committee Long-Term Incentive Plan (MC LTIP) were not included in the 2009 computation of earnings per common share, because the performance targets under the terms of the awards were not met and, as a result, the awards expired in the first quarter of 2010. In addition, the other performance-based equity awards of approximately 5 million shares were not included in the third quarters of 2010 and 2009 earnings per share calculation, because the performance targets under the terms of the awards were not met.

        Equity units convertible into approximately 118 million shares and 235 million shares of Citigroup common stock held by the Abu Dhabi Investment Authority (ADIA) were not included in the computation of earnings per common share in the third quarters of 2010 and 2009, respectively, because the exercise price of $31.83 was greater than the average market price of the Company's common stock.

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9.    TRADING ACCOUNT ASSETS AND LIABILITIES

        Trading account assets and Trading account liabilities, at fair value, consisted of the following at September 30, 2010 and December 31, 2009:

In millions of dollars   September 30,
2010
  December 31,
2009
 

Trading account assets

             

Mortgage-backed securities(1)

             
 

U.S. government agency guaranteed

  $ 23,782   $ 20,638  
 

Prime

    1,798     1,156  
 

Alt-A

    1,416     1,229  
 

Subprime

    1,854     9,734  
 

Non-U.S. residential

    2,829     2,368  
 

Commercial

    3,296     3,455  
           

Total mortgage-backed securities(1)

  $ 34,975   $ 38,580  
           

U.S. Treasury and federal agencies

             
 

U.S. Treasuries

  $ 23,785   $ 28,938  
 

Agency and direct obligations

    4,173     2,041  
           

Total U.S. Treasury and federal agencies

  $ 27,958   $ 30,979  
           

State and municipal securities

    6,729   $ 7,147  

Foreign government securities

    98,200     72,769  

Corporate

    51,989     51,985  

Derivatives(2)

    55,560     58,879  

Equity securities

    37,117     46,221  

Asset-backed securities(1)

    9,681     4,089  

Other debt securities

    14,889     32,124  
           

Total trading account assets

  $ 337,098   $ 342,773  
           

Trading account liabilities

             

Securities sold, not yet purchased

  $ 79,539   $ 73,406  

Derivatives(2)

    62,466     64,106  
           

Total trading account liabilities

  $ 142,005   $ 137,512  
           

(1)
The Company invests in mortgage-backed securities and asset-backed securities. Mortgage securitizations are generally considered VIEs. The Company's maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, information is provided in Note 14 to the Consolidated Financial Statements.

(2)
Presented net, pursuant to master netting agreements. See Note 15 to the Consolidated Financial Statements for a discussion regarding the accounting and reporting for derivatives.

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10.    INVESTMENTS

In millions of dollars   September 30,
2010
  December 31,
2009
 

Securities available-for-sale

  $ 295,682   $ 239,599  

Debt securities held-to-maturity(1)

    30,107     51,527  

Non-marketable equity securities carried at fair value(2)

    6,427     6,830  

Non-marketable equity securities carried at cost(3)

    8,034     8,163  
           

Total investments

  $ 340,250   $ 306,119  
           

(1)
Recorded at amortized cost, less impairment on securities that have credit-related impairment.

(2)
Unrealized gains and losses for non-marketable equity securities carried at fair value are recognized in earnings.

(3)
Non-marketable equity securities carried at cost primarily consist of shares issued by the Federal Reserve Bank, Federal Home Loan Bank, foreign central banks and various clearing houses of which Citigroup is a member.

Securities Available-for-Sale

        The amortized cost and fair value of securities available-for-sale (AFS) at September 30, 2010 and December 31, 2009 were as follows:

 
  September 30, 2010   December 31, 2009  
In millions of dollars   Amortized
cost
  Gross
unrealized
gains
  Gross
unrealized
Losses
  Fair
value
  Amortized
cost
  Gross
unrealized
gains
  Gross
unrealized
losses
  Fair
value
 

Debt securities AFS

                                                 

Mortgage-backed securities(1)

                                                 
 

U.S. government-agency guaranteed

  $ 22,197   $ 605   $ 45   $ 22,757   $ 20,625   $ 339   $ 50   $ 20,914  
 

Prime

    2,687     28     224     2,491     7,291     119     932     6,478  
 

Alt-A

    69     3     1     71     538     93     4     627  
 

Subprime

    1             1     1             1  
 

Non-U.S. residential

    340     1     1     340     258         3     255  
 

Commercial

    587     28     19     596     883     10     100     793  
                                   

Total mortgage-backed securities

  $ 25,881   $ 665   $ 290   $ 26,256   $ 29,596   $ 561   $ 1,089   $ 29,068  

U.S. Treasury and federal agency securities

                                                 
 

U.S. Treasury

    64,802     1,097     2     65,897     26,857     36     331     26,562  
 

Agency obligations

    48,750     400     4     49,146     27,714     46     208     27,552  
                                   

Total U.S. Treasury and federal agency securities

  $ 113,552   $ 1,497   $ 6   $ 115,043   $ 54,571   $ 82   $ 539   $ 54,114  

State and municipal

    16,391     293     2,118     14,566     16,677     147     1,214     15,610  

Foreign government

    102,718     1,349     212     103,855     101,987     860     328     102,519  

Corporate

    17,161     476     39     17,598     20,024     435     146     20,313  

Asset-backed securities(1)

    10,260     42     72     10,230     10,089     50     93     10,046  

Other debt securities

    2,202     34     95     2,141     2,179     21     77     2,123  
                                   

Total debt securities AFS

  $ 288,165   $ 4,356   $ 2,832   $ 289,689   $ 235,123   $ 2,156   $ 3,486   $ 233,793  
                                   

Marketable equity securities AFS

  $ 3,834   $ 2,433   $ 274   $ 5,993   $ 4,089   $ 1,929   $ 212   $ 5,806  
                                   

Total securities AFS

  $ 291,999   $ 6,789   $ 3,106   $ 295,682   $ 239,212   $ 4,085   $ 3,698   $ 239,599  
                                   

(1)
The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered VIEs. The Company's maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, information is provided in Note 14 to the Consolidated Financial Statements.

        As discussed in more detail below, the Company conducts and documents periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. Any credit-related impairment related to debt securities the Company does not intend to sell and is not likely to be required to sell is recognized in the Consolidated Statement of Income, with the non-credit-related impairment recognized in OCI. For other impaired debt securities that the Company intends to sell, the entire impairment is recognized in the Consolidated Statement of Income.

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        The table below shows the fair value of investments in AFS securities that have been in an unrealized loss position for less than 12 months or for 12 months or longer as of September 30, 2010 and December 31, 2009:

 
  Less than 12 months   12 months or longer   Total  
In millions of dollars   Fair
value
  Gross
unrealized
losses
  Fair
value
  Gross
unrealized
losses
  Fair
value
  Gross
unrealized
losses
 

September 30, 2010

                                     

Securities AFS

                                     

Mortgage-backed securities

                                     
 

U.S. government-agency guaranteed

  $ 5,474   $ 45   $ 18   $   $ 5,492   $ 45  
 

Prime

    169     4     1,822     220     1,991     224  
 

Alt-A

    10         2     1     12     1  
 

Subprime

                         
 

Non-U.S. residential

            209     1     209     1  
 

Commercial

    48     12     50     7     98     19  
                           

Total mortgage-backed securities

  $ 5,701   $ 61   $ 2,101   $ 229   $ 7,802   $ 290  

U.S. Treasury and federal agency securities

                                     
 

U.S. Treasury

    2,456     2     51         2,507     2  
 

Agency obligations

    3,847     4     1         3,848     4  
                           

Total U.S. Treasury and federal agency securities

  $ 6,303   $ 6   $ 52   $   $ 6,355   $ 6  

State and municipal

    880     40     11,897     2,078     12,777     2,118  

Foreign government

    23,085     116     4,588     96     27,673     212  

Corporate

    656     22     305     17     961     39  

Asset-backed securities

    280     8     303     64     583     72  

Other debt securities

            632     95     632     95  

Marketable equity securities AFS

    69     31     2,033     243     2,102     274  
                           

Total securities AFS

  $ 36,974   $ 284   $ 21,911   $ 2,822   $ 58,885   $ 3,106  
                           

December 31, 2009

                                     

Securities AFS

                                     

Mortgage-backed securities

                                     
 

U.S. government-agency guaranteed

  $ 6,793   $ 47   $ 263   $ 3   $ 7,056   $ 50  
 

Prime

    5,074     905     228     27     5,302     932  
 

Alt-A

    106         35     4     141     4  
 

Subprime

                         
 

Non-U.S. residential

    250     3             250     3  
 

Commercial

    93     2     259     98     352     100  
                           

Total mortgage-backed securities

  $ 12,316   $ 957   $ 785   $ 132   $ 13,101   $ 1,089  

U.S. Treasury and federal agency securities

                                     
 

U.S. Treasury

    23,378     224     308     107     23,686     331  
 

Agency obligations

    17,957     208     7         17,964     208  
                           

Total U.S. Treasury and federal agency securities

  $ 41,335   $ 432   $ 315   $ 107   $ 41,650   $ 539  

State and municipal

    769     97     12,508     1,117     13,277     1,214  

Foreign government

    39,241     217     10,398     111     49,639     328  

Corporate

    1,165     47     907     99     2,072     146  

Asset-backed securities

    627     4     986     89     1,613     93  

Other debt securities

    28     2     647     75     675     77  

Marketable equity securities AFS

    102     4     2,526     208     2,628     212  
                           

Total securities AFS

  $ 95,583   $ 1,760   $ 29,072   $ 1,938   $ 124,655   $ 3,698  
                           

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        The following table presents the amortized cost and fair value of debt securities available-for-sale by contractual maturity dates as of September 30, 2010 and December 31, 2009:

 
  September 30, 2010   December 31, 2009  
In millions of dollars   Amortized
Cost
  Fair
value
  Amortized
cost
  Fair
value
 

Mortgage-backed securities(1)

                         

Due within 1 year

  $   $   $ 2   $ 3  

After 1 but within 5 years

    396     392     16     16  

After 5 but within 10 years

    418     440     626     597  

After 10 years(2)

    25,067     25,424     28,952     28,452  
                   

Total

  $ 25,881   $ 26,256   $ 29,596   $ 29,068  
                   

U.S. Treasury and federal agencies

                         

Due within 1 year

  $ 21,716   $ 21,734   $ 5,357   $ 5,366  

After 1 but within 5 years

    70,324     71,097     35,912     35,618  

After 5 but within 10 years

    18,502     19,094     8,815     8,773  

After 10 years(2)

    3,010     3,118     4,487     4,357  
                   

Total

  $ 113,552   $ 115,043   $ 54,571   $ 54,114  
                   

State and municipal

                         

Due within 1 year

  $ 80   $ 47   $ 7   $ 8  

After 1 but within 5 years

    49     141     119     129  

After 5 but within 10 years

    399     245     340     359  

After 10 years(2)

    15,863     14,133     16,211     15,114  
                   

Total

  $ 16,391   $ 14,566   $ 16,677   $ 15,610  
                   

Foreign government

                         

Due within 1 year

  $ 39,362   $ 39,386   $ 32,223   $ 32,365  

After 1 but within 5 years

    55,127     55,794     61,165     61,426  

After 5 but within 10 years

    7,283     7,506     7,844     7,845  

After 10 years(2)

    946     1,169     755     883  
                   

Total

  $ 102,718   $ 103,855   $ 101,987   $ 102,519  
                   

All other(3)

                         

Due within 1 year

  $ 3,321   $ 3,309   $ 4,243   $ 4,244  

After 1 but within 5 years

    13,483     13,629     14,286     14,494  

After 5 but within 10 years

    8,491     8,683     9,483     9,597  

After 10 years(2)

    4,328     4,348     4,280     4,147  
                   

Total

  $ 29,623   $ 29,969   $ 32,292   $ 32,482  
                   

Total debt securities AFS

  $ 288,165   $ 289,689   $ 235,123   $ 233,793  
                   

(1)
Includes mortgage-backed securities of U.S. federal agencies.

(2)
Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights.

(3)
Includes corporate securities and other debt securities.

        The following tables present interest and dividends on all investments for the three- and nine-month periods ended September 30, 2010 and 2009:

 
  Three months ended   Nine months ended  
In millions of dollars   September 30,
2010
  September 30,
2009
  September 30,
2010
  September 30,
2009
 

Taxable interest

  $ 2,353   $ 2,956   $ 7,896   $ 9,084  

Interest exempt from U.S. federal income tax

    185     226     555     591  

Dividends

    73     101     255     219  
                   

Total interest and dividends

  $ 2,611   $ 3,283   $ 8,706   $ 9,894  
                   

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        The following table presents realized gains and losses on all investments for the three- and nine-month periods ended September 30, 2010 and 2009. The gross realized investment losses exclude losses from other-than-temporary impairment:

 
  Three months ended   Nine months ended  
In millions of dollars   September 30,
2010
  September 30,
2009
  September 30,
2010
  September 30,
2009
 

Gross realized investment gains

  $ 1,133   $ 439   $ 2,280   $ 1,797  

Gross realized investment losses(1)

    (171 )   (12 )   (257 )   (78 )
                   

Net realized gains

  $ 962   $ 427   $ 2,023   $ 1,719  
                   

(1)
During the first quarter of 2010, the Company sold four corporate debt securities that were classified as held-to-maturity. These sales were in response to a significant deterioration in the creditworthiness of the issuers. The securities sold had a carrying value of $413 million, and the Company recorded a realized loss of $49 million.

Debt Securities Held-to-Maturity

        The carrying value and fair value of securities held-to-maturity (HTM) at September 30, 2010 and December 31, 2009 were as follows:

In millions of dollars   Amortized
cost(1)
  Net unrealized
loss
recognized in
AOCI
  Carrying
value(2)
  Gross
unrecognized
gains
  Gross
unrecognized
losses
  Fair
value
 

September 30, 2010

                                     

Debt securities HTM(3)

                                     

Mortgage-backed securities

                                     
 

Prime

  $ 4,963   $ 870   $ 4,093   $ 491   $ 11   $ 4,573  
 

Alt-A

    12,314     3,318     8,996     774     153     9,617  
 

Subprime

    731     86     645     10     61     594  
 

Non-U.S. residential

    5,362     842     4,520     331     63     4,788  
 

Commercial

    948     24     924         115     809  
                           
 

Total mortgage-backed securities

  $ 24,318   $ 5,140   $ 19,178   $ 1,606   $ 403   $ 20,381  

State and municipal

    2,612     129     2,483     100     55     2,528  

Corporate

    6,717     170     6,547     494     101     6,940  

Asset-backed securities(3)

    1,974     75     1,899     62     60     1,901  

Other debt securities

                         
                           

Total debt securities HTM

  $ 35,621   $ 5,514   $ 30,107   $ 2,262   $ 619   $ 31,750  
                           

December 31, 2009

                                     

Debt securities HTM(3)

                                     

Mortgage-backed securities

                                     
 

Prime

  $ 6,118   $ 1,151   $ 4,967   $ 317   $ 5   $ 5,279  
 

Alt-A

    14,710     4,276     10,434     905     243     11,096  
 

Subprime

    1,087     128     959     77     100     936  
 

Non-U.S. residential

    9,002     1,119     7,883     469     134     8,218  
 

Commercial

    1,303     45     1,258     1     208     1,051  
                           
 

Total mortgage-backed securities

  $ 32,220   $ 6,719   $ 25,501   $ 1,769   $ 690   $ 26,580  

State and municipal

    3,067     147     2,920     92     113     2,899  

Corporate

    7,457     264     7,193     524     182     7,535  

Asset-backed securities(3)

    16,348     435     15,913     567     496     15,984  

Other debt securities

                         
                           

Total debt securities HTM

  $ 59,092   $ 7,565   $ 51,527   $ 2,952   $ 1,481   $ 52,998  
                           

(1)
For securities transferred to HTM from Trading account assets, amortized cost is defined as the fair value amount of the securities at the date of transfer plus any accretion income and less any impairments recognized in earnings subsequent to transfer. For securities transferred to HTM from AFS, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less any impairment recognized in earnings.

(2)
HTM securities are carried on the Consolidated Balance Sheet at amortized cost and the changes in the value of these securities other than impairment charges are not reported on the financial statements.

(3)
The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered variable interest entities (VIEs). The Company's maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, information is provided in Note 14 to the Consolidated Financial Statements.

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        The net unrealized losses classified in AOCI relate to debt securities reclassified from AFS investments to HTM investments. Additionally, for HTM securities that have suffered credit impairment, declines in fair value for reasons other than credit losses are recorded in AOCI. The AOCI balance was $5.5 billion as of September 30, 2010, compared to $7.6 billion as of December 31, 2009. The AOCI balance for HTM securities is amortized over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same debt securities. This will have no impact on the Company's net income because the amortization of the unrealized holding loss reported in equity will offset the effect on interest income of the accretion of the discount on these securities.

        The credit-related impairment on HTM securities is recognized in earnings.

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        The table below shows the fair value of investments in HTM that have been in an unrecognized loss position for less than 12 months or for 12 months or longer as of September 30, 2010 and December 31, 2009:

 
  Less than 12 months   12 months or longer   Total  
In millions of dollars   Fair
value
  Gross
unrecognized
losses
  Fair
value
  Gross
unrecognized
losses
  Fair
value
  Gross
unrecognized
losses
 

September 30, 2010

                                     

Debt securities HTM

                                     

Mortgage-backed securities

  $ 211   $ 26   $ 14,543   $ 377   $ 14,754   $ 403  

State and municipal

    605     3     950     52     1,555     55  

Corporate

    1,019     44     1,404     57     2,423     101  

Asset-backed securities

    268     10     578     50     846     60  

Other debt securities

                         
                           

Total debt securities HTM

  $ 2,103   $ 83   $ 17,475   $ 536   $ 19,578   $ 619  
                           

December 31, 2009

                                     

Debt securities HTM

                                     

Mortgage-backed securities

  $   $   $ 16,923   $ 690   $ 16,923   $ 690  

State and municipal

    755     79     713     34     1,468     113  

Corporate

            1,519     182     1,519     182  

Asset-backed securities

    348     18     5,460     478     5,808     496  

Other debt securities

                         
                           

Total debt securities HTM

  $ 1,103   $ 97   $ 24,615   $ 1,384   $ 25,718   $ 1,481  
                           

        Excluded from the gross unrecognized losses presented in the above table are the $5.5 billion and $7.6 billion of gross unrealized losses recorded in AOCI mainly related to the HTM securities that were reclassified from AFS investments as of September 30, 2010 and December 31, 2009, respectively. Virtually all of these unrealized losses relate to securities that have been in a loss position for 12 months or longer at both September 30, 2010 and December 31, 2009.

        The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates as of September 30, 2010 and December 31, 2009:

 
  September 30, 2010   December 31, 2009  
In millions of dollars   Carrying value   Fair value   Carrying value   Fair value  

Mortgage-backed securities

                         

Due within 1 year

  $   $   $ 1   $ 1  

After 1 but within 5 years

    272     238     466     385  

After 5 but within 10 years

    499     439     697     605  

After 10 years(1)

    18,407     19,704     24,337     25,589  
                   

Total

  $ 19,178   $ 20,381   $ 25,501   $ 26,580  
                   

State and municipal

                         

Due within 1 year

  $ 6   $ 6   $ 6   $ 6  

After 1 but within 5 years

    65     66     53     79  

After 5 but within 10 years

    88     89     99     99  

After 10 years(1)

    2,324     2,367     2,762     2,715  
                   

Total

  $ 2,483   $ 2,528   $ 2,920   $ 2,899  
                   

All other(2)

                         

Due within 1 year

  $ 541   $ 677   $ 4,652   $ 4,875  

After 1 but within 5 years

    1,064     1,163     3,795     3,858  

After 5 but within 10 years

    5,149     5,280     6,240     6,526  

After 10 years(1)

    1,692     1,721     8,419     8,260  
                   

Total

  $ 8,446   $ 8,841   $ 23,106   $ 23,519  
                   

Total debt securities HTM

  $ 30,107   $ 31,750   $ 51,527   $ 52,998  
                   

(1)
Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights.

(2)
Includes asset-backed securities and all other debt securities.

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Evaluating Investments for Other-Than-Temporary Impairments

        The Company conducts and documents periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other than temporary. Prior to January 1, 2009, these reviews were conducted pursuant to FASB Staff Position No. FAS 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (now incorporated into ASC 320-10-35, Investments—Debt and Equity Securities—Subsequent Measurement). Any unrealized loss identified as other-than-temporary was recorded directly in the Consolidated Statement of Income. As of January 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2 (now incorporated into ASC 320-10-35-34, Investments—Debt and Equity Securities: Recognition of an Other-Than-Temporary Impairment). This guidance amends the impairment model for debt securities; the impairment model for equity securities was not affected.

        Under the guidance for debt securities, other-than-temporary impairment (OTTI) is recognized in earnings for debt securities which the Company has an intent to sell or which the Company believes it is more-likely-than-not that it will be required to sell prior to recovery of the amortized cost basis. For those securities which the Company does not intend to sell or expect to be required to sell, credit-related impairment is recognized in earnings, with the non-credit-related impairment recorded in AOCI.

        An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities, while such losses related to HTM securities are not recorded, as these investments are carried at their amortized cost. For securities transferred to HTM from Trading account assets, amortized cost is defined as the fair value of the securities at the date of transfer, plus any accretion income and less any impairment recognized in earnings subsequent to transfer. For securities transferred to HTM from AFS, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less any impairment recognized in earnings subsequent to transfer.

        Regardless of the classification of the securities as AFS or HTM, the Company has assessed each position for impairment.

        Factors considered in determining whether a loss is temporary include:

        The Company's review for impairment generally entails:

        For equity securities, management considers the various factors described above, including its intent and ability to hold the equity security for a period of time sufficient for recovery to cost. Where management lacks that intent or ability, the security's decline in fair value is deemed to be other than temporary and is recorded in earnings. AFS equity securities deemed other-than-temporarily impaired are written down to fair value, with the full difference between fair value and cost recognized in earnings.

        For debt securities that are not deemed to be credit impaired, management assesses whether it intends to sell or whether it is more-likely-than-not that it would be required to sell the investment before the expected recovery of the amortized cost basis. In most cases, management has asserted that it has no intent to sell and that it believes it is not likely to be required to sell the investment before recovery of its amortized cost basis. Where such an assertion has not been made, the security's decline in fair value is deemed to be other-than-temporary and is recorded in earnings.

        For debt securities, a critical component of the evaluation for OTTI is the identification of credit impaired securities, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. For securities purchased and classified as AFS with the expectation of receiving full principal and interest cash flows as of the date of purchase, this analysis considers the likelihood of receiving all contractual principal and interest. For securities reclassified out of the trading category in the fourth quarter of 2008, the analysis considers the likelihood of receiving the expected principal and interest cash flows anticipated as of the date of reclassification in the fourth quarter of 2008. The extent of the Company's analysis regarding credit quality and the stress on assumptions used in the analysis have been refined for securities where the current fair value or other characteristics of the security warrant. The paragraphs below describe the Company's process for identifying credit impairment in security types with the most significant unrealized losses as of September 30, 2010.

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Mortgage-backed securities

        For U.S. mortgage-backed securities (and in particular for Alt-A and other mortgage-backed securities that have significant unrealized losses as a percentage of amortized cost), credit impairment is assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows on the mortgage-backed securities through the current period and then projects the remaining cash flows using a number of assumptions, including default rates, prepayment rates, and recovery rates (on foreclosed properties).

        Management develops specific assumptions using as much market data as possible and includes internal estimates as well as estimates published by rating agencies and other third-party sources. Default rates are projected by considering current underlying mortgage loan performance, generally assuming the default of (1) 10% of current loans, (2) 25% of 30-59 day delinquent loans, (3) 70% of 60-90 day delinquent loans and (4) 100% of 91+ day delinquent loans. These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default rate. Other assumptions used contemplate the actual collateral attributes, including geographic concentrations, rating agency loss projections, rating actions and current market prices.

        The key assumptions for mortgage-backed securities as of September 30, 2010 are in the table below:

 
  September 30, 2010  

Prepayment rate(1)

    3-8 CRR  

Loss severity(2)

    45%–85%  

Unemployment rate

    9.8%  
       

(1)
Conditional Repayment Rate (CRR) represents the annualized expected rate of voluntary prepayment of principal for mortgage-backed securities over a certain period of time.

(2)
Loss severity rates are estimated considering collateral characteristics and generally range from 45%-60% for prime bonds, 50%-85% for Alt-A bonds, and 65%-85% for subprime bonds.

        The valuation as of September 30, 2010 assumes that U.S. housing prices are unchanged for the remainder of 2010, increase 1.2% in 2011, increase 1.8% in 2012 and increase 3% per year from 2013 onwards.

        In addition, cash flow projections are developed using more stressful parameters, and management assesses the results of those stress tests (including the severity of any cash shortfall indicated and the likelihood of the stress scenarios actually occurring based on the underlying pool's characteristics and performance) to assess whether management expects to recover the amortized cost basis of the security. If cash flow projections indicate that the Company does not expect to recover its amortized cost basis, the Company recognizes the estimated credit loss in earnings.

State and municipal securities

        Citigroup's AFS state and municipal bonds consist mainly of bonds that are financed through Tender Option Bond programs. The process for identifying credit impairment for bonds in this program as well as for bonds that were previously financed in this program is largely based on third-party credit ratings. Individual bond positions must meet minimum ratings requirements, which vary based on the sector of the bond issuer.

        Citigroup monitors the bond issuer and insurer ratings on a daily basis. The average portfolio rating, ignoring any insurance, is Aa3/AA-. In the event of a downgrade of the bond below Aa3/AA-, the subject bond is specifically reviewed for potential shortfall in contractual principal and interest. Citigroup has not recorded any credit impairments on bonds held as part of the Tender Option Bond program or on bonds that were previously held as part of the Tender Option Bond program.

        The remainder of Citigroup's AFS state and municipal bonds, outside of the above, are specifically reviewed for credit impairment based on instrument-specific estimates of cash flows, probability of default and loss given default.

Recognition and Measurement of OTTI

        The following table presents the total OTTI recognized in earnings during the three months and nine months ended September 30, 2010:

OTTI on Investments   Three months ended Sept 30, 2010   Nine months ended Sept 30, 2010  
In millions of dollars   AFS   HTM   Total   AFS   HTM   Total  

Impairment losses related to securities which the Company does not intend to sell nor will likely be required to sell:

                                     

Total OTTI losses recognized during the periods ended September 30, 2010

  $ 22   $ 142   $ 164   $ 258   $ 691   $ 949  

Less: portion of OTTI loss recognized in AOCI (before taxes)

    2     8     10     8     48     56  
                           

Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell

  $ 20   $ 134   $ 154   $ 250   $ 643   $ 893  

OTTI losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery

    66         66     288         288  
                           

Total impairment losses recognized in earnings

  $ 86   $ 134   $ 220   $ 538   $ 643   $ 1,181  
                           

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        The following is a 3-month roll-forward of the credit-related position recognized in earnings for AFS and HTM debt securities held as of September 30, 2010:

 
  Cumulative OTTI Credit Losses Recognized in Earnings  
In millions of dollars   June 30, 2010
balance
  Credit impairments
recognized in
earnings on
securities not
previously impaired
  Credit impairments
recognized in
earnings on
securities that have
been previously
impaired
  Reductions due to
sales of credit
impaired
securities sold or
matured
  September 30, 2010
balance
 

AFS debt securities

                               

Mortgage-backed securities

                               
 

Prime

  $ 280   $   $ 12   $   $ 292  
 

Alt-A

    2                 2  
 

Commercial real estate

    2                 2  
                       
 

Total mortgage-backed securities

  $ 284   $   $ 12   $   $ 296  

State and municipal

    3                 3  

U.S. Treasury

    36     2             38  

Foreign government

    159                 159  

Corporate

    147     6             153  

Asset-backed securities

    9                 9  

Other debt securities

    52                 52  
                       

Total OTTI credit losses recognized for AFS debt securities

  $ 690   $ 8   $ 12   $   $ 710  
                       

HTM debt securities

                               

Mortgage-backed securities

                               
 

Prime

  $ 297   $ 1   $ 1   $   $ 299  
 

Alt-A

    2,886     49     64         2,999  
 

Subprime

    213         19         232  
 

Non-U.S. residential

    96                 96  
 

Commercial real estate

    10                 10  
                       
 

Total mortgage-backed securities

  $ 3,502   $ 50   $ 84   $   $ 3,636  

State and municipal

    7                 7  

Corporate

    351                 351  

Asset-backed securities

    108                 108  

Other debt securities

    5                 5  
                       

Total OTTI credit losses recognized for HTM debt securities

  $ 3,973   $ 50   $ 84   $   $ 4,107  
                       

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        The following is a 9-month roll-forward of the credit-related position recognized in earnings for AFS and HTM debt securities held as of September 30, 2010:

 
  Cumulative OTTI Credit Losses Recognized in Earnings  
In millions of dollars   December 31, 2009
balance
  Credit impairments
recognized in
earnings on
securities not
previously impaired
  Credit impairments
recognized in
earnings on
securities that have
been previously
impaired
  Reductions due to
sales of credit
impaired
securities sold or
matured
  September 30, 2010
balance
 

AFS debt securities

                               

Mortgage-backed securities

                               
 

Prime

  $ 242   $ 12   $ 38   $   $ 292  
 

Alt-A

    1     1             2  
 

Commercial real estate

    2                 2  
                       
 

Total mortgage-backed securities

  $ 245   $ 13   $ 38   $   $ 296  

State and municipal

        3             3  

U.S. Treasury

        38             38  

Foreign government

    20     139             159  

Corporate

    137     11     5         153  

Asset-backed securities

    9                 9  

Other debt securities

    49     3             52  
                       

Total OTTI credit losses recognized for AFS debt securities

  $ 460   $ 207   $ 43   $   $ 710  
                       

HTM debt securities

                               

Mortgage-backed securities

                               
 

Prime

  $ 170   $ 127   $ 2   $   $ 299  
 

Alt-A

    2,569     358     72         2,999  
 

Subprime

    210     1     21         232  
 

Non-U.S. residential

    96                 96  
 

Commercial real estate

    9     1             10  
                       
 

Total mortgage-backed securities

  $ 3,054   $ 487   $ 95   $   $ 3,636  

State and municipal

    7                 7  

Corporate

    351                 351  

Asset-backed securities

    48     41     19         108  

Other debt securities

    4         1         5  
                       

Total OTTI credit losses recognized for HTM debt securities

  $ 3,464   $ 528   $ 115   $   $ 4,107  
                       

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Investments in Alternative Investment Funds that Calculate Net Asset Value per Share

        The Company holds investments in certain alternative investment funds that calculate net asset value (NAV) per share, including hedge funds, private equity funds, fund of funds and real estate funds. The Company's investments include co-investments in funds that are managed by the Company and investments in funds that are managed by third parties. Investments in funds are generally classified as non-marketable equity securities carried at fair value.

        The fair values of these investments are estimated using the NAV per share of the Company's ownership interest in the funds, where it is not probable that the Company will sell an investment at a price other than NAV.

In millions of dollars at September 30, 2010   Fair
value
  Unfunded commitments   Redemption frequency
(if currently eligible)
  Redemption notice
period
 

Hedge funds

  $ 972   $ 14     Monthly, quarterly, annually     10-95 days  

Private equity funds(1)(2)

    3,205     1,652          

Real estate funds(3)

    388     171          
                   

Total

  $ 4,565 (4) $ 1,837              
                   

(1)
Includes investments in private equity funds carried at cost with a carrying value of $266 million.

(2)
Private equity funds include funds that invest in infrastructure, leveraged buyout transactions, emerging markets and venture capital.

(3)
This category includes several real estate funds that invest primarily in commercial real estate in the U.S., Europe and Asia. These investments can never be redeemed with the funds. Distributions from each fund will be received as the underlying investments in the funds are liquidated. It is estimated that the underlying assets of the fund will be liquidated over a period of several years as market conditions allow. While certain assets within the portfolio may be sold, no specific assets have been identified for sale. Because it is not probable that any individual investment will be sold, the fair value of each individual investment has been estimated using the NAV of the Company's ownership interest in the partners' capital. There is no standard redemption frequency nor is a prior notice period required. The investee fund's management must approve of the buyer before the sale of the investments can be completed.

(4)
Included in the total fair value of investments above is $2.0 billion of fund assets that are valued using NAVs provided by third-party asset managers.

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11.    GOODWILL AND INTANGIBLE ASSETS

Goodwill

        The changes in Goodwill during the first nine months of 2010 were as follows:

In millions of dollars  

Balance at December 31, 2009

  $ 25,392  
       

Foreign exchange translation

    294  

Smaller acquisitions/divestitures, purchase accounting adjustments and other

    (24 )
       

Balance at March 31, 2010

  $ 25,662  
       

Foreign exchange translation

    (442 )

Smaller acquisitions/divestitures, purchase accounting adjustments and other

    (19 )
       

Balance at June 30, 2010

  $ 25,201  
       

Foreign exchange translation

    651  

Smaller acquisitions/divestitures, purchase accounting adjustments and other

    (55 )
       

Balance at September 30, 2010

  $ 25,797  
       

        During the first nine months of 2010, no goodwill was written off due to impairment. The Company performed its annual goodwill impairment test during the third quarter of 2010 and while no impairment was noted in step one for any of the reporting units, goodwill present in the Local Consumer Lending—Cards reporting unit may be particularly sensitive to further deterioration in economic conditions. Additionally, the fair value of the Asia Regional Consumer Banking and Transaction Services reporting units substantially exceeded their respective carrying values.

        Citigroup engaged the services of an independent valuation specialist to assist in the valuation of a number of its reporting units, including Local Consumer Lending—Cards. The fair value as a percentage of allocated book value for the Local Consumer Lending—Cards reporting unit is 121%. If economic conditions deteriorate or other events adversely impact the business models and the related assumptions, including the discount rate, expected recovery, and expected loss rates used to value this reporting unit, the Company could potentially experience future material impairment charges with respect to the $4,577 million of goodwill remaining in the Local Consumer Lending—Cards reporting unit. Any such charges, by themselves, would not negatively affect the Company's Tier 1, Tier 1 Common and Total Capital regulatory ratios, its Tangible Common Equity or the company's liquidity position. The Company will continue to monitor this reporting unit.

        The following tables present the Company's goodwill balances by reporting unit and by segment at September 30, 2010:

In millions of dollars  
Reporting unit(1)   Goodwill  

North America Regional Consumer Banking

  $ 2,502  

EMEA Regional Consumer Banking

    319  

Asia Regional Consumer Banking

    5,779  

Latin America Regional Consumer Banking

    1,747  

Securities and Banking

    9,241  

Transaction Services

    1,567  

Brokerage and Asset Management

    65  

Local Consumer Lending—Cards

    4,577  
       

Total

  $ 25,797  
       

By Segment

       

Regional Consumer Banking

  $ 10,347  

Institutional Clients Group

    10,808  

Citi Holdings

    4,642  
       

Total

  $ 25,797  
       

(1)
Local Consumer Lending—Other is excluded from the table as there is no goodwill allocated to it.

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Intangible Assets

        The components of intangible assets were as follows:

 
  September 30, 2010   December 31, 2009  
In millions of dollars   Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
  Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
 

Purchased credit card relationships

  $ 7,784   $ 4,923   $ 2,861   $ 8,148   $ 4,838   $ 3,310  

Core deposit intangibles

    1,424     920     504     1,373     791     582  

Other customer relationships

    699     190     509     675     176     499  

Present value of future profits

    240     111     129     418     280     138  

Indefinite-lived intangible assets

    540         540     569         569  

Other(1)

    4,749     1,587     3,162     4,977     1,361     3,616  
                           

Intangible assets (excluding MSRs)

  $ 15,436   $ 7,731   $ 7,705   $ 16,160   $ 7,446   $ 8,714  

MSRs

    3,976         3,976     6,530         6,530  
                           

Total intangible assets

  $ 19,412   $ 7,731   $ 11,681   $ 22,690   $ 7,446   $ 15,244  
                           

(1)
Includes contract-related intangible assets.

        The changes in intangible assets during the first nine months of 2010 were as follows:

In millions of dollars   Net carrying
amount at
December 31,
2009
  Acquisitions/
divestitures
  Amortization   Impairments   FX
and
other(1)
  Net carrying
amount at
September 30,
2010
 

Purchased credit card relationships

  $ 3,310   $ (53 ) $ (368 ) $ (39 ) $ 11   $ 2,861  

Core deposit intangibles

    582         (81 )       3     504  

Other customer relationships

    499         (42 )       52     509  

Present value of future profits

    138         (10 )       1     129  

Indefinite-lived intangible assets

    569     (46 )           17     540  

Other

    3,616         (236 )   (32 )   (186 )   3,162  
                           

Intangible assets (excluding MSRs)

  $ 8,714   $ (99 ) $ (737 ) $ (71 ) $ (102 ) $ 7,705  

MSRs(2)

    6,530                             3,976  
                                   

Total intangible assets

  $ 15,244                           $ 11,681  
                                   

(1)
Includes foreign exchange translation and purchase accounting adjustments.

(2)
See Note 14 to the Consolidated Financial Statements for the roll-forward of MSRs.

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12.    DEBT

Short-Term Borrowings

        Short-term borrowings consist of commercial paper and other borrowings as follows:

In millions of dollars   September 30,
2010
  December 31,
2009
 

Commercial paper

             

Bank

  $ 26,604   $  

Other non-bank

    9,564     10,223  
           

  $ 36,168   $ 10,223  

Other short-term borrowings(1)

    50,845     58,656  
           

Total short-term borrowings(2)

  $ 87,013   $ 68,879  
           

(1)
At September 30, 2010 and December 31, 2009, collateralized advances from the Federal Home Loan Bank were $11.9 billion and $23.0 billion, respectively.

(2)
September 30, 2010 includes $32.2 billion of short-term borrowings related to VIEs consolidated effective January 1, 2010 with the adoption of SFAS 166/167.

        Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate or bids submitted by the banks. Citigroup pays commitment fees for its lines of credit.

        Some of Citigroup's non-bank subsidiaries have credit facilities with Citigroup's subsidiary depository institutions, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act.

        Citigroup Global Markets Holdings Inc. (CGMHI) has substantial borrowing agreements consisting of facilities that CGMHI has been advised are available, but where no contractual lending obligation exists. These arrangements are reviewed on an ongoing basis to ensure flexibility in meeting CGMHI's short-term requirements.

Long-Term Debt

In millions of dollars   September 30,
2010
  December 31,
2009
 

Citigroup parent company

  $ 197,948   $ 197,804  

Bank(1)

    116,062     78,857  

Other non-bank

    73,320     87,358  
           

Total long-term debt(2)(3)(4)

  $ 387,330   $ 364,019  
           

(1)
At September 30, 2010 and December 31, 2009, collateralized advances from the Federal Home Loan Bank were $18.5 billion and $24.1 billion, respectively.

(2)
September 30, 2010, includes $69.6 billion of long-term debt related to VIEs consolidated effective January 1, 2010 with the adoption of SFAS 166/167.

(3)
Of this amount, approximately $59.6 billion is guaranteed by the FDIC under the TLGP with $1.3 billion maturing in 2010, $20.3 billion maturing in 2011 and $38 billion maturing in 2012.

(4)
Includes Principal-Protected Trust Securities (Safety First Trust Securities) with carrying values of $469 million issued by Safety First Trust Series 2006-1, 2007-1, 2007-2, 2007-3, 2007-4, 2008-1, 2008-2, 2008-3, 2008-4, 2008-5, 2008-6, 2009-1, 2009-2, and 2009-3 (collectively, the "Safety First Trusts") at September 30, 2010 and $528 million issued by Safety First Trust Series 2006-1, 2007-1, 2007-2, 2007-3, 2007-4, 2008-1, 2008-2, 2008-3, 2008-4, 2008-5, 2008-6, 2009-1, 2009-2, and 2009-3 at December 31, 2009. CFI owns all of the voting securities of the Safety First Trusts. The Safety First Trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Safety First Trust Securities and the Safety First Trusts' common securities. The Safety First Trusts' obligations under the Safety First Trust Securities are fully and unconditionally guaranteed by CFI, and CFI's guarantee obligations are fully and unconditionally guaranteed by Citigroup.

        CGMHI has committed long-term financing facilities with unaffiliated banks. At September 30, 2010, CGMHI had drawn down the full $900 million available under these facilities, of which $150 million is guaranteed by Citigroup. Generally, a bank can terminate these facilities by giving CGMHI one-year prior notice.

        The Company issues both fixed and variable rate debt in a range of currencies. It uses derivative contracts, primarily interest rate swaps, to effectively convert a portion of its fixed rate debt to variable rate debt and variable rate debt to fixed rate debt. The maturity structure of the derivatives generally corresponds to the maturity structure of the debt being hedged. In addition, the Company uses other derivative contracts to manage the impact of FX translation on certain debt issuances.

        Long-term debt at September 30, 2010 and December 31, 2009 includes $20.4 billion and $19.3 billion, respectively, of junior subordinated debt. The Company formed statutory business trusts under the laws of the state of Delaware. The trusts exist for the exclusive purposes of (1) issuing trust securities representing undivided beneficial interests in the assets of the trust; (2) investing the gross proceeds of the trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of its parent; and (3) engaging in only those activities necessary or incidental thereto. Upon approval from the Federal Reserve Board, Citigroup has the right to redeem these securities.

        Citigroup has contractually agreed not to redeem or purchase (i) the 6.50% Enhanced Trust Preferred Securities of Citigroup Capital XV before September 15, 2056, (ii) the 6.45% Enhanced Trust Preferred Securities of Citigroup

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Capital XVI before December 31, 2046, (iii) the 6.35% Enhanced Trust Preferred Securities of Citigroup Capital XVII before March 15, 2057, (iv) the 6.829% Fixed Rate/Floating Rate Enhanced Trust Preferred Securities of Citigroup Capital XVIII before June 28, 2047, (v) the 7.250% Enhanced Trust Preferred Securities of Citigroup Capital XIX before August 15, 2047, (vi) the 7.875% Enhanced Trust Preferred Securities of Citigroup Capital XX before December 15, 2067, and (vii) the 8.300% Fixed Rate/Floating Rate Enhanced Trust Preferred Securities of Citigroup Capital XXI before December 21, 2067, unless certain conditions, described in Exhibit 4.03 to Citigroup's Current Report on Form 8-K filed on September 18, 2006, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on November 28, 2006, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on March 8, 2007, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on July 2, 2007, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on August 17, 2007, in Exhibit 4.2 to Citigroup's Current Report on Form 8-K filed on November 27, 2007, and in Exhibit 4.2 to Citigroup's Current Report on Form 8-K filed on December 21, 2007, respectively, are met. These agreements are for the benefit of the holders of Citigroup's 6.00% Junior Subordinated Deferrable Interest Debentures due 2034.

        Citigroup owns all of the voting securities of these subsidiary trusts. These subsidiary trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the subsidiary trusts and the subsidiary trusts' common securities. These subsidiary trusts' obligations are fully and unconditionally guaranteed by Citigroup.

        The following table summarizes the financial structure of each of the Company's subsidiary trusts at September 30, 2010:

 
   
   
   
   
   
  Junior subordinated debentures
owned by trust
 
Trust securities with distributions guaranteed by Citigroup
In millions of dollars, except share amounts
  Issuance
date
  Securities
issued
  Liquidation
value
  Coupon
rate
  Common
shares issued
to parent
  Amount(1)   Maturity   Redeemable
by issuer
beginning
 

Citigroup Capital III

    Dec. 1996     194,053   $ 194     7.625 %   6,003   $ 200     Dec. 1, 2036     Not redeemable  

Citigroup Capital VII

    July 2001     35,885,898     897     7.125 %   1,109,874     925     July 31, 2031     July 31, 2006  

Citigroup Capital VIII

    Sept. 2001     43,651,597     1,091     6.950 %   1,350,050     1,125     Sept. 15, 2031     Sept. 17, 2006  

Citigroup Capital IX

    Feb. 2003     33,874,813     847     6.000 %   1,047,675     873     Feb. 14, 2033     Feb. 13, 2008  

Citigroup Capital X

    Sept. 2003     14,757,823     369     6.100 %   456,428     380     Sept. 30, 2033     Sept. 30, 2008  

Citigroup Capital XI

    Sept. 2004     18,387,128     460     6.000 %   568,675     474     Sept. 27, 2034     Sept. 27, 2009  

Citigroup Capital XII

    Mar. 2010     92,000,000     2,300     8.500 %   25     2,300     Mar. 30, 2040     Mar. 30, 2015  

Citigroup Capital XIII

    Sept. 2010     89,840,000     2,246     7.875 %   25     2,246     Oct. 30, 2040     Oct. 30, 2015  

Citigroup Capital XIV

    June 2006     12,227,281     306     6.875 %   40,000     307     June 30, 2066     June 30, 2011  

Citigroup Capital XV

    Sept. 2006     25,210,733     630     6.500 %   40,000     631     Sept. 15, 2066     Sept. 15, 2011  

Citigroup Capital XVI

    Nov. 2006     38,148,947     954     6.450 %   20,000     954     Dec. 31, 2066     Dec. 31, 2011  

Citigroup Capital XVII

    Mar. 2007     28,047,927     701     6.350 %   20,000     702     Mar. 15, 2067     Mar. 15, 2012  

Citigroup Capital XVIII

    June 2007     99,901     157     6.829 %   50     158     June 28, 2067     June 28, 2017  

Citigroup Capital XIX

    Aug. 2007     22,771,968     569     7.250 %   20,000     570     Aug. 15, 2067     Aug. 15, 2012  

Citigroup Capital XX

    Nov. 2007     17,709,814     443     7.875 %   20,000     443     Dec. 15, 2067     Dec. 15, 2012  

Citigroup Capital XXI

    Dec. 2007     2,345,801     2,346     8.300 %   500     2,346     Dec. 21, 2077     Dec. 21, 2037  

Citigroup Capital XXXI

    Nov. 2007     1,875,000     1,875     6.700 %   10     1,875     Mar. 15, 2042     Mar. 15, 2014  

Citigroup Capital XXXII

    Nov. 2007     1,875,000     1,875     6.935 %   10     1,875     Sept. 15, 2042     Sept. 15, 2014  

Citigroup Capital XXXIII

    July 2009     3,025,000     3,025     8.000 %   100     3,025     July 30, 2039     July 30, 2014  

Adam Capital Trust III

    Dec. 2002     17,500     18     3 mo. LIB
+335 bp.
    542     18     Jan. 7, 2033     Jan. 7, 2008  

Adam Statutory Trust III

    Dec. 2002     25,000     25     3 mo. LIB
+325 bp.
    774     26     Dec. 26, 2032     Dec. 26, 2007  

Adam Statutory Trust IV

    Sept. 2003     40,000     40     3 mo. LIB
+295 bp.
    1,238     41     Sept. 17, 2033     Sept. 17, 2008  

Adam Statutory Trust V

    Mar. 2004     35,000     35     3 mo. LIB
+279 bp.
    1,083     36     Mar. 17, 2034     Mar. 17, 2009  
                                               

Total obligated

              $ 21,403               $ 21,530              
                                               

(1)
Represents the proceeds received from the Trust at the date of issuance.

        In each case, the coupon rate on the debentures is the same as that on the trust securities. Distributions on the trust securities and interest on the debentures are payable quarterly, except for Citigroup Capital III, Citigroup Capital XVIII and Citigroup Capital XXI, on which distributions are payable semiannually.

        During the second quarter of 2010 Citigroup exchanged Citigroup Capital Trust XXX for $1.875 billion of senior notes with a coupon of 6% payable semi-annually. The senior notes mature on December 13, 2013.

        On September 29, 2010, Citigroup modified the Citigroup Capital Trust XXXIII Trust Preferred Securities held by the U.S. Treasury by exchanging the U.S. Treasury's $2.234 billion position in those securities for

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$2.246 billion of Citigroup Capital Trust XIII Trust Preferred Securities with a coupon of 7.875%, payable quarterly. The U.S. Treasury then sold all of such securities of Citigroup Capital Trust XIII to the public.

13.    CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

        The following table shows the changes in each component of "Accumulated Other Comprehensive Income (Loss)" for the first, second and third quarters of 2010:

In millions of dollars   Net unrealized
gains (losses) on
investment
securities
  Foreign
currency
translation
adjustment,
net of hedges
  Cash flow
hedges
  Pension
liability
adjustments
  Accumulated other
comprehensive
income (loss)
 

Balance, December 31, 2009

  $ (4,347 ) $ (7,947 ) $ (3,182 ) $ (3,461 ) $ (18,937 )

Change in net unrealized gains (losses) on investment securities, net of taxes(1)

    1,210                 1,210  

Reclassification adjustment for net gains included in net income, net of taxes

    (28 )               (28 )

Foreign currency translation adjustment, net of taxes(2)

        (279 )           (279 )

Cash flow hedges, net of taxes(3)

            223         223  

Pension liability adjustment, net of taxes(4)

                (48 )   (48 )
                       

Change

  $ 1,182   $ (279 ) $ 223   $ (48 ) $ 1,078  
                       

Balance, March 31, 2010

  $ (3,165 ) $ (8,226 ) $ (2,959 ) $ (3,509 ) $ (17,859 )

Change in net unrealized gains (losses) on investment securities, net of taxes(1)

    967                 967  

Reclassification adjustment for net gains included in net income, net of taxes

    (61 )               (61 )

Foreign currency translation adjustment, net of taxes(2)

        (2,036 )           (2,036 )

Cash flow hedges, net of taxes(3)

            (225 )       (225 )

Pension liability adjustment, net of taxes(4)

                44     44  
                       

Change

  $ 906   $ (2,036 ) $ (225 ) $ 44   $ (1,311 )
                       

Balance, June 30, 2010

  $ (2,259 ) $ (10,262 ) $ (3,184 ) $ (3,465 ) $ (19,170 )

Change in net unrealized gains (losses) on investment securities, net of taxes(1)

    1,729                 1,729  

Reclassification adjustment for net gains included in net income, net of taxes

    (467 )               (467 )

Foreign currency translation adjustment, net of taxes(2)

        2,755             2,755  

Cash flow hedges, net of taxes(3)

            (121 )       (121 )

Pension liability adjustment, net of taxes(4)

                (35 )   (35 )
                       

Change

  $ 1,262   $ 2,755   $ (121 ) $ (35 ) $ 3,861  
                       

Balance, September 30, 2010

  $ (997 ) $ (7,507 ) $ (3,305 ) $ (3,500 ) $ (15,309 )
                       

(1)
See Note 10 to the Consolidated Financial Statements for details of the unrealized gains and losses on Citigroup's Available-for-sale and held-to-maturity securities.

(2)
Primarily impacted by the movements in the British pound, Euro, Japanese yen, Korean won and Mexican peso against the U.S. dollar, and changes in related tax effects and hedges.

(3)
Primarily driven by Citigroup's pay fixed/receive floating interest rate swap programs that are hedging the floating rates on deposits and long-term debt.

(4)
Reflects adjustments to the funded status of pension and postretirement plans, which is the difference between the fair value of the plan assets and the projected benefit obligation.

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14.    SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

Overview

        Citigroup and its subsidiaries are involved with several types of off-balance sheet arrangements, including special purpose entities (SPEs). See Note 1 to the Consolidated Financial Statements for a discussion of changes to the accounting for transfers and servicing of financial assets and consolidation of VIEs, including the elimination of QSPEs.

Uses of SPEs

        An SPE is an entity designed to fulfill a specific limited need of the company that organized it. The principal uses of SPEs are to obtain liquidity and favorable capital treatment by securitizing certain of Citigroup's financial assets, to assist clients in securitizing their financial assets, and to create investment products for clients. SPEs may be organized in many legal forms including trusts, partnerships or corporations. In a securitization, the company transferring assets to an SPE converts all (or a portion) of those assets into cash before they would have been realized in the normal course of business, through the SPE's issuance of debt and equity instruments, certificates, commercial paper and other notes of indebtedness, which are recorded on the balance sheet of the SPE and not reflected in the transferring company's balance sheet, assuming applicable accounting requirements are satisfied. Investors usually have recourse to the assets in the SPE and often benefit from other credit enhancements, such as a collateral account or over-collateralization in the form of excess assets in the SPE, a line of credit, or from a liquidity facility, such as a liquidity put option or asset purchase agreement. The SPE can typically obtain a more favorable credit rating from rating agencies than the transferor could obtain for its own debt issuances, resulting in less expensive financing costs than unsecured debt. The SPE may also enter into derivative contracts in order to convert the yield or currency of the underlying assets to match the needs of the SPE investors or to limit or change the credit risk of the SPE. Citigroup may be the provider of certain credit enhancements as well as the counterparty to any related derivative contracts. Since QSPEs were eliminated, most of Citigroup's SPEs are now VIEs.

Variable Interest Entities

        VIEs are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights, and right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity). Investors that finance the VIE through debt or equity interests or other counterparties that provide other forms of support, such as guarantees, subordinated fee arrangements, or certain types of derivative contracts, are variable interest holders in the entity. Since January 1, 2010, the variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Citigroup would be deemed to have a controlling financial interest if it has both of the following characteristics:

        The Company must evaluate its involvement in each VIE and understand the purpose and design of the entity, the role the Company had in the entity's design, and its involvement in its ongoing activities. The Company then must evaluate which activities most significantly impact the economic performance of the VIE and who has the power to direct such activities.

        For those VIEs where the Company determines that it has the power to direct the activities that most significantly impact the VIE's economic performance, the Company then must evaluate its economic interests, if any, and determine whether it could absorb losses or receive benefits that could potentially be significant to the VIE. When evaluating whether the Company has an obligation to absorb losses that could potentially be significant, it considers the maximum exposure to such loss without consideration of probability. Such obligations could be in various forms, including but not limited to, debt and equity investments, guarantees, liquidity agreements, and certain derivative contracts.

        Prior to January 1, 2010, the variable interest holder, if any, that would absorb a majority of the entity's expected losses, receive a majority of the entity's residual returns or both was deemed to be the primary beneficiary and consolidated the VIE. Consolidation of the VIE was determined based primarily on the variability generated in scenarios that are considered most likely to occur, rather than on scenarios that are considered more remote. In many cases, a detailed quantitative analysis was required to make this determination.

        In various other transactions, the Company may act as a derivative counterparty (for example, interest rate swap, cross-currency swap, or purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE); may act as underwriter or placement agent; may provide administrative, trustee, or other services; or may make a market in debt securities or other instruments issued by VIEs. The Company generally considers such involvement, by itself, not to be variable interests and thus not an indicator of power or potentially significant benefits or losses.

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        Citigroup's involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests or has continuing involvement through servicing a majority of the assets in a VIE as of September 30, 2010 and December 31, 2009 is presented below:

As of September 30, 2010  
 
   
   
   
  Maximum exposure to loss in significant unconsolidated VIEs(1)  
 
   
   
   
  Funded exposures(2)   Unfunded exposures(3)   Total  
 
  Total
involvement
with SPE
assets
   
   
 
In millions of dollars   Consolidated
VIE / SPE
assets(4)
  Significant
unconsolidated
VIE assets(4)(5)
  Debt
investments
  Equity
investments
  Funding
commitments
  Guarantees
and
derivatives
  Total  

Citicorp

                                                 

Credit card securitizations

  $ 62,157   $ 62,157   $   $   $   $   $   $  

Mortgage securitizations(6)

                                                 
 

U.S. agency-sponsored

    172,133         172,133     1,581             29     1,610  
 

Non-agency-sponsored

    8,875     2,479     6,396     415                 415  

Citi-administered asset-backed commercial paper conduits (ABCP)

    30,459     22,820     7,639             7,639         7,639  

Third-party commercial paper conduits

    4,334         4,334     288         298         586  

Collateralized debt obligations (CDOs)

    6,513         6,513     133                 133  

Collateralized loan obligations (CLOs)

    4,426         4,426     96                 96  

Asset-based financing

    17,804     1,015     16,789     5,500         1,937     15     7,452  

Municipal securities tender option bond trusts (TOBs)

    19,722     9,088     10,634             7,443     469     7,912  

Municipal investments

    12,562     256     12,306     641     2,798     1,110         4,549  

Client intermediation

    5,612     1,235     4,377     1,236     8             1,244  

Investment funds

    3,336     233     3,103     2     35         23     60  

Trust preferred securities

    21,673         21,673         128             128  

Other

    4,998     1,460     3,538     542     16     115     133     806  
                                   

Total

  $ 374,604   $ 100,743   $ 273,861   $ 10,434   $ 2,985   $ 18,542   $ 669   $ 32,630  
                                   

Citi Holdings

                                                 

Credit card securitizations

  $ 33,079   $ 32,604   $ 475   $   $   $   $   $  

Mortgage securitizations(6)

                                                 
 

U.S. agency-sponsored

    244,496         244,496     2,127             114     2,241  
 

Non-agency-sponsored

    23,996     3,445     20,551     122                 122  

Student loan securitizations

    35,041     35,041                          

Auto loan securitizations

                                 

Citi-administered asset-backed commercial paper conduits (ABCP)

    105     105                          

Third-party commercial paper conduits

    3,411         3,411             252         252  

Collateralized debt obligations (CDOs)

    8,344     105     8,239     372             125     497  

Collateralized loan obligations (CLOs)

    13,259     291     12,968     1,554         8     392     1,954  

Asset-based financing

    41,237     3     41,234     13,334     4     455     2     13,795  

Municipal securities tender option bond trusts (TOBs)

    5     5                          

Municipal investments

    4,597         4,597     77     193     161         431  

Client intermediation

    700     219     481     62             347     409  

Investment funds

    3,216     795     2,421     8     72     284         364  

Other

    2,708     1,024     1,684     262     109     125         496  
                                   

Total

  $ 414,194   $ 73,637   $ 340,557   $ 17,918   $ 378   $ 1,285   $ 980   $ 20,561  
                                   

Total Citigroup

  $ 788,798   $ 174,380   $ 614,418   $ 28,352   $ 3,363   $ 19,827   $ 1,649   $ 53,191  
                                   

(1)
The definition of maximum exposure to loss is included in the text that follows.

(2)
Included in Citigroup's September 30, 2010 Consolidated Balance Sheet.

(3)
Not included in Citigroup's September 30, 2010 Consolidated Balance Sheet.

(4)
Due to the adoption of ASC 810, Consolidation (formerly FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities) on January 1, 2010, the previously disclosed assets of former QSPEs are now included in either the "Consolidated VIE / SPE assets" or the "Significant unconsolidated VIE assets" columns for the September 30, 2010 period.

(5)
A significant unconsolidated VIE is an entity where the Company has any variable interest considered to be significant, regardless of the likelihood of loss or the notional amount of exposure.

(6)
A significant portion of the Company's securitized mortgage portfolio was transferred from Citi Holdings to Citicorp during the first quarter of 2010.

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  As of December 31, 2009  
In millions of dollars   Total
involvement
with SPE assets
  QSPE
assets
  Consolidated
VIE assets
  Significant
unconsolidated
VIE assets(1)
  Maximum exposure to
loss in significant
unconsolidated VIEs(2)
 

Citicorp

                               

Credit card securitizations

  $ 78,833   $ 78,833   $   $   $  

Mortgage securitizations

                               
 

U.S. agency-sponsored

    180,487     180,487              
 

Non-agency-sponsored

    84,462     84,462              

Citi-administered asset-backed commercial paper conduits (ABCP)

    36,327             36,327     36,326  

Third-party commercial paper conduits

    3,718             3,718     353  

Collateralized debt obligations (CDOs)

    2,785             2,785     21  

Collateralized loan obligations (CLOs)

    5,409             5,409     120  

Asset-based financing

    19,612         1,279     18,333     5,221  

Municipal securities tender option bond trusts (TOBs)

    19,455     705     9,623     9,127     6,841  

Municipal investments

    10,906         11     10,895     2,370  

Client intermediation

    8,607         2,749     5,858     881  

Investment funds

    93         39     54     10  

Trust preferred securities

    19,345             19,345     128  

Other

    7,380     1,808     1,838     3,734     446  
                       

Total

  $ 477,419   $ 346,295   $ 15,539   $ 115,585   $ 52,717  
                       

Citi Holdings

                               

Credit card securitizations

  $ 42,274   $ 42,274   $   $   $  

Mortgage securitizations

                               
 

U.S. agency-sponsored

    288,605     288,605              
 

Non-agency-sponsored

    19,899     19,899              

Student loan securitizations

    14,343     14,343              

Citi-administered asset-backed commercial paper conduits (ABCP)

    98         98          

Third-party commercial paper conduits

    5,776             5,776     439  

Collateralized debt obligations (CDOs)

    24,157         7,614     16,543     1,158  

Collateralized loan obligations (CLOs)

    13,515         142     13,373     1,658  

Asset-based financing

    52,598         370     52,228     18,385  

Municipal securities tender option bond trusts (TOBs)

    1,999         1,999          

Municipal investments

    5,364         882     4,482     375  

Client intermediation

    675         230     445     396  

Investment funds

    10,178         1,037     9,141     268  

Other

    3,732     610     1,472     1,650     604  
                       

Total

  $ 483,213   $ 365,731   $ 13,844   $ 103,638   $ 23,283  
                       

Total Citigroup

  $ 960,632   $ 712,026   $ 29,383   $ 219,223   $ 76,000  
                       

(1)
A significant unconsolidated VIE is an entity where the Company has any variable interest considered to be significant, regardless of the likelihood of loss or the notional amount of exposure.

(2)
The definition of maximum exposure to loss is included in the text that follows.

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The previous table does not include:

Prior to January 1, 2010, the table did not include:

        The asset balances for consolidated VIEs represent the carrying amounts of the assets consolidated by the Company. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the legal form of the asset (e.g., security or loan) and the Company's standard accounting policies for the asset type and line of business.

        The asset balances for unconsolidated VIEs where the Company has significant involvement represent the most current information available to the Company. In most cases, the asset balances represent an amortized cost basis without regard to impairments in fair value, unless fair value information is readily available to the Company.

        The maximum funded exposure represents the balance sheet carrying amount of the Company's investment in the VIE. It reflects the initial amount of cash invested in the VIE plus any accrued interest and is adjusted for any impairments in value recognized in earnings and any cash principal payments received. The maximum exposure of unfunded positions represents the remaining undrawn committed amount, including liquidity and credit facilities provided by the Company, or the notional amount of a derivative instrument considered to be a variable interest, adjusted for any declines in fair value recognized in earnings. In certain transactions, the Company has entered into derivative instruments or other arrangements that are not considered variable interests in the VIE (e.g., interest rate swaps, cross-currency swaps, or where the Company is the purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE). Receivables under such arrangements are not included in the maximum exposure amounts.

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Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments

        The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding commitments in the SPE table as of September 30, 2010:

In millions of dollars   Liquidity Facilities   Loan Commitments  

Citicorp

             

Citi-administered asset-backed commercial paper conduits (ABCP)

  $ 7,639   $  

Third-party commercial paper conduits

    298      

Asset-based financing

    5     1,932  

Municipal securities tender option bond trusts (TOBs)

    7,443      

Municipal investments

        1,110  

Other

        115  
           

Total Citicorp

  $ 15,385   $ 3,157  
           

Citi Holdings

             

Third-party commercial paper conduits

  $ 252   $  

Collateralized loan obligations (CLOs)

        8  

Asset-based financing

        455  

Municipal investments

        161  

Investment funds

        284  

Other

        125  
           

Total Citi Holdings

  $ 252   $ 1,033  
           

Total Citigroup funding commitments

  $ 15,637   $ 4,190  
           

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Citicorp and Citi Holdings Consolidated VIEs

        The following table presents the carrying amounts and classifications of consolidated assets that are collateral for consolidated VIE and SPE obligations.

        The Company engages in on-balance-sheet securitizations which are securitizations that do not qualify for sales treatment; thus, the assets remain on the Company's balance sheet. The consolidated VIEs included in the tables below represent hundreds of separate entities with which the Company is involved. In general, the third-party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to the Company, except where the Company has provided a guarantee to the investors or is the counterparty to certain derivative transactions involving the VIE. In addition, the assets are generally restricted only to pay such liabilities. Thus, the Company's maximum legal exposure to loss due to outstanding third-party financing related to consolidated VIEs is significantly less than the carrying value of the consolidated VIE assets. Intercompany assets and liabilities are excluded from the table. All assets are restricted from being sold or pledged as collateral. The cash flows from these assets are the only source used to pay down the associated liabilities, which are non-recourse to the Company's general assets.

 
  September 30, 2010   December 31, 2009  
In billions of dollars   Citicorp   Citi Holdings   Citigroup   Citicorp   Citi Holdings   Citigroup  

Cash

  $ 0.3   $ 2.0   $ 2.3   $   $ 0.7   $ 0.7  

Trading account assets

    3.5     1.4     4.9     3.7     9.5     13.2  

Investments

    9.4     0.1     9.5     9.8     2.7     12.5  

Total loans, net

    86.0     38.5     124.5     0.1     0.4     0.5  

Other

    1.6     31.6     33.2     1.9     0.5     2.4  
                           

Total assets

  $ 100.8   $ 73.6   $ 174.4   $ 15.5   $ 13.8   $ 29.3  
                           

Short-term borrowings

  $ 35.1   $ 1.3   $ 36.4   $ 9.5   $ 2.6   $ 12.1  

Long-term debt

    48.7     20.9     69.6     4.6     0.3     4.9  

Other liabilities

    1.2     30.7     31.9     0.1     1.5     1.6  
                           

Total liabilities

  $ 85.0   $ 52.9   $ 137.9   $ 14.2   $ 4.4   $ 18.6  
                           

Citicorp and Citi Holdings Significant Interests in Unconsolidated VIEs—Balance Sheet Classification

        The following tables present the carrying amounts and classification of significant interests in unconsolidated VIEs:

 
  September 30, 2010   December 31, 2009  
In billions of dollars   Citicorp   Citi Holdings   Citigroup   Citicorp   Citi Holdings   Citigroup  

Trading account assets

  $ 3.3   $ 2.6   $ 5.9   $ 3.2   $ 3.1   $ 6.3  

Investments

    3.3     6.8     10.1     2.0     7.3     9.3  

Loans

    4.4     7.7     12.1     2.3     10.5     12.8  

Other

    2.2     1.9     4.1     0.5     0.1     0.6  
                           

Total assets

  $ 13.2   $ 19.0   $ 32.2   $ 8.0   $ 21.0   $ 29.0  
                           

Long-term debt

  $ 0.5   $ 0.5   $ 1.0   $ 0.5   $   $ 0.5  

Other liabilities

    0.1         0.1     0.3     0.2     0.5  
                           

Total liabilities

  $ 0.6   $ 0.5   $ 1.1   $ 0.8   $ 0.2   $ 1.0  
                           

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Credit Card Securitizations

        The Company securitizes credit card receivables through trusts that are established to purchase the receivables. Citigroup transfers receivables into the trusts on a non-recourse basis. Credit card securitizations are revolving securitizations; that is, as customers pay their credit card balances, the cash proceeds are used to purchase new receivables and replenish the receivables in the trust. Prior to 2010, such transfers were accounted for as sale transactions under SFAS 140 and, accordingly, the sold assets were removed from the consolidated balance sheet and a gain or loss was recognized in connection with the transaction. With the adoption of SFAS 166 and SFAS 167, beginning in 2010 the trusts are treated as consolidated entities, because, as servicer, Citigroup has power to direct the activities that most significantly impact the economic performance of the trusts and also holds a seller's interest and certain securities issued by the trusts, and provides liquidity facilities to the trusts, which could result in potentially significant losses or benefits from the trusts. Accordingly, the transferred credit card receivables are required to remain on the Consolidated Balance Sheet with no gain or loss recognized. The debt issued by the trusts to third parties is included in the Consolidated Balance Sheet.

        The Company relies on securitizations to fund a significant portion of its credit card businesses in North America. The following table reflects amounts related to the Company's securitized credit card receivables:

 
  Citicorp   Citi Holdings  
In billions of dollars   September 30,
2010
  December 31,
2009
  September 30,
2010
  December 31,
2009(2)
 

Principal amount of credit card receivables in trusts

  $ 67.8   $ 78.8   $ 33.2   $ 42.3  
                   

Ownership interests in principal amount of trust credit card receivables

                         
 

Sold to investors via trust-issued securities

    48.1     66.5     16.3     28.2  
 

Retained by Citigroup as trust-issued securities

    4.3     5.0     7.2     10.1  
 

Retained by Citigroup via non-certificated interests

    15.4     7.3     9.7     4.0  
                   

Total ownership interests in principal amount of trust credit card receivables

  $ 67.8   $ 78.8   $ 33.2   $ 42.3  
                   

Other amounts recorded on the balance sheet related to interests retained in the trusts

                         
 

Other retained interests in securitized assets

    NA   $ 1.4     NA   $ 1.6  
 

Residual interest in securitized assets(1)

    NA     0.3     NA     1.2  
 

Amounts payable to trusts

    NA     1.2     NA     0.8  
                   

(1)
December 31, 2009 balances include net unbilled interest of $0.3 billion for Citicorp and $0.4 billion for Citi Holdings.

(2)
Includes information related to the Broadway Trust which was sold during the third quarter of 2010.

Credit Card Securitizations—Citicorp

        The Company recorded net gains (losses) from securitization of credit card receivables of $102 million and $253 million during the three and nine months ended September 30, 2009. Net gains (losses) reflect the following:

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        The following table summarizes selected cash flow information related to Citicorp's credit card securitizations for the three and nine months ended September 30, 2010 and 2009:

 
  Three months ended September 30,  
In billions of dollars   2010   2009  

Proceeds from new securitizations

  $   $ 1.0  

Pay down of maturing notes

    (1.0 )   N/A  

Proceeds from collections reinvested in new receivables

    N/A     38.5  

Contractual servicing fees received

    N/A     0.3  

Cash flows received on retained interests and other net cash flows

    N/A     0.7  
           

N/A—Not applicable due to the adoption of SFAS 166/167

 
  Nine months ended September 30,  
In billions of dollars   2010   2009  

Proceeds from new securitizations

  $   $ 11.7  

Pay down of maturing notes

    (18.4 )   N/A  

Proceeds from collections reinvested in new receivables

    N/A     110.0  

Contractual servicing fees received

    N/A     1.0  

Cash flows received on retained interests and other net cash flows

    N/A     2.3  
           

N/A—Not applicable due to the adoption of SFAS 166/167

Managed Loans

        As previously mentioned, prior to 2010, securitized receivables were treated as sold and removed from the balance sheet. Beginning in 2010, all securitized credit card receivables are included in the Consolidated Balance Sheet. Accordingly, the Managed-basis (Managed) presentation is only relevant prior to 2010.

        After securitization of credit card receivables, the Company continues to maintain credit card customer account relationships and provides servicing for receivables transferred to the trusts. As a result, the Company considers the securitized credit card receivables to be part of the business it manages.

        Managed-basis presentations are non-GAAP financial measures. Managed presentations include results from both the on-balance-sheet loans and off-balance-sheet loans, and exclude the impact of card securitization activity. Managed presentations assume that securitized loans have not been sold and present the results of the securitized loans in the same manner as Citigroup's owned loans. Citigroup's management believes that Managed presentations provide a greater understanding of ongoing operations and enhance comparability of those results in prior periods as well as demonstrating the effects of unusual gains and charges in the current period. Management further believes that a meaningful analysis of the Company's financial performance requires an understanding of the factors underlying that performance and that investors find it useful to see these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in Citigroup's underlying performance.

Managed Loans—Citicorp

        The following tables present a reconciliation between the Managed basis and on-balance-sheet credit card portfolios and the related delinquencies (loans which are 90 days or more past due) and credit losses, net of recoveries.

In millions of dollars, except loans in billions   September 30,
2010
  December 31,
2009
 

Loan amounts, at period end

             

On balance sheet

  $ 111.0   $ 44.8  

Securitized amounts

        72.6  
           

Total managed loans

  $ 111.0   $ 117.4  
           

Delinquencies, at period end

             

On balance sheet

  $ 2,394   $ 1,165  

Securitized amounts

        2,121  
           

Total managed delinquencies

  $ 2,394   $ 3,286  
           

 

Credit losses, net of recoveries, for the
three months ended September 30,
  2010   2009  

On balance sheet

  $ 2,397   $ 1,047  

Securitized amounts

        1,876  
           

Total managed

  $ 2,397   $ 2,923  
           

 

Credit losses, net of recoveries, for the
nine months ended September 30,
  2010   2009  

On balance sheet

  $ 7,766   $ 2,862  

Securitized amounts

        5,205  
           

Total managed

  $ 7,766   $ 8,067  
           

Credit Card SecuritizationsCiti Holdings

        The Company recorded net losses from securitization of Citi Holdings' credit card receivables of $(105) million and $(781) million for the three and nine months ended September 30, 2009.

        The following table summarizes selected cash flow information related to Citi Holdings' credit card securitizations for the three and nine months ended September 30, 2010 and 2009:

 
  Three months ended September 30,  
In billions of dollars   2010   2009  

Proceeds from new securitizations

  $ 1.8   $ 4.3  

Pay down of maturing notes

    (2.1 )   N/A  

Proceeds from collections reinvested in new receivables

    N/A     11.1  

Contractual servicing fees received

    N/A     0.2  

Cash flows received on retained interests and other net cash flows

    N/A     0.7  
           

N/A—Not applicable due to the adoption of SFAS 166/167

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  Nine months ended September 30,  
In billions of dollars   2010   2009  

Proceeds from new securitizations

  $ 5.5   $ 23.0  

Pay down of maturing notes

    (15.8 )   N/A  

Proceeds from collections reinvested in new receivables

    N/A     36.9  

Contractual servicing fees received

    N/A     0.5  

Cash flows received on retained interests and other net cash flows

    N/A     1.9  
           

N/A—Not applicable due to the adoption of SFAS 166/167

Managed Loans—Citi Holdings

        The following tables present a reconciliation between the Managed basis and on-balance-sheet credit card portfolios and the related delinquencies (loans which are 90 days or more past due) and credit losses, net of recoveries.

In millions of dollars, except loans in billions   September 30,
2010
  December 31,
2009
 

Loan amounts, at period end

             

On balance sheet

  $ 52.7   $ 27.0  

Securitized amounts

        38.8  
           

Total managed loans

  $ 52.7   $ 65.8  
           

Delinquencies, at period end

             

On balance sheet

  $ 1,684   $ 1,250  

Securitized amounts

        1,326  
           

Total managed delinquencies

  $ 1,684   $ 2,576  
           

 

Credit losses, net of recoveries, for the
three months ended September 30,
  2010   2009  

On balance sheet

  $ 1,654   $ 867  

Securitized amounts

        1,137  
           

Total managed credit losses

  $ 1,654   $ 2,004  
           

 

Credit losses, net of recoveries, for the
nine months ended September 30,
  2010   2009  

On balance sheet

  $ 5,731   $ 2,640  

Securitized amounts

        3,472  
           

Total managed credit losses

  $ 5,731   $ 6,112  
           

Funding, Liquidity Facilities and Subordinated Interests

        Citigroup securitizes credit card receivables through three securitization trustsCitibank Credit Card Master Trust ("Master Trust"), which is part of Citicorp, and the Citibank OMNI Master Trust ("Omni Trust") and Broadway Credit Card Trust ("Broadway Trust") prior to its sale in September 2010, which are part of Citi Holdings.

        Master Trust issues fixed- and floating-rate term notes as well as commercial paper. Some of the term notes are issued to multi-seller commercial paper conduits. In 2009, the Master Trust issued $4.3 billion of notes that are eligible for the Term Asset-Backed Securities Loan Facility (TALF) program, where investors can borrow from the Federal Reserve using the trust securities as collateral. The weighted average maturity of the term notes issued by the Master Trust was 3.5 years as of September 30, 2010 and 3.6 years as of December 31, 2009. Beginning in 2010, the liabilities of the trusts are included in the Consolidated Balance Sheet.

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Master Trust liabilities (at par value)

In billions of dollars   September 30,
2010
  December 31,
2009
 

Term notes issued to multi- seller CP conduits

  $ 0.3   $ 0.8  

Term notes issued to third parties

    42.9     51.2  

Term notes retained by Citigroup affiliates

    4.3     5.0  

Commercial paper

    5.0     14.5  
           

Total Master Trust Liabilities

  $ 52.5   $ 71.5  
           

        The Omni Trust issues fixed- and floating-rate term notes, some of which are purchased by multi-seller commercial paper conduits. The Omni Trust also issues commercial paper. During 2009, a portion of the Omni Trust commercial paper had been purchased by the Federal Reserve's Commercial Paper Funding Facility (CPFF). In addition, some of the multi-seller conduits that hold Omni Trust term notes had placed commercial paper with CPFF. No Omni trust liabilities were funded through CPFF as of September 30, 2010. The total amount of Omni Trust liabilities funded directly or indirectly through the CPFF was $2.5 billion at December 31, 2009.

        The weighted average maturity of the third-party term notes issued by the Omni Trust was 2.0 years as of September 30, 2010 and 2.5 years as of December 31, 2009.

Omni Trust liabilities (at par value)

In billions of dollars   September 30,
2010
  December 31,
2009
 

Term notes issued to multi- seller commercial paper conduits

  $ 7.2   $ 13.1  

Term notes issued to third parties

    9.2     9.2  

Term notes retained by Citigroup affiliates

    7.1     9.8  

Commercial paper

        4.4  
           

Total Omni Trust liabilities

  $ 23.5   $ 36.5  
           

        Citibank (South Dakota), N.A. is the sole provider of full liquidity facilities to the commercial paper programs of the Master and Omni Trusts. Both of these facilities, which represent contractual obligations on the part of Citibank (South Dakota), N.A. to provide liquidity for the issued commercial paper, are made available on market terms to each of the trusts. The liquidity facilities require Citibank (South Dakota), N.A. to purchase the commercial paper issued by each trust at maturity, if the commercial paper does not roll over, as long as there are available credit enhancements outstanding, typically in the form of subordinated notes. As there was no Omni trust commercial paper outstanding as of September 30, 2010, there was no liquidity commitment at that time. The liquidity commitment related to the Omni Trust commercial paper programs amounted to $4.4 billion at December 31, 2009. The liquidity commitment related to the Master Trust commercial paper program amounted to $5.0 billion at September 30, 2010 and $14.5 billion at December 31, 2009. As of September 30, 2010 and December 31, 2009, none of the Master Trust liquidity commitment was drawn.

        In addition, Citibank (South Dakota), N.A. had provided liquidity to a third-party, non-consolidated multi-seller commercial paper conduit, which is not a VIE. The commercial paper conduit had acquired notes issued by the Omni Trust. The liquidity commitment to the third-party conduit was $2.5 billion at December 31, 2009, of which none was drawn.

        During 2009, all three of Citigroup's primary credit card securitization trusts—Master Trust, Omni Trust, and Broadway Trust—had bonds placed on ratings watch with negative implications by rating agencies. As a result of the ratings watch status, certain actions were taken by Citi with respect to each of the trusts. In general, the actions subordinated certain senior interests in the trust assets that were retained by Citi, which effectively placed these interests below investor interests in terms of priority of payment.

        As a result of these actions, based on the applicable regulatory capital rules, Citigroup began including the sold assets for all three of the credit card securitization trusts in its risk-weighted assets for purposes of calculating its risk-based capital ratios during 2009. The increase in risk-weighted assets occurred in the quarter during 2009 in which the respective actions took place. The effect of these changes increased Citigroup's risk-weighted assets by approximately $82 billion, and decreased Citigroup's Tier 1 Capital ratio by approximately 100 basis points each as of March 31, 2009, with respect to the Master and Omni Trusts. The inclusion of the Broadway Trust increased Citigroup's risk-weighted assets by an additional approximately $900 million at June 30, 2009. With the consolidation of the trusts, beginning in 2010 the credit card receivables that had previously been considered sold under SFAS 140 are now included in the Consolidated Balance Sheet and accordingly these assets continue to be included in Citigroup's risk-weighted assets. All bond ratings for each of the trusts have been affirmed by the rating agencies and no downgrades have occurred as of September 30, 2010.

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Mortgage Securitizations

        The Company provides a wide range of mortgage loan products to a diverse customer base.

        The Company often securitizes these originated and/or purchased loans through the use of SPEs, which prior to 2010 were QSPEs. These SPEs are funded through the issuance of Trust Certificates backed solely by the transferred assets. These certificates have the same average life as the transferred assets. In addition to providing a source of liquidity and less expensive funding, securitizing these assets also reduces the Company's credit exposure to the borrowers. These mortgage loan securitizations are primarily non-recourse, thereby effectively transferring the risk of future credit losses to the purchasers of the securities issued by the trust. However, while the Company's Consumer business generally retains the servicing rights and in certain instances retains investment securities, interest-only strips and residual interests in future cash flows from the trusts, Consumer also services a limited number of Securities and Banking's and the Special Asset Pool's mortgage securitizations.

        Consumer securitizes mortgage loans generally through either a government-sponsored agency, such as Ginnie Mae, FNMA or Freddie Mac (U.S. agency—sponsored mortgages), or private label (Non-agency-sponsored mortgages) securitization. The Company is not the primary beneficiary of its U.S. agency-sponsored mortgage securitizations, because Citigroup does not have the power to direct the activities of the SPE that most significantly impact the entity's economic performance. Therefore, Citi does not consolidate these U.S. agency-sponsored mortgage securitizations. Securities and Banking and Special Asset Pool securitize mortgage loans only through non-agency-sponsored securitization. In certain instances, the Company has (1) the power to direct the activities and (2) the obligation to either absorb losses or right to receive benefits that could be potentially significant to its non-agency-sponsored mortgage securitizations and, therefore, is the primary beneficiary and consolidates the SPE.

Mortgage SecuritizationsCiticorp

        The following tables summarize selected cash flow information related to mortgage securitizations for the three and nine months ended September 30, 2010 and 2009:

 
  Three months ended September 30,  
 
  2010   2009  
In billions of dollars   U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
  Agency- and non-agency-
sponsored
mortgages
 

Proceeds from new securitizations

  $ 16.8   $ 0.8   $ 5.0  

Contractual servicing fees received

    0.1          

Cash flows received on retained interests and other net cash flows

    0.1          
               

 

 
  Nine months ended September 30,  
 
  2010   2009  
In billions of dollars   U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
  Agency- and non-agency-
sponsored
mortgages
 

Proceeds from new securitizations

  $ 40.0   $ 1.9   $ 12.0  

Contractual servicing fees received

    0.4          

Cash flows received on retained interests and other net cash flows

    0.1          
               

(1)
Includes Securities and Banking mortgage securitizations.

        Gains (losses) recognized on the securitization of U.S. agency-sponsored mortgages were $(4) million and $(1) million for the three and nine months ended September 30, 2010, respectively. For the three and nine months ended September 30, 2010, losses recognized on the securitization of non-agency-sponsored mortgages were $(1) million and $(2) million, respectively.

        Agency and non-agency mortgage securitization gains for the three and nine months ended September 30, 2009 were $4 million and $19 million, respectively.

        Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the three months ended September 30, 2010 and 2009 are as follows:

 
  September 30, 2010   September 30, 2009
 
  U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
  Agency- and non-agency-
sponsored mortgages

Discount rate

  2.6% to 35.7%   0.8% to 44.9%   0.4% to 46.8%

Constant prepayment rate

  2.7% to 26.0%   1.5% to 49.5%   1.2% to 45.6%

Anticipated net credit losses

  NM   13.0% to 80.0%   6.0% to 70.0%
             

(1)
Includes Securities and Banking mortgage securitizations.

NM Not meaningful.    Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

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        The range in the key assumptions is due to the different characteristics of the interests retained by the Company. The interests retained range from highly rated and/or senior in the capital structure to unrated and/or residual interests.

        The effect of adverse changes of 10% and 20% in each of the key assumptions used to determine the fair value of retained interests is disclosed below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown below.

        At September 30, 2010, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:

 
  September 30, 2010
 
  U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)

Discount rate

  2.6% to 35.7%   0.8% to 44.9%

Constant prepayment rate

  2.7% to 26.0%   1.5% to 49.5%

Anticipated net credit losses

  NM   13.0% to 80.0%
         

(1)
Includes Securities and Banking mortgage securitizations.

NM
Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

In millions of dollars   U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
 

Carrying value of retained interests

  $ 2,752   $ 773  
           

Discount rates

             
 

Adverse change of 10%

  $ (73 ) $ (34 )
 

Adverse change of 20%

    (142 )   (65 )
           

Constant prepayment rate

             
 

Adverse change of 10%

  $ (121 ) $ (17 )
 

Adverse change of 20%

    (235 )   (34 )
           

Anticipated net credit losses

             
 

Adverse change of 10%

  $ (6 ) $ (21 )
 

Adverse change of 20%

    (12 )   (37 )
           

Mortgage Securitizations—Citi Holdings

        The following tables summarize selected cash flow information related to Citi Holdings mortgage securitizations for the three and nine months ended September 30, 2010 and 2009:

 
  Three months ended September 30,  
 
  2010   2009  
In billions of dollars   U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
  Agency- and Non-agency-
sponsored mortgages
 

Proceeds from new securitizations

  $ 0.6   $   $ 15.9  

Contractual servicing fees received

    0.2         0.3  

Cash flows received on retained interests and other net cash flows

            0.1  
               

 

 
  Nine months ended September 30,  
 
  2010   2009  
In billions of dollars   U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
  Agency- and Non-agency-
sponsored Mortgages
 

Proceeds from new securitizations

  $ 0.6   $   $ 61.0  

Contractual servicing fees received

    0.6     0.1     1.0  

Cash flows received on retained interests and other net cash flows

    0.1         0.4  
               

(1)
Includes Securities and Banking mortgage securitizations.

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        The Company did not recognize gains (losses) on the securitization of U.S. agency- and non-agency-sponsored mortgages in the three and nine months ended September 30, 2010 and 2009.

        Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the three months ended September 30, 2010 and 2009 are as follows:

 
  Three months ended September 30,
 
  2010   2009
 
  U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
  Agency- and Non-agency-
sponsored mortgages

Discount rate

  N/A   N/A   11.7% to 12.0%

Constant prepayment rate

  N/A   N/A   3.7% to 4.2%

Anticipated net credit losses

  N/A   N/A  
             

(1)
Includes Securities and Banking mortgage securitizations.

N/A
Not applicable

        The range in the key assumptions is due to the different characteristics of the interests retained by the Company. The interests retained range from highly rated and/or senior in the capital structure to unrated and/or residual interests.

        The effect of adverse changes of 10% and 20% in each of the key assumptions used to determine the fair value of retained interests is disclosed below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown below.

        At September 30, 2010, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions are as follows:

 
  September 30, 2010
 
  U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
Mortgages(1)

Discount rate

  12.8%   7.3% to 36.2%

Constant prepayment rate

  25.0%   2.0% to 35.4%

Anticipated net credit losses

  0.1%   0.2% to 76.1%

Weighted average life

  4.9 years   4.0 years
         

 

In millions of dollars   U.S. agency-
sponsored
mortgages
  Non-agency-
sponsored
mortgages(1)
 

Carrying value of retained interests

  $ 2,157   $ 450  
           

Discount rates

             
 

Adverse change of 10%

  $ (74 ) $ (16 )
 

Adverse change of 20%

    (143 )   (31 )
           

Constant prepayment rate

             
 

Adverse change of 10%

  $ (155 ) $ (42 )
 

Adverse change of 20%

    (297 )   (81 )
           

Anticipated net credit losses

             
 

Adverse change of 10%

  $ (23 ) $ (24 )
 

Adverse change of 20%

    (46 )   (49 )
           

(1)
Includes Securities and Banking mortgage securitization.

Mortgage Servicing Rights

        In connection with the securitization of mortgage loans, the Company's U.S. Consumer mortgage business retains the servicing rights, which entitle the Company to a future stream of cash flows based on the outstanding principal balances of the loans and the contractual servicing fee. Failure to service the loans in accordance with contractual requirements may lead to a termination of the servicing rights and the loss of future servicing fees.

        The fair value of capitalized mortgage servicing rights (MSRs) was $4.0 billion and $6.2 billion at September 30, 2010 and 2009, respectively. The MSRs correspond to principal loan balances of $503 billion and $577 billion as of September 30, 2010 and 2009, respectively. The following table summarizes the changes in capitalized MSRs for the three and nine months ended September 30, 2010 and 2009:

 
  Three months ended
September 30,
 
In millions of dollars   2010   2009  

Balance, as of June 30

  $ 4,894   $ 6,770  

Originations

    155     267  

Changes in fair value of MSRs due to changes in inputs and assumptions

    (635 )   (490 )

Other changes(1)

    (438 )   (319 )
           

Balance, as of September 30

  $ 3,976   $ 6,228  
           

 

 
  Nine months ended
September 30,
 
In millions of dollars   2010   2009  

Balance, as of the beginning of year

  $ 6,530   $ 5,657  

Originations

    424     893  

Changes in fair value of MSRs due to changes in inputs and assumptions

    (1,929 )   1,027  

Other changes(1)

    (1,049 )   (1,349 )
           

Balance, as of September 30

  $ 3,976   $ 6,228  
           

(1)
Represents changes due to customer payments and passage of time.

        The market for MSRs is not sufficiently liquid to provide participants with quoted market prices. Therefore, the Company uses an option-adjusted spread valuation approach to determine the fair value of MSRs. This approach consists of projecting servicing cash flows under multiple interest rate scenarios and discounting these cash flows using risk-adjusted discount rates. The key assumptions used in the valuation of MSRs include mortgage prepayment speeds and discount

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rates. The model assumptions and the MSRs' fair value estimates are compared to observable trades of similar MSR portfolios and interest-only security portfolios, as available, as well as to MSR broker valuations and industry surveys. The cash flow model and underlying prepayment and interest rate models used to value these MSRs are subject to validation in accordance with the Company's model validation policies.

        The fair value of the MSRs is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. In managing this risk, the Company economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities and purchased securities classified as trading.

        The Company receives fees during the course of servicing previously securitized mortgages. The amounts of these fees for the three and nine months ended September 30, 2010 and 2009 were as follows:

 
  Three months ended
September 30,
  Nine months ended
September 30,
 
In millions of dollars   2010   2009   2010   2009  

Servicing fees

  $ 336   $ 397   $ 1,049   $ 1,255  

Late fees

    22     23     67     71  

Ancillary fees

    53     18     145     60  
                   

Total MSR fees

  $ 411   $ 438   $ 1,261   $ 1,386  
                   

        These fees are classified in the Consolidated Statement of Income as Commissions and fees.

Re-securitizations

        The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. During the three months and nine months ended September 30, 2010, Citi transferred non-agency (private-label) securities with principal of approximately $3,559 million and $4,642 million, respectively, to re-securitization entities. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients. For the three months and nine months ended September 30, 2010, Citi recognized losses on the sale of securities to private-label re-securitization entities of approximately $117 million and $118 million, respectively. As of September 30, 2010, the market value of Citi owned interests in non-agency re-securitization transactions structured by Citi totaled approximately $421 million and are recorded in trading assets. Of this amount, approximately $257 million and $163 million relate to senior and subordinated beneficial interests, respectively.

        The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (Agency) securities. For the three and nine month periods ending September 30, 2010, Citi transferred Agency securities with principal of approximately $5,897 million and $18,579 million, respectively, to re-securitization entities. As of September 30, 2010, the market value of Citi owned interests in Agency re-securitization transactions structured by Citi totaled approximately $2,546 million and are recorded in trading assets.

        As of September 30, 2010, the Company did not consolidate any private-label or Agency re-securitization entities.

Student Loan Securitizations

        The Company indirectly owns, through Citibank, N.A., 80% of the outstanding common stock of The Student Loan Corporation (SLC), which is part of Citi Holdings—Local Consumer Lending. As further discussed in Note 2, in the third quarter of 2010, Citi announced the sale of SLC. As part of the transaction, Citi has agreed to sell its residual interests in substantially all of the student loans securitization trusts. These transactions are currently expected to close in the fourth quarter of 2010. At September 30, 2010, approximately $31.4 billion of loans have been transferred to Assets of discontinued operations held for sale.

        Through this business, the Company maintains programs to securitize certain portfolios of student loan assets. Under these securitization programs, loans are sold to VIEs (some of them being former QSPEs), which are funded through the issuance of pass-through term notes collateralized solely by the trust assets.

        The Company has (1) the power to direct the activities of these VIEs that most significantly impact their economic performance and (2) the obligation to either absorb losses or the right to receive benefits that could be potentially significant to the VIEs.

        As a result of the adoption of SFAS 166 and SFAS 167, the Company consolidated all student loan trusts that were formerly QSPEs, as well as newly created securitization VIEs, as the primary beneficiary. Prior to the adoption of SFAS 166 and SFAS 167, the student loan securitizations through QSPEs were accounted for as off-balance-sheet securitizations, with the Company generally retaining interests in the form of subordinated residual interests (i.e., interest only strips) and servicing rights.

        Under terms of the trust arrangements, the Company has no obligation to provide financial support and has not provided such support. A substantial portion of the credit risk associated with the securitized loans has been transferred to third-party guarantors or insurers either under the Federal Family Education Loan Program (FFEL Program), authorized by the U.S. Department of Education under the Higher Education Act of 1965, as amended, or through private credit insurance. On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 was signed into law, which eliminated new FFEL Program loan originations. Effective July 1, 2010, in compliance with this regulatory change, SLC ceased originating new FFEL Program loans. This change is not currently anticipated to materially impact the Company's financial statements.

        The following tables summarize selected cash flow information related to student loan securitizations for the nine months ended September 30, 2010 and 2009 (three months end September 30, 2010 and 2009 are nil):

 
  Nine months ended
September 30,
 
In billions of dollars   2010   2009  

Contractual servicing fees received

  $   $ 0.1  

Cash flows received on retained interests and other net cash flows

        0.1  

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Citi-Administered Asset-Backed Commercial Paper Conduits

        The Company is active in the asset-backed commercial paper conduit business as administrator of several multi-seller commercial paper conduits, and also as a service provider to single-seller and other commercial paper conduits sponsored by third parties.

        The multi-seller commercial paper conduits are designed to provide the Company's clients access to low-cost funding in the commercial paper markets. The conduits purchase assets from or provide financing facilities to clients and are funded by issuing commercial paper to third-party investors. The conduits generally do not purchase assets originated by the Company. The funding of the conduit is facilitated by the liquidity support and credit enhancements provided by the Company.

        As administrator to the conduits, the Company is generally responsible for selecting and structuring assets purchased or financed by the conduits, making decisions regarding the funding of the conduits, including determining the tenor and other features of the commercial paper issued, monitoring the quality and performance of the conduits' assets, and facilitating the operations and cash flows of the conduits. In return, the Company earns structuring fees from customers for individual transactions and earns an administration fee from the conduit, which is equal to the income from client program and liquidity fees of the conduit after payment of interest costs and other fees. This administration fee is fairly stable, since most risks and rewards of the underlying assets are passed back to the clients and, once the asset pricing is negotiated, most ongoing income, costs and fees are relatively stable as a percentage of the conduit's size.

        The conduits administered by the Company do not generally invest in liquid securities that are formally rated by third parties. The assets are privately negotiated and structured transactions that are designed to be held by the conduit, rather than actively traded and sold. The yield earned by the conduit on each asset is generally tied to the rate on the commercial paper issued by the conduit, thus passing interest rate risk to the client. Each asset purchased by the conduit is structured with transaction-specific credit enhancement features provided by the third-party client seller, including over collateralization, cash and excess spread collateral accounts, direct recourse or third-party guarantees. These credit enhancements are sized with the objective of approximating a credit rating of A or above, based on the Company's internal risk ratings.

        Substantially all of the funding of the conduits is in the form of short-term commercial paper, with a weighted average life generally ranging from 30 to 60 days. As of September 30, 2010 and December 31, 2009, the weighted average lives of the commercial paper issued by consolidated and unconsolidated conduits were approximately 57 days and 43 days, respectively.

        The primary credit enhancement provided to the conduit investors is in the form of transaction-specific credit enhancement described above. In addition, there are generally two additional forms of credit enhancement that protect the commercial paper investors from defaulting assets. First, the subordinate loss notes issued by each conduit absorb any credit losses up to their full notional amount. Second, each conduit has obtained a letter of credit from the Company, which needs to be sized to at least 8-10% of the conduit's assets. The letters of credit provided by the Company to the consolidated conduits total approximately $3.4 billion. The net result across all multi-seller conduits administered by the Company is that, in the event defaulted assets exceed the transaction-specific credit enhancement described above, any losses in each conduit are allocated in the following order:

        The Company also provides the conduits with two forms of liquidity agreements that are used to provide funding to the conduits in the event of a market disruption, among other events. Each asset of the conduit is supported by a transaction-specific liquidity facility in the form of an asset purchase agreement (APA). Under the APA, the Company has agreed to purchase non-defaulted eligible receivables from the conduit at par. Any assets purchased under the APA are subject to increased pricing. The APA is not designed to provide credit support to the conduit, as it generally does not permit the purchase of defaulted or impaired assets and generally reprices the assets purchased to consider potential increased credit risk. The APA covers all assets in the conduits and is considered in the Company's maximum exposure to loss. In addition, the Company provides the conduits with program-wide liquidity in the form of short-term lending commitments. Under these commitments, the Company has agreed to lend to the conduits in the event of a short-term disruption in the commercial paper market, subject to specified conditions. The total notional exposure under the program-wide liquidity agreement for the Company's unconsolidated administered conduit as of September 30, 2010, is $0.6 billion and is considered in the Company's maximum exposure to loss. The Company receives fees for providing both types of liquidity agreement and considers these fees to be on fair market terms.

        Finally, the Company is one of several named dealers in the commercial paper issued by the conduits and earns a market-based fee for providing such services. Along with third-party dealers, the Company makes a market in the commercial paper and may from time to time fund commercial paper pending sale to a third party. On specific dates with less liquidity in the market, the Company may hold in inventory commercial paper issued by conduits administered by the Company, as well as conduits administered by third parties. The amount of commercial paper issued by its administered conduits held in inventory fluctuates based on market conditions and activity. As of September 30, 2010, the Company owned none of the commercial paper issued by its unconsolidated administered conduit.

        Upon adoption of SFAS 167 on January 1, 2010, with the exception of the government-guaranteed loan conduit described below, the asset-backed commercial paper conduits were consolidated by the Company. The Company determined that through its role as administrator it had the power to direct the activities that most significantly impacted the entities' economic performance. These powers included

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its ability to structure and approve the assets purchased by the conduits, its ongoing surveillance and credit mitigation activities, and its liability management. In addition, as a result of all the Company's involvement described above, it was concluded that the Company had an economic interest that could potentially be significant. However, the assets and liabilities of the Conduits are separate and apart from those of Citigroup. No assets of any Conduit are available to satisfy the creditors of Citigroup or any of its other subsidiaries.

        The Company administers one conduit that originates loans to third-party borrowers and those obligations are fully guaranteed primarily by AAA-rated government agencies that support export and development financing programs. The economic performance of this government-guaranteed loan conduit is most significantly impacted by the performance of its underlying assets. The guarantors must approve each loan held by the entity and the guarantors have the ability (through establishment of the servicing terms to direct default mitigation and to purchase defaulted loans) to manage the conduit's loans that become delinquent to improve the economic performance of the conduit. Because the Company does not have the power to direct the activities of this government-guaranteed loan conduit that most significantly impact the economic performance of the entity, it was concluded that the Company should not consolidate the entity. As of September 30, 2010, this unconsolidated government-guaranteed loan conduit held assets of approximately $7.6 billion.

        Prior to January 1, 2010, the Company was required to analyze the expected variability of each conduit quantitatively to determine whether the Company was the primary beneficiary of the conduit. The Company performed this analysis on a quarterly basis. For conduits where the subordinate loss notes or third-party guarantees were sufficient to absorb a majority of the expected loss of the conduit, the Company did not consolidate. In circumstances where the subordinate loss notes or third-party guarantees were insufficient to absorb a majority of the expected loss, the Company consolidated the conduit as its primary beneficiary due to the additional credit enhancement provided by the Company. In conducting this analysis, the Company considered three primary sources of variability in the conduit: credit risk, interest rate risk and fee variability.

Third-Party Commercial Paper Conduits

        The Company also provides liquidity facilities to single- and multi-seller conduits sponsored by third parties. These conduits are independently owned and managed and invest in a variety of asset classes, depending on the nature of the conduit. The facilities provided by the Company typically represent a small portion of the total liquidity facilities obtained by each conduit, and are collateralized by the assets of each conduit. As of September 30, 2010, the notional amount of these facilities was approximately $838 million, of which $288 million was funded under these facilities. The Company is not the party that has the power to direct the activities of these conduits that most significantly impact their economic performance and thus does not consolidate them.

Collateralized Debt and Loan Obligations

        A securitized collateralized debt obligation (CDO) is an SPE that purchases a pool of assets consisting of asset-backed securities and synthetic exposures through derivatives on asset-backed securities and issues multiple tranches of equity and notes to investors. A third-party asset manager is typically retained by the CDO to select the pool of assets and manage those assets over the term of the CDO. The Company earns fees for warehousing assets prior to the creation of a CDO, structuring CDOs and placing debt securities with investors. In addition, the Company has retained interests in many of the CDOs it has structured and makes a market in those issued notes.

        A cash CDO, or arbitrage CDO, is a CDO designed to take advantage of the difference between the yield on a portfolio of selected assets, typically residential mortgage-backed securities, and the cost of funding the CDO through the sale of notes to investors. "Cash flow" CDOs are vehicles in which the CDO passes on cash flows from a pool of assets, while "market value" CDOs pay to investors the market value of the pool of assets owned by the CDO at maturity. Both types of CDOs are typically managed by a third-party asset manager. In these transactions, all of the equity and notes issued by the CDO are funded, as the cash is needed to purchase the debt securities. In a typical cash CDO, a third-party investment manager selects a portfolio of assets, which the Company funds through a warehouse financing arrangement prior to the creation of the CDO. The Company then sells the debt securities to the CDO in exchange for cash raised through the issuance of notes. The Company's continuing involvement in cash CDOs is typically limited to investing in a portion of the notes or loans issued by the CDO and making a market in those securities, and acting as derivative counterparty for interest rate or foreign currency swaps used in the structuring of the CDO.

        A synthetic CDO is similar to a cash CDO, except that the CDO obtains exposure to all or a portion of the referenced assets synthetically through derivative instruments, such as credit default swaps. Because the CDO does not need to raise cash sufficient to purchase the entire referenced portfolio, a substantial portion of the senior tranches of risk is typically passed on to CDO investors in the form of unfunded liabilities or derivative instruments. Thus, the CDO writes credit protection on select referenced debt securities to the Company or third parties and the risk is then passed on to the CDO investors in the form of funded notes or purchased credit protection through derivative instruments. Any cash raised from investors is invested in a portfolio of collateral securities or investment contracts. The collateral is then used to support the obligations of the CDO on the credit default swaps written to counterparties. The Company's continuing involvement in synthetic CDOs generally includes purchasing credit protection through credit default swaps with the CDO, owning a portion of the capital structure of the CDO in the form of both unfunded derivative positions (primarily super-senior exposures discussed below) and funded notes, entering into interest-rate swap and total-return swap transactions with the CDO, lending to the CDO, and making a market in those funded notes.

        A securitized collateralized loan obligation (CLO) is substantially similar to the CDO transactions described above, except that the assets owned by the SPE (either cash instruments or synthetic exposures through derivative instruments) are corporate loans and to a lesser extent corporate bonds, rather than asset-backed debt securities.

        Where a CDO vehicle issues preferred shares, the preferred shares generally represent an insufficient amount of equity

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(less than 10%) and create the presumption that the preferred shares are insufficient to finance the entity's activities without subordinated financial support. In addition, although the preferred shareholders generally have full exposure to expected losses on the collateral and uncapped potential to receive expected residual rewards, it is not always clear whether they have the ability to make decisions about the entity that have a significant effect on the entity's financial results because of their limited role in making day-to-day decisions and their limited ability to remove the third-party asset manager. Because one or both of the above conditions will generally be met, we have assumed that, even where a CDO vehicle issued preferred shares, the vehicle should be classified as a VIE.

Consolidation and subsequent deconsolidation of CDOs

        Substantially all of the CDOs that the Company is involved with are managed by a third-party asset manager. In general, the third-party asset manager, through its ability to purchase and sell assets or, where the reinvestment period of a CDO has expired, the ability to sell assets, will have the power to direct the activities of the vehicle that most significantly impact the economic performance of the CDO. However, where a CDO has experienced an event of default, the activities of the third-party asset manager may be curtailed and certain additional rights will generally be provided to the investors in a CDO vehicle, including the right to direct the liquidation of the CDO vehicle.

        The Company has retained significant portions of the "super-senior" positions issued by certain CDOs. These positions are referred to as "super-senior" because they represent the most senior positions in the CDO and, at the time of structuring, were senior to tranches rated AAA by independent rating agencies. These positions include facilities structured in the form of short-term commercial paper, where the Company wrote put options ("liquidity puts") to certain CDOs. Under the terms of the liquidity puts, if the CDO was unable to issue commercial paper at a rate below a specified maximum (generally LIBOR + 35 bps to LIBOR + 40 bps), the Company was obligated to fund the senior tranche of the CDO at a specified interest rate. As of September 30, 2010, the Company no longer had exposure to this commercial paper as all of the underlying CDOs had been liquidated.

        Since the inception of many CDO transactions, the subordinate tranches of the CDOs have diminished significantly in value and in rating. The declines in value of the subordinate tranches and in the super-senior tranches indicate that the super-senior tranches are now exposed to a significant portion of the expected losses of the CDOs, based on current market assumptions.

        The Company does not generally have the power to direct the activities of the vehicle that most significantly impact the economic performance of the CDOs as this power is held by the third-party asset manager of the CDO. As such, certain synthetic and cash CDOs that were consolidated under ASC 810, were deconsolidated upon the adoption of SFAS 167. The deconsolidation of certain synthetic CDOs resulted in the recognition of current receivables and payables related to purchased and written credit default swaps entered into by Citigroup with the CDOs, which had previously been eliminated upon consolidation of these vehicles.

        Where: (i) an event of default has occurred for a CDO vehicle, (ii) the Company has the unilateral ability to remove the third-party asset manager without cause or liquidate the CDO, and (iii) the Company has exposure to the vehicle that is potentially significant to the vehicle, the Company will consolidate the CDO. In addition, where the Company is the asset manager of the CDO vehicle and has exposure to the vehicle that is potentially significant, the Company will generally consolidate the CDO.

        The net impact of adopting SFAS 167 for CDOs was an increase in the Company's assets of $1.9 billion and liabilities of $1.9 billion as of January 1, 2010. The Company continues to monitor its involvement in unconsolidated CDOs. If the Company were to acquire additional interests in these vehicles, be provided the right to direct the activities of a CDO (if the Company obtains the unilateral ability to remove the third-party asset manager without cause or liquidate the CDO), or if the CDOs' contractual arrangements were to be changed to reallocate expected losses or residual returns among the various interest holders, the Company may be required to consolidate the CDOs. For cash CDOs, the net result of such consolidation would be to gross up the Company's balance sheet by the current fair value of the subordinate securities held by third parties, whose amounts are not considered material. For synthetic CDOs, the net result of such consolidation may reduce the Company's balance sheet by eliminating intercompany derivative receivables and payables in consolidation.

Key Assumptions and Retained Interests—Citi Holdings

        The key assumptions, used for the securitization of CDOs and CLOs during the quarter ended September 30, 2010, in measuring the fair value of retained interests at the date of sale or securitization are as follows:

 
  CDOs   CLOs

Discount rate

  14.7% to 16.2%   4.9% to 5.4%
         

        The effect of two negative changes in discount rates used to determine the fair value of retained interests is disclosed below.

In millions of dollars   CDOs   CLOs  

Carrying value of retained interests

  $ 51   $ 661  
           

Discount rates

             
 

Adverse change of 10%

  $ (5 ) $ (8 )
 

Adverse change of 20%

    (11 )   (17 )
           

Asset-Based Financing

        The Company provides loans and other forms of financing to VIEs that hold assets. Those loans are subject to the same credit approvals as all other loans originated or purchased by the Company. Financings in the form of debt securities or derivatives are, in most circumstances, reported in Trading account assets and accounted for at fair value through earnings. The Company does not have the power to direct the activities that most significantly impact these VIEs' economic performance and thus it does not consolidate them.

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Asset-Based Financing—Citicorp

        The primary types of Citicorp's asset-based financing, total assets of the unconsolidated VIEs with significant involvement and the Company's maximum exposure to loss at September 30, 2010 are shown below. For the Company to realize that maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.

In billions of dollars   Total
assets
  Maximum
exposure
 

Type

             

Commercial and other real estate

  $ 0.6   $ 0.1  

Hedge funds and equities

    8.6     3.7  

Airplanes, ships and other assets

    7.6     3.7  
           

Total

  $ 16.8   $ 7.5  
           

Asset-Based Financing—Citi Holdings

        The primary types of Citi Holdings' asset-based financing, total assets of the unconsolidated VIEs with significant involvement and the Company's maximum exposure to loss at September 30, 2010 are shown below. For the Company to realize that maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.

In billions of dollars   Total
assets
  Maximum
exposure
 

Type

             

Commercial and other real estate

  $ 29.0   $ 5.2  

Corporate loans

    7.6     6.4  

Airplanes, ships and other assets

    4.6     2.2  
           

Total

  $ 41.2   $ 13.8  
           

        The following table summarizes selected cash flow information related to asset-based financing for the three and nine months ended September 30, 2010 and 2009:

 
  Three months ended
September 30,
 
In billions of dollars   2010   2009  

Cash flows received on retained interests and other net cash flows

  $ 0.2   $ 0.1  
           

 

 
  Nine months ended
September 30,
 
In billions of dollars   2010   2009  

Cash flows received on retained interests and other net cash flows

  $ 1.2   $ 2.0  
           

        The effect of two negative changes in discount rates used to determine the fair value of retained interests is disclosed below.

In millions of dollars   Asset-based
financing
 

Carrying value of retained interests

  $ 6,441  

Value of underlying portfolio

       
 

Adverse change of 10%

  $  
 

Adverse change of 20%

    (221 )
       

Municipal Securities Tender Option Bond (TOB) Trusts

        The Company sponsors TOB trusts that hold fixed- and floating-rate, tax-exempt securities issued by state or local municipalities. The trusts are typically single-issuer trusts whose assets are purchased from the Company and from the market. The trusts are referred to as Tender Option Bond trusts because the senior interest holders have the ability to tender their interests periodically back to the issuing trust, as described further below.

        The TOB trusts fund the purchase of their assets by issuing long-term senior floating rate notes (Floaters) and junior residual securities (Residuals). The Floaters and the Residuals have a tenor equal to the maturity of the trust, which is equal to or shorter than the tenor of the underlying municipal bond. Residuals are frequently less than 1% of a trust's total funding and entitle their holder to the residual cash flows from the issuing trust. The Residuals are generally rated based on the long-term rating of the underlying municipal bond. The Floaters bear interest rates that are typically reset weekly to a new market rate (based on the SIFMA index: a seven day high grade market index of tax exempt, variable rate municipal bonds). Floater holders have an option to tender their Floaters back to the trust periodically. The Floaters have a long-term rating based on the long-term rating of the underlying municipal bond, including any credit enhancement provided by monoline insurance companies, and a short-term rating based on that of the liquidity provider to the trust.

        The Company sponsors two kinds of TOB trusts: customer TOB trusts and proprietary TOB trusts. Customer TOB trusts are trusts through which customers finance investments in municipal securities. The Residuals are held by customers, and the Floaters by third-party investors. Proprietary TOB trusts are trusts through which the Company finances its own investments in municipal securities. The Company holds the Residuals in proprietary TOB trusts.

        The Company serves as remarketing agent to the trusts, facilitating the sale of the Floaters to third parties at inception and facilitating the reset of the Floater coupon and tenders of Floaters. If Floaters are tendered and the Company (in its role as remarketing agent) is unable to find a new investor within a specified period of time, it can declare a failed remarketing (in which case the trust is unwound) or it may choose to buy the Floaters into its own inventory and may continue to try to sell them to a third-party investor. While the level of the Company's inventory of Floaters fluctuates, the Company held none of the Floater inventory related to the customer or proprietary TOB programs as of September 30, 2010.

        Approximately $0.8 billion of the municipal bonds owned by TOB trusts have a credit guarantee provided by the Company. In all other cases, the assets are either unenhanced or are insured with a monoline insurance company. While the trusts have not encountered any adverse credit events as defined in the underlying trust agreements, certain monoline insurance companies have experienced downgrades. In these cases, the Company has proactively managed the TOB programs by applying additional insurance on the assets or proceeding with orderly unwinds of the trusts.

        If a trust is unwound early due to an event other than a credit event on the underlying municipal bond, the underlying municipal bond is sold in the market. If there is an accompanying shortfall in the trust's cash flows to fund the redemption of the Floaters after the sale of the

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underlying municipal bond, the trust draws on a liquidity agreement in an amount equal to the shortfall. Liquidity agreements are generally provided to the trust directly by the Company. For customer TOBs where the Residual is less than 25% of the trust's capital structure, the Company has a reimbursement agreement with the Residual holder under which the Residual holder reimburses the Company for any payment made under the liquidity arrangement. Through this reimbursement agreement, the Residual holder remains economically exposed to fluctuations in value of the municipal bond. These reimbursement agreements are actively margined based on changes in value of the underlying municipal bond to mitigate the Company's counterparty credit risk. In cases where a third party provides liquidity to a proprietary TOB trust, a similar reimbursement arrangement is made whereby the Company (or a consolidated subsidiary of the Company) as Residual holder absorbs any losses incurred by the liquidity provider. As of September 30, 2010, liquidity agreements provided with respect to customer TOB trusts, and other non-consolidated, customer-sponsored municipal investment funds, totaled $7.3 billion, offset by reimbursement agreements in place with a notional amount of $5.8 billion. The remaining exposure relates to TOB transactions where the Residual owned by the customer is at least 25% of the bond value at the inception of the transaction and no reimbursement agreement is executed. In addition, the Company has provided liquidity arrangements with a notional amount of $0.1 billion for other non-consolidated proprietary TOB trusts described below.

        The Company considers the customer and proprietary TOB trusts to be VIEs. Customer TOB trusts were not consolidated by the Company in prior periods and remain unconsolidated upon the Company's adoption of SFAS 167. Because third-party investors hold the Residual and Floater interests in the customer TOB trusts, the Company's involvement includes only its role as remarketing agent and liquidity provider. The Company has concluded that the power over customer TOB trusts is primarily held by the customer Residual holder, who may unilaterally cause the sale of the trust's bonds. Because the Company does not hold the Residual interest and thus does not have the power to direct the activities that most significantly impact the trust's economic performance, it does not consolidate the customer TOB trusts under SFAS 167.

        Proprietary TOB trusts generally were consolidated in prior periods. They remain consolidated upon the Company's adoption of SFAS 167. The Company's involvement with the Proprietary TOB trusts includes holding the Residual interests as well as the remarketing and liquidity agreements with the trusts. Similar to customer TOB trusts, the Company has concluded that the power over the proprietary TOB trusts is primarily held by the Residual holder, who may unilaterally cause the sale of the trust's bonds. Because the Company holds the Residual interest, and thus has the power to direct the activities that most significantly impact the trust's economic performance, it continues to consolidate the proprietary TOB trusts under SFAS 167.

        Prior to 2010, certain TOB trusts met the definition of a QSPE and were not consolidated in prior periods. Upon the Company's adoption of SFAS 167, former QSPE trusts have been consolidated by the Company as Residual interest holders and are presented as proprietary TOB trusts.

        Total assets in proprietary TOB trusts also include $0.5 billion of assets where the Residuals are held by hedge funds that are consolidated and managed by the Company. The assets and the associated liabilities of these TOB trusts are not consolidated by the hedge funds (and, thus, are not consolidated by the Company) under the application of ASC 946, Financial Services—Investment Companies, which precludes consolidation of owned investments. The Company consolidates the hedge funds, because the Company holds controlling financial interests in the hedge funds. Certain of the Company's equity investments in the hedge funds are hedged with derivatives transactions executed by the Company with third parties referencing the returns of the hedge fund. The Company's accounting for these hedge funds and their interests in the TOB trusts is unchanged by the Company's adoption of SFAS 167.

Municipal Investments

        Municipal investment transactions are primarily interests in partnerships that finance the construction and rehabilitation of low-income housing, facilitate lending in new or underserved markets, or finance the construction or operation of renewable municipal energy facilities. The Company generally invests in these partnerships as a limited partner and earns a return primarily through the receipt of tax credits and grants earned from the investments made by the partnership. These entities are generally considered VIEs. The power to direct the activities of these entities is typically held by the general partner. Accordingly, these entities have remained unconsolidated by the Company upon adoption of SFAS 167.

Client Intermediation

        Client intermediation transactions represent a range of transactions designed to provide investors with specified returns based on the returns of an underlying security, referenced asset or index. These transactions include credit-linked notes and equity-linked notes. In these transactions, the SPE typically obtains exposure to the underlying security, referenced asset or index through a derivative instrument, such as a total-return swap or a credit-default swap. In turn the SPE issues notes to investors that pay a return based on the specified underlying security, referenced asset or index. The SPE invests the proceeds in a financial asset or a guaranteed insurance contract (GIC) that serves as collateral for the derivative contract over the term of the transaction. The Company's involvement in these transactions includes being the counterparty to the SPE's derivative instruments and investing in a portion of the notes issued by the SPE. In certain transactions, the investor's maximum risk of loss is limited and the Company absorbs risk of loss above a specified level. The Company does not have the power to direct the activities of the VIEs which most significantly impact their economic performance and thus it does not consolidate them.

        The Company's maximum risk of loss in these transactions is defined as the amount invested in notes issued by the SPE and the notional amount of any risk of loss absorbed by the Company through a separate instrument issued by the SPE. The derivative instrument held by the Company may generate a receivable from the SPE (for example, where the Company purchases credit protection from the SPE in connection with the SPE's issuance of a credit-linked note), which is collateralized by the assets owned by the SPE. These

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derivative instruments are not considered variable interests and any associated receivables are not included in the calculation of maximum exposure to the SPE.

Structured Investment Vehicles

        Structured Investment Vehicles (SIVs) are SPEs that issue junior notes and senior debt (medium-term notes and short-term commercial paper) to fund the purchase of high quality assets. The Company acted as manager for the SIVs.

        In order to complete the wind-down of the SIVs, the Company purchased the remaining assets of the SIVs in November 2008. The Company funded the purchase of the SIV assets by assuming the obligation to pay amounts due under the medium-term notes issued by the SIVs as the medium-term notes mature.

Investment Funds

        The Company is the investment manager for certain investment funds that invest in various asset classes including private equity, hedge funds, real estate, fixed income and infrastructure. The Company earns a management fee, which is a percentage of capital under management, and may earn performance fees. In addition, for some of these funds the Company has an ownership interest in the investment funds. The Company has also established a number of investment funds as opportunities for qualified employees to invest in private equity investments. The Company acts as investment manager to these funds and may provide employees with financing on both a recourse and non-recourse basis for a portion of the employees' investment commitments.

        The Company has determined that a majority of the investment vehicles managed by Citigroup are provided a deferral from the requirements of SFAS 167, because they meet the criteria in Accounting Standards Update No. 2010-10, Consolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10) (see Note 1). These vehicles continue to be evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R)).

        Where the Company has determined that certain investment vehicles are subject to the consolidation requirements of SFAS 167, the consolidation conclusions reached upon initial application of SFAS 167 are consistent with the consolidation conclusions reached under the requirements of ASC 810-10, prior to the implementation of SFAS 167.

Trust Preferred Securities

        The Company has raised financing through the issuance of trust preferred securities. In these transactions, the Company forms a statutory business trust and owns all of the voting equity shares of the trust. The trust issues preferred equity securities to third-party investors and invests the gross proceeds in junior subordinated deferrable interest debentures issued by the Company. These trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the preferred equity securities held by third-party investors. These trusts' obligations are fully and unconditionally guaranteed by the Company.

        Because the sole asset of the trust is a receivable from the Company and the proceeds to the Company from the receivable exceed the Company's investment in the VIE's equity shares, the Company is not permitted to consolidate the trusts, even though the Company owns all of the voting equity shares of the trust, has fully guaranteed the trusts' obligations, and has the right to redeem the preferred securities in certain circumstances. The Company recognizes the subordinated debentures on its Consolidated Balance Sheet as long-term liabilities.

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15.    DERIVATIVES ACTIVITIES

        In the ordinary course of business, Citigroup enters into various types of derivative transactions. These derivative transactions include:

        Citigroup enters into these derivative contracts relating to interest rate, foreign currency, commodity, and other market/credit risks for the following reasons:

        Derivatives may expose Citigroup to market, credit or liquidity risks in excess of the amounts recorded on the Consolidated Balance Sheet. Market risk on a derivative product is the exposure created by potential fluctuations in interest rates, foreign-exchange rates and other factors and is a function of the type of product, the volume of transactions, the tenor and terms of the agreement, and the underlying volatility. Credit risk is the exposure to loss in the event of nonperformance by the other party to the transaction where the value of any collateral held is not adequate to cover such losses. The recognition in earnings of unrealized gains on these transactions is subject to management's assessment as to collectability. Liquidity risk is the potential exposure that arises when the size of the derivative position may not be able to be rapidly adjusted in periods of high volatility and financial stress at a reasonable cost.

        Information pertaining to the volume of derivative activity is provided in the tables below. The notional amounts, for both long and short derivative positions, of Citigroup's derivative instruments as of September 30, 2010 and December 31, 2009 are presented in the table below.

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Derivative Notionals

 
  Hedging instruments under
ASC 815 (SFAS 133)(1)(2)
  Other derivative instruments  
 
   
   
  Trading derivatives   Management hedges(3)  
In millions of dollars   September 30,
2010
  December 31,
2009
  September 30,
2010
  December 31,
2009
  September 30,
2010
  December 31,
2009
 

Interest rate contracts

                                     
 

Swaps

  $ 156,634   $ 128,797   $ 27,006,830   $ 20,571,814   $ 123,701   $ 107,193  
 

Futures and forwards

            5,726,949     3,366,927     61,588     65,597  
 

Written options

            3,484,198     3,616,240     12,232     11,050  
 

Purchased options

            3,160,691     3,590,032     13,935     28,725  
                           

Total interest rate contract notionals

  $ 156,634   $ 128,797   $ 39,378,668   $ 31,145,013   $ 211,456   $ 212,565  
                           

Foreign exchange contracts

                                     
 

Swaps

  $ 28,296   $ 42,621   $ 1,087,603   $ 855,560   $ 27,828   $ 24,044  
 

Futures and forwards

    91,747     76,507     2,549,208     1,946,802     31,383     54,249  
 

Written options

    2,779     4,685     592,512     409,991     278     9,305  
 

Purchased options

    9,423     22,594     582,244     387,786     871     10,188  
                           

Total foreign exchange contract notionals

  $ 132,245   $ 146,407   $ 4,811,567   $ 3,600,139   $ 60,360   $ 97,786  
                           

Equity contracts

                                     
 

Swaps

  $   $   $ 66,644   $ 59,391   $   $  
 

Futures and forwards

            21,952     14,627          
 

Written options

            612,793     410,002          
 

Purchased options

            525,234     377,961         275  
                           

Total equity contract notionals

  $   $   $ 1,226,623   $ 861,981   $   $ 275  
                           

Commodity and other contracts

                                     
 

Swaps

  $   $   $ 20,624   $ 25,956   $   $  
 

Futures and forwards

            120,397     91,582          
 

Written options

            63,641     37,952          
 

Purchased options

            64,800     40,321         3  
                           

Total commodity and other contract notionals

  $   $   $ 269,462   $ 195,811   $   $ 3  
                           

Credit derivatives(4)

                                     
 

Protection sold

  $   $   $ 1,263,870   $ 1,214,053   $   $  
 

Protection purchased

    6,506     6,981     1,340,915     1,325,981     34,195      
                           

Total credit derivatives

  $ 6,506   $ 6,981   $ 2,604,785   $ 2,540,034   $ 34,195   $  
                           

Total derivative notionals

  $ 295,385   $ 282,185   $ 48,291,105   $ 38,342,978   $ 306,011   $ 310,629  
                           

(1)
The notional amounts presented in this table do not include derivatives in hedge accounting relationships under ASC 815 (SFAS 133), where Citigroup is hedging the foreign currency risk of a net investment in a foreign operation by issuing a foreign currency denominated debt instrument. The notional amount of such debt is $9,778 million and $7,442 million at September 30, 2010 and December 31, 2009, respectively.

(2)
Derivatives in hedge accounting relationships accounted for under ASC 815 (SFAS 133) are recorded in either Other assets/liabilities or Trading account assets/liabilities on the Consolidated Balance Sheet.

(3)
Management hedges represent derivative instruments used in certain economic hedging relationships that are identified for management purposes, but for which hedge accounting is not applied. These derivatives are recorded in Other assets/liabilities on the Consolidated Balance Sheet.

(4)
Credit derivatives are arrangements designed to allow one party (protection buyer) to transfer the credit risk of a "reference asset" to another party (protection seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset without directly purchasing that asset. The Company has entered into credit derivatives positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification of overall risk.

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Derivative Mark-to-Market (MTM) Receivables/Payables

 
  Derivatives classified in trading
account assets/liabilities(1)
  Derivatives classified in other
assets/liabilities
 
In millions of dollars at September 30, 2010   Assets   Liabilities   Assets   Liabilities  

Derivative instruments designated as ASC 815 (SFAS 133) hedges

                         

Interest rate contracts

  $ 1,123   $ 227   $ 10,086   $ 3,459  

Foreign exchange contracts

    469     1,449     1,283     3,122  
                   

Total derivative instruments designated as ASC 815 (SFAS 133) hedges

  $ 1,592   $ 1,676   $ 11,369   $ 6,581  
                   

Other derivative instruments

                         

Interest rate contracts

  $ 668,787   $ 666,488   $ 3,793   $ 2,814  

Foreign exchange contracts

    99,464     105,722     2,519     879  

Equity contracts

    19,557     37,749          

Commodity and other contracts

    14,159     14,863          

Credit derivatives(2)

    73,186     67,185     229     294  
                   

Total other derivative instruments

  $ 875,153   $ 892,007   $ 6,541   $ 3,987  
                   

Total derivatives

  $ 876,745   $ 893,683   $ 17,910   $ 10,568  

Cash collateral paid/received

    61,457     46,590     275     4,940  

Less: Netting agreements and market value adjustments

    (882,642 )   (877,807 )   (4,221 )   (4,221 )
                   

Net receivables/payables

  $ 55,560   $ 62,466   $ 13,964   $ 11,287  
                   

(1)
The trading derivatives fair values are presented in Note 9 to the Consolidated Financial Statements.

(2)
The credit derivatives trading assets are composed of $53,234 million related to protection purchased and $19,952 million related to protection sold as of September 30, 2010. The credit derivatives trading liabilities are composed of $19,454 million related to protection purchased and $47,731 million related to protection sold as of September 30, 2010.

 
  Derivatives classified in trading
account assets/liabilities(1)
  Derivatives classified in other
assets/liabilities
 
In millions of dollars at December 31, 2009   Assets   Liabilities   Assets   Liabilities  

Derivative instruments designated as ASC 815 (SFAS 133) hedges

                         

Interest rate contracts

  $ 304   $ 87   $ 4,267   $ 2,898  

Foreign exchange contracts

    753     1,580     3,599     1,416  
                   

Total derivative instruments designated as ASC 815 (SFAS 133) hedges

  $ 1,057   $ 1,667   $ 7,866   $ 4,314  
                   

Other derivative instruments

                         

Interest rate contracts

  $ 454,974   $ 449,551   $ 2,882   $ 3,022  

Foreign exchange contracts

    71,005     70,584     1,498     2,381  

Equity contracts

    18,132     40,612     6     5  

Commodity and other contracts

    16,698     15,492          

Credit derivatives(2)

    92,792     82,424          
                   

Total other derivative instruments

  $ 653,601   $ 658,663   $ 4,386   $ 5,408  
                   

Total derivatives

  $ 654,658   $ 660,330   $ 12,252   $ 9,722  

Cash collateral paid/received

    48,561     38,611     263     4,950  

Less: Netting agreements and market value adjustments

    (644,340 )   (634,835 )   (4,224 )   (4,224 )
                   

Net receivables/payables

  $ 58,879   $ 64,106   $ 8,291   $ 10,448  
                   

(1)
The trading derivatives fair values are presented in Note 9 to the Consolidated Financial Statements.

(2)
The credit derivatives trading assets are composed of $68,558 million related to protection purchased and $24,234 million related to protection sold as of December 31, 2009. The credit derivatives trading liabilities are composed of $24,162 million related to protection purchased and $58,262 million related to protection sold as of December 31, 2009.

        All derivatives are reported on the balance sheet at fair value. In addition, where applicable, all such contracts covered by master netting agreements are reported net. Gross positive fair values are netted with gross negative fair values by counterparty pursuant to a valid master netting agreement. In addition, payables and receivables in respect of cash collateral received from or paid to a given counterparty are included in this netting. However, non-cash collateral is not included.

        The amount of payables in respect of cash collateral received that was netted with unrealized gains from derivatives was $40 billion and $30 billion as of September 30, 2010 and December 31, 2009, respectively. The amount of receivables in respect of cash collateral paid that was netted with unrealized losses from derivatives was $56 billion as of September 30, 2010 and $41 billion as of December 31, 2009, respectively.

        The amounts recognized in Principal transactions in the Consolidated Statement of Income for the three and nine months ended September 30, 2010 and September 30, 2009 related to derivatives not designated in a qualifying hedging relationship as well as the underlying non-derivative instruments are included in the table below. Citigroup has elected to present this disclosure by business classification, showing derivative gains and losses related to its trading activities together with gains and losses related to non-derivative instruments within the same trading portfolios, as this better represents the way these portfolios are risk managed.

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  Three Months Ended September 30,   Nine Months Ended September 30,  
In millions of dollars   2010(1)   2009(1)   2010(1)   2009(1)  

Interest rate contracts

  $ 76   $ 166   $ 3,718   $ 6,619  

Foreign exchange contracts

    992     522     1,495     2,386  

Equity contracts

    468     (353 )   783     550  

Commodity and other contracts

    (33 )   162     197     989  

Credit derivatives

    25     846     1,705     (3,500 )
                   

Total Citigroup(2)

  $ 1,528   $ 1,343   $ 7,898   $ 7,044  
                   

(1)
Beginning in the second quarter of 2010, for clarity purposes, Citigroup has reclassified the MSR mark-to-market and MSR hedging activities from multiple income statement lines into Other revenue. All periods presented reflect this reclassification.

(2)
Also see Note 6 to the Consolidated Financial Statements.

        The amounts recognized in Other revenue in the Consolidated Statement of Income for the three and nine months ended September 30, 2010 and September 30, 2009 related to derivatives not designated in a qualifying hedging relationship and not recorded within Trading account assets or Trading account liabilities are shown below. The table below does not include the offsetting gains/losses on the hedged items, which amounts are also recorded in Other revenue.

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
In millions of dollars   2010(1)   2009(1)   2010(1)   2009(1)  

Interest rate contracts

  $ 750   $ 91   $ 451   $ (259 )

Foreign exchange contracts

    3,895     2,077     (1,930 )   4,545  

Equity contracts

                 

Commodity and other contracts

                 

Credit derivatives

    (389 )       (248 )    
                   

Total Citigroup(2)

  $ 4,256   $ 2,168   $ (1,727 ) $ 4,286  
                   

(1)
Beginning in the second quarter of 2010, for clarity purposes, Citigroup has reclassified the MSR mark-to-market and MSR hedging activities from multiple income statement lines into Other revenue. All periods presented reflect this reclassification.

(2)
Non-designated derivatives are derivative instruments not designated in qualifying hedging relationships.

Accounting for Derivative Hedging

        Citigroup accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging (formerly SFAS 133). As a general rule, hedge accounting is permitted where the Company is exposed to a particular risk, such as interest-rate or foreign-exchange risk, that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset, liability or a forecasted transaction that may affect earnings.

        Derivative contracts hedging the risks associated with the changes in fair value are referred to as fair value hedges, while contracts hedging the risks affecting the expected future cash flows are called cash flow hedges. Hedges that utilize derivatives or debt instruments to manage the foreign exchange risk associated with equity investments in non-U.S.-dollar functional currency foreign subsidiaries (net investment in a foreign operation) are called net investment hedges.

        If certain hedging criteria specified in ASC 815 are met, including testing for hedge effectiveness, special hedge accounting may be applied. The hedge effectiveness assessment methodologies for similar hedges are performed in a similar manner and are used consistently throughout the hedging relationships. For fair value hedges, the changes in value of the hedging derivative, as well as the changes in value of the related hedged item due to the risk being hedged, are reflected in current earnings. For cash flow hedges and net investment hedges, the changes in value of the hedging derivative are reflected in Accumulated other comprehensive income (loss) in Citigroup's stockholders' equity, to the extent the hedge is effective. Hedge ineffectiveness, in either case, is reflected in current earnings.

        For asset/liability management hedging, the fixed-rate long-term debt may be recorded at amortized cost under current U.S. GAAP. However, by electing to use ASC 815 (SFAS 133) hedge accounting, the carrying value of the debt is adjusted for changes in the benchmark interest rate, with any such changes in value recorded in current earnings. The related interest-rate swap is also recorded on the balance sheet at fair value, with any changes in fair value reflected in earnings. Thus, any ineffectiveness resulting from the hedging relationship is recorded in current earnings. Alternatively, an economic hedge, which does not meet the ASC 815 hedging criteria, would involve recording only the derivative at fair value on the balance sheet, with its associated changes in fair value recorded in earnings. The debt would continue to be carried at amortized cost and, therefore, current earnings would be impacted only by the interest rate shifts and other factors that cause the change in the swap's value and the underlying yield of the debt. This type of hedge is undertaken when hedging requirements cannot be achieved or management decides not to apply ASC 815 hedge accounting. Another alternative for the Company would be to elect to carry the debt at fair value under the fair value option. Once the irrevocable election is made upon issuance of the debt, the full change in fair value of the debt would be reported in earnings. The related interest rate swap, with changes in fair value, would also be reflected in earnings, and provides a natural offset to the debt's fair value change. To the extent the two offsets would not be exactly equal, the difference would be reflected in current earnings. This type of economic hedge is undertaken when the Company prefers to follow this

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simpler method that achieves generally similar financial statement results to an ASC 815 fair value hedge.

        Key aspects of achieving ASC 815 hedge accounting are documentation of hedging strategy and hedge effectiveness at the hedge inception and substantiating hedge effectiveness on an ongoing basis. A derivative must be highly effective in accomplishing the hedge objective of offsetting either changes in the fair value or cash flows of the hedged item for the risk being hedged. Any ineffectiveness in the hedge relationship is recognized in current earnings. The assessment of effectiveness excludes changes in the value of the hedged item that are unrelated to the risks being hedged. Similarly, the assessment of effectiveness may exclude changes in the fair value of a derivative related to time value that, if excluded, are recognized in current earnings.

Fair Value Hedges

Hedging of benchmark interest rate risk

        Citigroup hedges exposure to changes in the fair value of outstanding fixed-rate issued debt and certificate of deposit. The fixed cash flows from those financing transactions are converted to benchmark variable-rate cash flows by entering into receive-fixed, pay-variable interest rate swaps. Most of these fair value hedge relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis, while others use regression.

        Citigroup also hedges exposure to changes in the fair value of fixed-rate assets, including available-for-sale debt securities and loans. The hedging instruments used are receive-variable, pay-fixed interest rate swaps. Most of these fair value hedging relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis, while certain others use regression analysis.

Hedging of foreign exchange risk

        Citigroup hedges the change in fair value attributable to foreign-exchange rate movements in available-for-sale securities that are denominated in currencies other than the functional currency of the entity holding the securities, which may be within or outside the U.S. The hedging instrument employed is a forward foreign-exchange contract. In this type of hedge, the change in fair value of the hedged available-for-sale security attributable to the portion of foreign exchange risk hedged is reported in earnings and not Accumulated other comprehensive income—a process that serves to offset substantially the change in fair value of the forward contract that is also reflected in earnings. Citigroup considers the premium associated with forward contracts (differential between spot and contractual forward rates) as the cost of hedging; this is excluded from the assessment of hedge effectiveness and reflected directly in earnings. Dollar-offset method is used to assess hedge effectiveness. Since that assessment is based on changes in fair value attributable to changes in spot rates on both the available-for-sale securities and the forward contracts for the portion of the relationship hedged, the amount of hedge ineffectiveness is not significant.

        The following table summarizes the gains (losses) on the Company's fair value hedges for the three and nine months ended September 30, 2010 and September 30, 2009:

 
  Gains (losses) on fair value hedges(1)  
 
  Three Months ended September 30,   Nine Months ended September 30,  
In millions of dollars   2010   2009   2010   2009  

Gain (loss) on fair value designated and qualifying hedges

                         

Interest rate contracts

  $ 1,603   $ 1,273   $ 3,945   $ (3,648 )

Foreign exchange contracts

    (993 )   (317 )   681     1,308  
                   

Total gain (loss) on fair value designated and qualifying hedges

  $ 610   $ 956   $ 4,626   $ (2,340 )
                   

Gain (loss) on the hedged item in designated and qualifying fair value hedges

                         

Interest rate hedges

  $ (1,712 ) $ (1,223 ) $ (4,160 ) $ 3,725  

Foreign exchange hedges

    1,095     424     (496 )   (1,010 )
                   

Total gain (loss) on the hedged item in designated and qualifying fair value hedges

  $ (617 ) $ (799 ) $ (4,656 ) $ 2,715  
                   

Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges

                         

Interest rate hedges

  $ (111 ) $ 76   $ (178 ) $ 292  

Foreign exchange hedges

    4     74     30     114  
                   

Total hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges

  $ (107 ) $ 150   $ (148 ) $ 406  
                   

Net gain (loss) excluded from assessment of the effectiveness of fair value hedges

                         

Interest rate contracts

  $ 2   $ (26 ) $ (37 ) $ (215 )

Foreign exchange contracts

    98     33     155     184  
                   

Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges

  $ 100   $ 7   $ 118   $ (31 )
                   

(1)
Amounts are included in Other revenue on the Consolidated Statement of Income. The accrued interest income on fair value hedges is recorded in Net interest revenue and is excluded from this table.

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Cash Flow Hedges

Hedging of benchmark interest rate risk

        Citigroup hedges variable cash flows resulting from floating-rate liabilities and roll-over (re-issuance) of short-term liabilities. Variable cash flows from those liabilities are converted to fixed-rate cash flows by entering into receive-variable, pay-fixed interest-rate swaps and receive-variable, pay-fixed forward-starting interest-rate swaps. These cash-flow hedging relationships use either regression analysis or dollar-offset ratio analysis to assess whether the hedging relationships are highly effective at inception and on an ongoing basis. Since efforts are made to match the terms of the derivatives to those of the hedged forecasted cash flows as closely as possible, the amount of hedge ineffectiveness is not significant.

Hedging of foreign exchange risk

        Citigroup locks in the functional currency equivalent of cash flows of various balance sheet liability exposures, including short-term borrowings and long-term debt (and the forecasted issuances or rollover of such items) that are denominated in a currency other than the functional currency of the issuing entity. Depending on the risk-management objectives, these types of hedges are designated as either cash-flow hedges of only foreign exchange risk or cash-flow hedges of both foreign-exchange and interest rate risk, and the hedging instruments used are foreign-exchange forward contracts, cross-currency swaps and foreign-currency options. For some hedges, Citigroup matches all terms of the hedged item and the hedging derivative at inception and on an ongoing basis to eliminate hedge ineffectiveness. Citigroup does not exclude any terms from consideration when applying the matched terms method. To the extent all terms are not perfectly matched, any ineffectiveness is measured using the "hypothetical derivative method" from FASB Derivative Implementation Group Issue G7 (now ASC 815-30-35-12 through 35-32). Efforts are made to match up the terms of the hypothetical and actual derivatives used as closely as possible. As a result, the amount of hedge ineffectiveness is not significant even when the terms do not match perfectly.

Hedging total return

        Citigroup generally manages the risk associated with highly leveraged financing it has entered into by seeking to sell a majority of its exposures to the market prior to or shortly after funding. The portion of the highly leveraged financing that is retained by Citigroup is hedged with a total return swap.

        The amount of hedge ineffectiveness on the cash flow hedges recognized in earnings for the three and nine months ended September 30, 2010 and September 30, 2009 is not significant.

        The pretax change in Accumulated other comprehensive income (loss) from cash flow hedges for three and nine months ended September 30, 2010 and September 30, 2009 is presented below:

 
  Three Months ended September 30,   Nine Months ended September 30,  
In millions of dollars   2010   2009   2010   2009  

Effective portion of cash flow hedges included in AOCI

                         

Interest rate contracts

  $ (239 ) $ (291 ) $ (864 ) $ 279  

Foreign exchange contracts

    (379 )   (312 )   (768 )   321  

Credit derivatives

        (404 )       (46 )
                   

Total effective portion of cash flow hedges included in AOCI

  $ (618 ) $ (1,007 ) $ (1,632 ) $ 554  
                   

Effective portion of cash flow hedges reclassified from AOCI to earnings

                         

Interest rate contracts

    (326 ) $ (431 ) $ (1,060 ) $ (1,288 )

Foreign exchange contracts

    (97 )   (149 )   (378 )   (128 )
                   

Total effective portion of cash flow hedges reclassified from AOCI to earnings(1)

  $ (423 ) $ (580 ) $ (1,438 ) $ (1,416 )
                   

(1)
Included primarily in Other revenue and Net interest revenue on the Consolidated Income Statement.

        For cash flow hedges, any changes in the fair value of the end-user derivative remaining in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheet will be included in earnings of future periods to offset the variability of the hedged cash flows when such cash flows affect earnings. The net loss associated with cash flow hedges expected to be reclassified from Accumulated other comprehensive income within 12 months of September 30, 2010 is approximately $1.6 billion. The maximum length of time over which forecasted cash flows are hedged is 10 years.

        The impact of cash flow hedges on AOCI is also shown in Note 13 to the Consolidated Financial Statements.

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Net Investment Hedges

        Consistent with ASC 830-20, Foreign Currency Matters—Foreign Currency Transactions (formerly SFAS 52, Foreign Currency Translation), ASC 815 allows hedging of the foreign-currency risk of a net investment in a foreign operation. Citigroup uses foreign-currency forwards, options and swaps and foreign-currency-denominated debt instruments to manage the foreign-exchange risk associated with Citigroup's equity investments in several non-U.S. dollar functional currency foreign subsidiaries. Citigroup records the change in the carrying amount of these investments in the Cumulative translation adjustment account within Accumulated other comprehensive income (loss). Simultaneously, the effective portion of the hedge of this exposure is also recorded in the Cumulative translation adjustment account and the ineffective portion, if any, is immediately recorded in earnings.

        For derivatives used in net investment hedges, Citigroup follows the forward-rate method from FASB Derivative Implementation Group Issue H8 (now ASC 815-35-35-16 through 35-26), "Foreign Currency Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge." According to that method, all changes in fair value, including changes related to the forward-rate component of the foreign-currency forward contracts and the time-value of foreign-currency options, are recorded in the foreign currency.

        Cumulative translation adjustment account. For foreign-currency denominated debt instruments that are designated as hedges of net investments, the translation gain or loss that is recorded in the foreign-currency translation adjustment account is based on the spot exchange rate between the functional currency of the respective subsidiary and the U.S. dollar, which is the functional currency of Citigroup. To the extent the notional amount of the hedging instrument exactly matches the hedged net investment and the underlying exchange rate of the derivative hedging instrument relates to the exchange rate between the functional currency of the net investment and Citigroup's functional currency (or, in the case of a non-derivative debt instrument, such instrument is denominated in the functional currency of the net investment), no ineffectiveness is recorded in earnings.

        The pretax loss recorded in foreign-currency translation adjustment within Accumulated other comprehensive income (loss), related to the effective portion of the net investment hedges, is $3.3 billion and $2.8 billion for the three and nine months ended September 30, 2010 and $1.5 billion and $4.5 billion for the three and nine months ended September 30, 2009, respectively.

Credit Derivatives

        A credit derivative is a bilateral contract between a buyer and a seller under which the seller agrees to provide protection to the buyer against the credit risk of a particular entity ("reference entity" or "reference credit"). Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined credit events (commonly referred to as "settlement triggers"). These settlement triggers are defined by the form of the derivative and the reference credit and are generally limited to the market standard of failure to pay on indebtedness and bankruptcy of the reference credit and, in a more limited range of transactions, debt restructuring. Credit derivative transactions referring to emerging market reference credits will also typically include additional settlement triggers to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions, protection may be provided on a portfolio of referenced credits or asset-backed securities. The seller of such protection may not be required to make payment until a specified amount of losses has occurred with respect to the portfolio and/or may only be required to pay for losses up to a specified amount.

        The Company makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts, the Company either purchases or writes protection on either a single name or a portfolio of reference credits. The Company uses credit derivatives to help mitigate credit risk in its corporate and consumer loan portfolios and other cash positions, to take proprietary trading positions, and to facilitate client transactions.

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        The range of credit derivatives sold includes credit default swaps, total return swaps and credit options.

        A credit default swap is a contract in which, for a fee, a protection seller agrees to reimburse a protection buyer for any losses that occur due to a credit event on a reference entity. If there is no credit default event or settlement trigger, as defined by the specific derivative contract, then the protection seller makes no payments to the protection buyer and receives only the contractually specified fee. However, if a credit event occurs as defined in the specific derivative contract sold, the protection seller will be required to make a payment to the protection buyer.

        A total return swap transfers the total economic performance of a reference asset, which includes all associated cash flows, as well as capital appreciation or depreciation. The protection buyer receives a floating rate of interest and any depreciation on the reference asset from the protection seller and, in return, the protection seller receives the cash flows associated with the reference asset plus any appreciation. Thus, according to the total return swap agreement, the protection seller will be obligated to make a payment anytime the floating interest rate payment and any depreciation of the reference asset exceed the cash flows associated with the underlying asset. A total return swap may terminate upon a default of the reference asset subject to the provisions of the related total return swap agreement between the protection seller and the protection buyer.

        A credit option is a credit derivative that allows investors to trade or hedge changes in the credit quality of the reference asset. For example, in a credit spread option, the option writer assumes the obligation to purchase or sell the reference asset at a specified "strike" spread level. The option purchaser buys the right to sell the reference asset to, or purchase it from, the option writer at the strike spread level. The payments on credit spread options depend either on a particular credit spread or the price of the underlying credit-sensitive asset. The options usually terminate if the underlying assets default.

        A credit-linked note is a form of credit derivative structured as a debt security with an embedded credit default swap. The purchaser of the note writes credit protection to the issuer, and receives a return which will be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the purchaser of the credit-linked note may assume the long position in the debt security and any future cash flows from it, but will lose the amount paid to the issuer of the credit-linked note. Thus the maximum amount of the exposure is the carrying amount of the credit-linked note. As of September 30, 2010 and December 31, 2009, the amount of credit-linked notes held by the Company in trading inventory was immaterial.

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        The following tables summarize the key characteristics of the Company's credit derivative portfolio as protection seller as of September 30, 2010 and December 31, 2009:

In millions of dollars as of
September 30, 2010
  Maximum potential
amount of
future payments
  Fair value
payable(1)
 

By industry/counterparty

             

Bank

  $ 824,452   $ 28,175  

Broker-dealer

    321,330     12,789  

Non-financial

    1,690     51  

Insurance and other financial institutions

    116,398     6,716  
           

Total by industry/counterparty

  $ 1,263,870   $ 47,731  
           

By instrument

             

Credit default swaps and options

  $ 1,262,408   $ 47,419  

Total return swaps and other

    1,462     312  
           

Total by instrument

  $ 1,263,870   $ 47,731  
           

By rating

             

Investment grade

  $ 535,545     7,587  

Non-investment grade

    472,696     26,705  

Not rated

    255,629     13,439  
           

Total by rating

  $ 1,263,870   $ 47,731  
           

By maturity:

             

Within 1 year

  $ 154,308   $ 968  

From 1 to 5 years

    871,926     24,238  

After 5 years

    237,636     22,525  
           

Total by maturity

  $ 1,263,870   $ 47,731  
           

(1)
In addition, fair value amounts receivable under credit derivatives sold were $19,952 million.

In millions of dollars as of
December 31, 2009
  Maximum potential
amount of
future payments
  Fair value
payable(1)
 

By industry/counterparty

             

Bank

  $ 807,484   $ 34,666  

Broker-dealer

    340,949     16,309  

Monoline

    33      

Non-financial

    623     262  

Insurance and other financial institutions

    64,964     7,025  
           

Total by industry/counterparty

  $ 1,214,053   $ 58,262  
           

By instrument

             

Credit default swaps and options

  $ 1,213,208   $ 57,987  

Total return swaps and other

    845     275  
           

Total by instrument

  $ 1,214,053   $ 58,262  
           

By rating

             

Investment grade

  $ 576,930     9,632  

Non-investment grade

    339,920     28,664  

Not rated

    297,203     19,966  
           

Total by rating

  $ 1,214,053   $ 58,262  
           

By maturity:

             

Within 1 year

  $ 165,056   $ 873  

From 1 to 5 years

    806,143     30,181  

After 5 years

    242,854     27,208  
           

Total by maturity

  $ 1,214,053   $ 58,262  
           

(1)
In addition, fair value amounts receivable under credit derivatives sold were $24,234 million.

        Citigroup evaluates the payment/performance risk of the credit derivatives to which it stands as a protection seller based on the credit rating which has been assigned to the underlying referenced credit. Where external ratings by nationally recognized statistical rating organizations (such as Moody's and S&P) are used, investment grade ratings are considered to be Baa/BBB or above, while anything below is considered non-investment grade. The Citigroup internal ratings are in line with the related external credit rating system. On certain underlying reference credits, mainly related to over-the-counter credit derivatives, ratings are not available, and these are included in the not-rated category. Credit derivatives written on an underlying non-investment grade reference credit represent greater payment risk to the Company. The non-investment grade category in the table above primarily includes credit derivatives where the underlying referenced entity has been downgraded subsequent to the inception of the derivative.

        The maximum potential amount of future payments under credit derivative contracts presented in the table above is based on the notional value of the derivatives. The Company believes that the maximum potential amount of future payments for credit protection sold is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the Company's rights to the underlying assets and the related cash flows. In accordance with most credit derivative contracts, should a credit event (or settlement trigger) occur, the Company is usually liable for the difference between the protection sold and the recourse it holds in the value of the underlying assets. Thus, if the reference entity defaults, Citi will generally have a right to collect on the underlying reference credit and any related cash flows, while being liable for the full notional amount of credit protection sold to the buyer. Furthermore, this maximum potential amount of future payments for credit protection sold has not been reduced for any cash collateral paid to a given counterparty, as such payments would be calculated after netting all derivative exposures, including any credit derivatives with that counterparty in accordance with a related master netting agreement. Due to such netting processes, determining the amount of collateral that corresponds to credit derivative exposures only is not possible. The Company actively monitors open credit risk exposures, and manages this exposure by using a variety of strategies including purchased credit derivatives, cash collateral or direct holdings of the referenced assets. This risk mitigation activity is not captured in the table above.

Credit-Risk-Related Contingent Features in Derivatives

        Certain derivative instruments contain provisions that require the Company to either post additional collateral or immediately settle any outstanding liability balances upon the occurrence of a specified credit-risk-related event. These events, which are defined by the existing derivative contracts, are primarily downgrades in the credit ratings of the Company and its affiliates. The fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position at September 30, 2010 and December 31, 2009 is $28 billion and $17 billion, respectively. The Company has posted $22 billion and $11 billion as collateral for this exposure in the normal course of business as of September 30, 2010 and December 31, 2009, respectively. Each downgrade would trigger additional collateral requirements for the Company and its affiliates. In the event that each legal entity was downgraded a single notch as of September 30, 2010, the Company would be required to post additional collateral of $2.1 billion.

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16.    FAIR VALUE MEASUREMENT

        SFAS 157 (now ASC 820-10) defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. Among other things, the standard requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In addition, it precludes the use of block discounts when measuring the fair value of instruments traded in an active market, and requires recognition of trade-date gains related to certain derivative transactions whose fair value has been determined using unobservable market inputs.

        This standard also requires that the impact of Citigroup's own credit risk on derivatives and other liabilities measured at fair value be factored into the valuation.

Fair Value Hierarchy

        ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy:

        This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions are all factors in determining the liquidity of markets and the relevance of observed prices in those markets.

        The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period.

Determination of Fair Value

        For assets and liabilities carried at fair value, the Company measures such value using the procedures set out below, irrespective of whether these assets and liabilities are carried at fair value as a result of an election or whether they were previously carried at fair value.

        When available, the Company generally uses quoted market prices to determine fair value and classifies such items as Level 1. In some cases where a market price is available, the Company will make use of acceptable practical expedients (such as matrix pricing) to calculate fair value, in which case the items are classified as Level 2.

        If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates, option volatilities, etc. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

        Where available, the Company may also make use of quoted prices for recent trading activity in positions with the same or similar characteristics to that being valued. The frequency and size of transactions and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations would be classified as Level 2. If prices are not available, other valuation techniques would be used and the item would be classified as Level 3.

        Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors or brokers. Vendors and brokers' valuations may be based on a variety of inputs ranging from observed prices to proprietary valuation models.

        The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models as well as any significant assumptions.

Securities purchased under agreements to resell and securities sold under agreements to repurchase

        No quoted prices exist for such instruments and so fair value is determined using a discounted cash-flow technique. Cash flows are estimated based on the terms of the contract, taking into account any embedded derivative or other features. Expected cash flows are discounted using market rates appropriate to the maturity of the instrument as well as the nature and amount of collateral taken or received. Generally, such instruments are classified within Level 2 of the fair value hierarchy as the inputs used in the fair valuation are readily observable.

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Trading account assets and liabilities—trading securities and trading loans

        When available, the Company uses quoted market prices to determine the fair value of trading securities; such items are classified as Level 1 of the fair value hierarchy. Examples include some government securities and exchange-traded equity securities.

        For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing internal valuation techniques. Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. If available, the Company may also use quoted prices for recent trading activity of assets with similar characteristics to the bond or loan being valued. Trading securities and loans priced using such methods are generally classified as Level 2. However, when less liquidity exists for a security or loan, a quoted price is stale or prices from independent sources vary, a loan or security is generally classified as Level 3.

        Where the Company's principal market for a portfolio of loans is the securitization market, the Company uses the securitization price to determine the fair value of the portfolio. The securitization price is determined from the assumed proceeds of a hypothetical securitization in the current market, adjusted for transformation costs (i.e., direct costs other than transaction costs) and securitization uncertainties such as market conditions and liquidity. As a result of the severe reduction in the level of activity in certain securitization markets since the second half of 2007, observable securitization prices for certain directly comparable portfolios of loans have not been readily available. Therefore, such portfolios of loans are generally classified as Level 3 of the fair value hierarchy. However, for other loan securitization markets, such as those related to conforming prime fixed-rate and conforming adjustable-rate mortgage loans, pricing verification of the hypothetical securitizations has been possible, since these markets have remained active. Accordingly, these loan portfolios are classified as Level 2 in the fair value hierarchy.

Trading account assets and liabilities—derivatives

        Exchange-traded derivatives are generally fair valued using quoted market (i.e., exchange) prices and so are classified as Level 1 of the fair value hierarchy.

        The majority of derivatives entered into by the Company are executed over the counter and so are valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The principal techniques used to value these instruments are discounted cash flows, Black-Scholes and Monte Carlo simulation. The fair values of derivative contracts reflect cash the Company has paid or received (for example, option premiums paid and received).

        The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign-exchange rates, the spot price of the underlying volatility and correlation. The item is placed in either Level 2 or Level 3 depending on the observability of the significant inputs to the model. Correlation and items with longer tenors are generally less observable.

Subprime-related direct exposures in CDOs

        The valuation of high-grade and mezzanine ABS CDO positions uses trader prices based on the underlying assets of each high-grade and mezzanine ABS CDO. The high-grade and mezzanine positions are now largely hedged through the ABX and bond short positions, which are trader priced. This results in closer symmetry in the way these long and short positions are valued by the Company. Citigroup intends to use trader marks to value this portion of the portfolio going forward so long as it remains largely hedged.

        For most of the lending and structuring direct subprime exposures, fair value is determined utilizing observable transactions where available, other market data for similar assets in markets that are not active and other internal valuation techniques.

Investments

        The investments category includes available-for-sale debt and marketable equity securities, whose fair value is determined using the same procedures described for trading securities above or, in some cases, using vendor prices as the primary source.

        Also included in investments are nonpublic investments in private equity and real estate entities held by the S&B business. Determining the fair value of nonpublic securities involves a significant degree of management resources and judgment as no quoted prices exist and such securities are generally very thinly traded. In addition, there may be transfer restrictions on private equity securities. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of nonpublic securities, the Company also considers events such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions.

        Private equity securities are generally classified as Level 3 of the fair value hierarchy.

Short-term borrowings and long-term debt

        Where fair value accounting has been elected, the fair value of non-structured liabilities is determined by discounting expected cash flows using the appropriate discount rate for the applicable maturity. Such instruments are generally classified as Level 2 of the fair value hierarchy as all inputs are readily observable.

        The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (performance linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are classified as Level 2 or Level 3 depending on the observability of significant inputs to the model.

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Market valuation adjustments

        Liquidity adjustments are applied to items in Level 2 and Level 3 of the fair value hierarchy to ensure that the fair value reflects the price at which the entire position could be liquidated. The liquidity reserve is based on the bid-offer spread for an instrument, adjusted to take into account the size of the position.

        Counterparty credit-risk adjustments are applied to derivatives, such as over-the-counter derivatives, where the base valuation uses market parameters based on the LIBOR interest rate curves. Not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, so it is necessary to consider the market view of the credit risk of a counterparty in order to estimate the fair value of such an item.

        Bilateral or "own" credit-risk adjustments are applied to reflect the Company's own credit risk when valuing derivatives and liabilities measured at fair value. Counterparty and own credit adjustments consider the expected future cash flows between Citi and its counterparties under the terms of the instrument and the effect of credit risk on the valuation of those cash flows, rather than a point-in-time assessment of the current recognized net asset or liability. Furthermore, the credit-risk adjustments take into account the effect of credit-risk mitigants, such as pledged collateral and any legal right of offset (to the extent such offset exists) with a counterparty through arrangements such as netting agreements.

Auction rate securities

        Auction rate securities (ARS) are long-term municipal bonds, corporate bonds, securitizations and preferred stocks with interest rates or dividend yields that are reset through periodic auctions. The coupon paid in the current period is based on the rate determined by the prior auction. In the event of an auction failure, ARS holders receive a "fail rate" coupon, which is specified by the original issue documentation of each ARS.

        Where insufficient orders to purchase all of the ARS issue to be sold in an auction were received, the primary dealer or auction agent would traditionally have purchased any residual unsold inventory (without a contractual obligation to do so). This residual inventory would then be repaid through subsequent auctions, typically in a short timeframe. Due to this auction mechanism and generally liquid market, ARS have historically traded and were valued as short-term instruments.

        Citigroup acted in the capacity of primary dealer for approximately $72 billion of ARS and continued to purchase residual unsold inventory in support of the auction mechanism until mid-February 2008. After this date, liquidity in the ARS market deteriorated significantly, auctions failed due to a lack of bids from third-party investors and Citigroup ceased to purchase unsold inventory. Following a number of ARS refinancings, at September 30, 2010, Citigroup continued to act in the capacity of primary dealer for approximately $24.7 billion of outstanding ARS.

        The Company classifies its ARS as held-to-maturity, available-for-sale and trading securities.

        Prior to the Company's first auction's failing in the first quarter of 2008, Citigroup valued ARS based on observation of auction market prices, because the auctions had a short maturity period (7, 28 and 35 days). This generally resulted in valuations at par. Once the auctions failed, ARS could no longer be valued using observation of auction market prices. Accordingly, the fair value of ARS is currently estimated using internally developed discounted cash flow valuation techniques specific to the nature of the assets underlying each ARS.

        For ARS with U.S. municipal securities as underlying assets, future cash flows are estimated based on the terms of the securities underlying each individual ARS and discounted at an estimated discount rate in order to estimate the current fair value. The key assumptions that impact the ARS valuations are estimated prepayments and refinancings, estimated fail rate coupons (i.e., the rate paid in the event of auction failure, which varies according to the current credit rating of the issuer) and the discount rate used to calculate the present value of projected cash flows. The discount rate used for each ARS is based on rates observed for straight issuances of other municipal securities. In order to arrive at the appropriate discount rate, these observed rates were adjusted upward to factor in the specifics of the ARS structure being valued, such as callability, and the illiquidity in the ARS market.

        For ARS with student loans as underlying assets, future cash flows are estimated based on the terms of the loans underlying each individual ARS, discounted at an appropriate rate in order to estimate the current fair value. The key assumptions that impact the ARS valuations are the expected weighted average life of the structure, estimated fail rate coupons, the amount of leverage in each structure and the discount rate used to calculate the present value of projected cash flows. The discount rate used for each ARS is based on rates observed for basic securitizations with similar maturities to the loans underlying each ARS being valued. In order to arrive at the appropriate discount rate, these observed rates were adjusted upward to factor in the specifics of the ARS structure being valued, such as callability, and the illiquidity in the ARS market.

        The majority of ARS continue to be classified as Level 3.

Alt-A mortgage securities

        The Company classifies its Alt-A mortgage securities as held-to-maturity, available-for-sale and trading investments. The securities classified as trading and available-for-sale are recorded at fair value with changes in fair value reported in current earnings and AOCI, respectively. For these purposes, Alt-A mortgage securities are non-agency residential mortgage-backed securities (RMBS) where (1) the underlying collateral has weighted average FICO scores between 680 and 720 or (2) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

        Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of Alt-A mortgage securities utilizing internal valuation techniques. Fair-value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities with the same or similar characteristics to that being valued.

        The internal valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures,

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consider estimated housing price changes, unemployment rates, interest rates and borrower attributes. They also consider prepayment rates as well as other market indicators.

        Alt-A mortgage securities that are valued using these methods are generally classified as Level 2. However, Alt-A mortgage securities backed by Alt-A mortgages of lower quality or more recent vintages are mostly classified as Level 3 due to the reduced liquidity that exists for such positions, which reduces the reliability of prices available from independent sources.

Commercial real estate exposure

        Citigroup reports a number of different exposures linked to commercial real estate at fair value with changes in fair value reported in earnings, including securities, loans and investments in entities that hold commercial real estate loans or commercial real estate directly. The Company also reports securities backed by commercial real estate as available-for-sale investments, which are carried at fair value with changes in fair-value reported in AOCI.

        Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of securities and loans linked to commercial real estate utilizing internal valuation techniques. Fair-value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities or loans with the same or similar characteristics to those being valued. Securities and loans linked to commercial real estate valued using these methodologies are generally classified as Level 3 as a result of the reduced liquidity currently in the market for such exposures.

        The fair value of investments in entities that hold commercial real estate loans or commercial real estate directly is determined using a similar methodology to that used for other non-public investments in real estate held by the S&B business. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of such investments, the Company also considers events, such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions. Such investments are generally classified as Level 3 of the fair-value hierarchy.

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Items Measured at Fair Value on a Recurring Basis

        The following tables present for each of the fair-value hierarchy levels the Company's assets and liabilities that are measured at fair value on a recurring basis. The Company often hedges positions that have been classified in the Level 3 category with financial instruments that have been classified as Level 1 or Level 2. In addition, the Company also hedges items classified in the Level 3 category with instruments classified in Level 3 of the fair value hierarchy. The effects of these hedges are presented gross in the following tables, as of September 30, 2010 and December 31, 2009:

In millions of dollars at September 30, 2010   Level 1   Level 2   Level 3   Gross
inventory
  Netting(1)   Net
balance
 

Assets

                                     

Federal funds sold and securities borrowed or purchased under agreements to resell

  $   $ 127,104   $ 8,180   $ 135,284   $ (41,094 ) $ 94,190  

Trading securities

                                     
 

Trading mortgage-backed securities

                                     
   

U.S. government sponsored

  $   $ 22,937   $ 845   $ 23,782   $   $ 23,782  
   

Prime

        907     891     1,798         1,798  
   

Alt-A

        1,065     351     1,416         1,416  
   

Subprime

        501     1,353     1,854         1,854  
   

Non-U.S. residential

        2,488     341     2,829         2,829  
   

Commercial

        1,749     1,547     3,296         3,296  
                           
 

Total trading mortgage-backed securities

  $   $ 29,647   $ 5,328   $ 34,975   $   $ 34,975  
                           
 

U.S. Treasury and federal agencies securities

                                     
   

U.S. Treasury

  $ 21,345   $ 2,440   $   $ 23,785   $   $ 23,785  
   

Agency obligations

        4,108     65     4,173         4,173  
                           
 

Total U.S. Treasury and federal agencies securities

  $ 21,345   $ 6,548   $ 65   $ 27,958   $   $ 27,958  
                           
 

State and municipal

  $   $ 6,424   $ 305   $ 6,729   $   $ 6,729  
 

Foreign government

    73,828     23,948     424     98,200         98,200  
 

Corporate

        45,617     6,372     51,989         51,989  
 

Equity securities

    30,414     5,852     851     37,117         37,117  
 

Asset-backed securities

        2,178     7,503     9,681         9,681  
 

Other debt securities

        13,796     1,093     14,889         14,889  
                           
 

Total trading securities

  $ 125,587   $ 134,010   $ 21,941   $ 281,538   $   $ 281,538  
                           
 

Derivatives

                                     
   

Interest rate contracts

  $ 572   $ 666,648   $ 2,690   $ 669,910              
   

Foreign exchange contracts

    5     98,837     1,091     99,933              
   

Equity contracts

    2,764     14,438     2,355     19,557              
   

Commodity and other contracts

    559     12,580     1,020     14,159              
   

Credit derivatives

    10     60,538     12,638     73,186              
                               
 

Total gross derivatives

  $ 3,910   $ 853,041   $ 19,794   $ 876,745              
 

Cash collateral paid

                      61,457              
 

Netting agreements and market value adjustments

                          $ (882,642 )      
                           
 

Total derivatives

  $ 3,910   $ 853,041   $ 19,794   $ 938,202   $ (882,642 ) $ 55,560  
                           

Investments

                                     
 

Mortgage-backed securities

                                     
   

U.S. government sponsored

  $ 77   $ 22,679   $ 1   $ 22,757   $     22,757  
   

Prime

        2,258     233     2,491         2,491  
   

Alt-A

        49     22     71         71  
   

Subprime

        1         1         1  
   

Non-U.S. residential

        340         340         340  
   

Commercial

        45     551     596         596  
                           

171


Table of Contents

In millions of dollars at September 30, 2010   Level 1   Level 2   Level 3   Gross
inventory
  Netting(1)   Net
balance
 
 

Total investment mortgage-backed securities

  $ 77   $ 25,372   $ 807   $ 26,256   $   $ 26,256  
                           
 

U.S. Treasury and federal agency securities

                                     
       

U.S. Treasury

  $ 13,783   $ 52,114   $   $ 65,897   $   $ 65,897  
       

Agency obligations

        49,128     18     49,146           49,146  
                           
 

Total U.S. Treasury and federal agency

  $ 13,783   $ 101,242   $ 18   $ 115,043   $   $ 115,043  
                           
 

State and municipal

  $   $ 14,566   $   $ 14,566   $   $ 14,566  
 

Foreign government

    52,423     51,093     339     103,855         103,855  
 

Corporate

        16,687     911     17,598         17,598  
 

Equity securities

    3,782     85     2,126     5,993         5,993  
 

Asset-backed securities

        3,071     7,159     10,230         10,230  
 

Other debt securities

        1,216     925     2,141         2,141  
 

Non-marketable equity securities

        137     6,290     6,427         6,427  
                           

Total investments

  $ 70,065   $ 213,469   $ 18,575   $ 302,109   $   $ 302,109  
                           

Loans(2)

  $   $ 1,234   $ 3,921   $ 5,155   $   $ 5,155  

MSRs

            3,976     3,976         3,976  

Other financial assets measured on a recurring basis

        24,441     2,698     27,139     (4,221 )   22,918  
                           

Total assets

  $ 199,562   $ 1,353,299   $ 79,085   $ 1,693,403   $ (927,957 ) $ 765,446  

Total as a percentage of gross assets(3)

    12.2 %   82.9 %   4.9 %   100.0 %            
                           

Liabilities

                                     

Interest-bearing deposits

  $   $ 1,009   $ 161   $ 1,170   $   $ 1,170  

Federal funds purchased and securities loaned or sold under agreements to repurchase

        159,668     1,410     161,078     (41,094 )   119,984  

Trading account liabilities

                                     
 

Securities sold, not yet purchased

    65,878     12,878     783     79,539         79,539  
 

Derivatives

                                     
   

Interest rate contracts

    595     663,663     2,457     666,715              
   

Foreign exchange contracts

    1     106,210     960     107,171              
   

Equity contracts

    3,222     30,931     3,596     37,749              
   

Commodity and other contracts

    447     12,597     1,819     14,863              
   

Credit derivatives

        56,277     10,908     67,185              
                               
 

Total gross derivatives

  $ 4,265   $ 869,678   $ 19,740     893,683              
 

Cash collateral received

                      46,590              
 

Netting agreements and market value adjustments

                            (877,807 )      
                           
 

Total derivatives

  $ 4,265   $ 869,678   $ 19,740   $ 940,273   $ (877,807 ) $ 62,466  

Short-term borrowings

        1,677     817     2,494         2,494  

Long-term debt

        16,108     10,532     26,640         26,640  

Other financial liabilities measured on a recurring basis

    1     15,507         15,508     (4,221 )   11,287  
                           

Total liabilities

  $ 70,144   $ 1,076,525   $ 33,443   $ 1,226,702   $ (923,122 ) $ 303,580  

Total as a percentage of gross liabilities(3)

    6.0 %   91.2 %   2.8 %   100.0 %            
                           

(1)
Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase, and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral and the market value adjustment.

(2)
There is no allowance for loan losses recorded for loans reported at fair value.

(3)
Percentage is calculated based on total assets and liabilities excluding collateral received/paid on derivatives.

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Table of Contents

In millions of dollars at December 31, 2009   Level 1   Level 2   Level 3   Gross
inventory
  Netting(1)   Net
balance
 

ASSETS

                                     

Federal funds sold and securities borrowed or purchased under agreements to resell

  $   $ 138,525   $   $ 138,525   $ (50,713 ) $ 87,812  

Trading securities

                                     
 

Trading mortgage- backed securities

                                     
   

U.S. government-sponsored agency guaranteed

  $   $ 19,666   $ 972   $ 20,638   $   $ 20,638  
   

Prime

        772     384     1,156         1,156  
   

Alt-A

        842     387     1,229         1,229  
   

Subprime

        736     8,998     9,734         9,734  
   

Non-U.S. residential

        1,796     572     2,368         2,368  
   

Commercial

        1,004     2,451     3,455         3,455  
                           
 

Total trading mortgage-backed securities

  $   $ 24,816   $ 13,764   $ 38,580   $   $ 38,580  
                           
 

U.S. Treasury and federal agencies securities

                                     
   

U.S. Treasury

  $ 27,943   $ 995   $   $ 28,938   $   $ 28,938  
   

Agency obligations

        2,041       $ 2,041         2,041  
                           
 

Total U.S. Treasury and federal agencies securities

  $ 27,943   $ 3,036   $   $ 30,979   $   $ 30,979  
                           
 

Other trading securities

                                     
 

State and municipal

  $   $ 6,925   $ 222   $ 7,147   $   $ 7,147  
 

Foreign government

    59,229     13,081     459     72,769         72,769  
 

Corporate

        43,365     8,620     51,985         51,985  
 

Equity securities

    33,754     11,827     640     46,221         46,221  
 

Other debt securities

        19,976     16,237     36,213         36,213  
                           

Total trading securities

  $ 120,926   $ 123,026   $ 39,942   $ 283,894   $   $ 283,894  
                           

Total derivatives(2)

  $ 4,002   $ 671,532   $ 27,685   $ 703,219   $ (644,340 ) $ 58,879  
                           

Investments

                                     
 

Mortgage-backed securities

                                     
   

U.S. government-sponsored agency guaranteed

  $ 89   $ 20,823   $ 2   $ 20,914   $   $ 20,914  
   

Prime

        5,742     736     6,478         6,478  
   

Alt-A

        572     55     627         627  
   

Subprime

            1     1         1  
   

Non-U.S. residential

        255         255         255  
   

Commercial

        47     746     793         793  
                           
 

Total investment mortgage-backed securities

  $ 89   $ 27,439   $ 1,540   $ 29,068   $   $ 29,068  
                           
 

U.S. Treasury and federal agency securities

                                     
   

U.S. Treasury

  $ 5,943   $ 20,619   $   $ 26,562   $   $ 26,562  
   

Agency obligations

        27,531     21     27,552         27,552  
                           
 

Total U.S. Treasury and federal agency

  $ 5,943   $ 48,150   $ 21   $ 54,114   $   $ 54,114  
                           
 

State and municipal

  $   $ 15,393   $ 217   $ 15,610   $   $ 15,610  
 

Foreign government

    60,484     41,765     270     102,519         102,519  
 

Corporate

        19,056     1,257     20,313         20,313  
 

Equity securities

    3,056     237     2,513     5,806         5,806  
 

Other debt securities

        3,337     8,832     12,169         12,169  
 

Non-marketable equity securities

        77     6,753     6,830         6,830  
                           

Total investments

  $ 69,572   $ 155,454   $ 21,403   $ 246,429   $   $ 246,429  
                           

Loans(3)

  $   $ 1,226   $ 213   $ 1,439   $   $ 1,439  

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Table of Contents

In millions of dollars at December 31, 2009   Level 1   Level 2   Level 3   Gross
inventory
  Netting(1)   Net
balance
 

MSRs

            6,530     6,530         6,530  

Other financial assets measured on a recurring basis

        15,787     1,101     16,888     (4,224 )   12,664  
                           

Total assets

  $ 194,500   $ 1,105,550   $ 96,874   $ 1,396,924   $ (699,277 ) $ 697,647  

    13.9 %   79.2 %   6.9 %   100.0 %            
                           

LIABILITIES

                                     

Interest-bearing deposits

  $   $ 1,517   $ 28   $ 1,545   $   $ 1,545  

Federal funds purchased and securities loaned or sold under agreements to repurchase

        152,687     2,056     154,743     (50,713 )   104,030  

Trading account liabilities

                                     
 

Securities sold, not yet purchased

    52,399     20,233     774     73,406         73,406  
 

Derivatives(2)

    4,980     669,384     24,577     698,941     (634,835 )   64,106  

Short-term borrowings

        408     231     639         639  

Long-term debt

        16,288     9,654     25,942         25,942  

Other financial liabilities measured on a recurring basis

        15,753     13     15,766     (4,224 )   11,542  
                           

Total liabilities

  $ 57,379   $ 876,270   $ 37,333   $ 970,982   $ (689,772 ) $ 281,210  

    5.9 %   90.2 %   3.8 %   100.0 %            
                           

(1)
Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase, and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral, and the market value adjustment.

(2)
Cash collateral paid/received is included in Level 2 derivative assets/liabilities, as it is primarily related to derivative positions classified in Level 2.

(3)
There is no allowance for loan losses recorded for loans reported at fair value.

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Table of Contents

Changes in Level 3 Fair-Value Category

        The following tables present the changes in the Level 3 fair-value category. The Company classifies financial instruments in Level 3 of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

        The Company often hedges positions with offsetting positions that are classified in a different level. For example, the gains and losses for assets and liabilities in the Level 3 category presented in the tables below do not reflect the effect of offsetting losses and gains on hedging instruments that have been classified by the Company in the Level 1 and Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair-value hierarchy. The effects of these hedges are presented gross in the following tables.

 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars   June 30,
2010
  Principal
transactions
  Other(1)(2)   Sept. 30,
2010
 

Assets

                                           

Federal funds sold and securities borrowed or purchased under agreements to resell

  $ 6,518   $   $   $ 1,714   $ (52 ) $ 8,180   $  

Trading securities

                                           
 

Trading mortgage-backed securities

                                           
     

U.S. government sponsored

  $ 758     (62 )       160     (11 ) $ 845     (75 )
     

Prime

    610     23         188     70     891     3  
     

Alt-A

    451     15         41     (156 )   351     (6 )
     

Subprime

    1,885     146         24     (702 )   1,353     29  
     

Non-U.S. residential

    234     29         904     (826 )   341     3  
     

Commercial

    2,184     70         57     (764 )   1,547     216  
                               
 

Total trading mortgage-backed securities

  $ 6,122   $ 221   $   $ 1,374   $ (2,389 ) $ 5,328   $ 170  
                               
 

U.S. Treasury and federal agencies securities

      $ 2   $   $ 47   $ 16   $ 65   $ (2 )
 

State and municipal

  $ 57     13         236     (1 ) $ 305     18  
 

Foreign government

    386     6         5     27     424     (4 )
 

Corporate

    6,211     236         198     (273 )   6,372     189  
 

Equity securities

    533     14         362     (58 )   851     62  
 

Asset-backed securities

    4,202     (55 )       4,850     (1,494 )   7,503     66  
 

Other debt securities

    1,047     (39 )       108     (23 )   1,093     4  
                               

Total trading securities

  $ 18,558   $ 398   $   $ 7,180   $ (4,195 ) $ 21,941   $ 503  
                               

Derivatives, net(4)

                                           
   

Interest rate contracts

  $ 575   $ (91 ) $   $ (37 ) $ (214 ) $ 233   $ (84 )
   

Foreign exchange contracts

    250     (162 )       62     (19 )   131     (222 )
   

Equity contracts

    (1,233 )   (196 )       277     (89 )   (1,241 )   (539 )
   

Commodity and other contracts

    (524 )   (158 )       (5 )   (112 )   (799 )   (62 )
   

Credit derivatives

    2,073     33         9     (385 )   1,730     (349 )
                               

Total derivatives, net(4)

  $ 1,141   $ (574 ) $   $ 306   $ (819 ) $ 54   $ (1,256 )
                               

Investments

                                           
 

Mortgage-backed securities

                                           
     

U.S. government-sponsored agency guaranteed

  $ 1   $   $   $   $   $ 1   $  
     

Prime

    772         78     (539 )   (78 )   233     3  
     

Alt-A

    205         35     (153 )   (65 )   22      
     

Subprime

    14         (1 )   (13 )            
     

Non-U.S. Residential

    814             (814 )            
     

Commercial

    558         11         (18 )   551      
                               
 

Total investment mortgage-backed debt securities

  $ 2,364   $   $ 123   $ (1,519 ) $ (161 ) $ 807   $ 3  
                               

U.S. Treasury and federal agencies securities

                                           
 

Agency obligations

  $ 19   $   $   $   $ (1 ) $ 18   $  
                               

Total U.S. Treasury and federal agencies securities

  $ 19   $   $   $   $ (1 ) $ 18   $  
                               
 

State and municipal

  $ 457   $   $   $ (233 ) $ (224 ) $   $  
 

Foreign government

    282         14     21     22     339     14  
 

Corporate

    1,271         46     (294 )   (112 )   911     17  
 

Equity securities

    2,238         (1 )   (12 )   (99 )   2,126     (23 )
 

Asset-backed securities

    12,303         (34 )   (4,918 )   (192 )   7,159     121  
 

Other debt securities

    891         (41 )   42     33     925     (11 )
 

Non-marketable equity securities

  $ 6,561   $   $ 318   $ 43   $ (632 ) $ 6,290   $ 323  
                               

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Table of Contents

 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars   June 30,
2010
  Principal
transactions
  Other(1)(2)   Sept. 30,
2010
 

Total investments

  $ 26,386   $   $ 425   $ (6,870 ) $ (1,366 ) $ 18,575   $ 444  
                               

Loans

  $ 3,668   $   $ (38 ) $ 378   $ (87 ) $ 3,921   $ 56  

MSRs

    4,894         (778 )         (140 )   3,976     (778 )

Other financial assets measured on a recurring basis

    3,089         7     44     (442 )   2,698     211  
                               

Liabilities

                                           

Interest-bearing deposits

  $ 183   $   $ (10 ) $ (35 ) $ 3   $ 161   $ (29 )

Federal funds purchased and securities loaned or sold under agreements to repurchase

    1,091   $ (40 )       3     276     1,410     (29 )

Trading account liabilities

                                           
 

Securities sold, not yet purchased

    621     (6 )       (34 )   190     783     (32 )

Short-term borrowings

    445     (26 )       351     (5 )   817     (32 )

Long-term debt

    10,741     (187 )   (67 )   338     (801 )   10,532     (199 )

Other financial liabilities measured on a recurring basis

    7         (1 )       (8 )          
                               

 

 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars   December 31,
2009
  Principal
transactions
  Other(1)(2)   Sept. 30,
2010
 

Assets

                                           

Federal funds sold and securities borrowed or purchased under agreements to resell

  $   $ 509   $   $ 6,931   $ 740   $ 8,180   $  

Trading securities

                                           
 

Trading mortgage-backed securities

                                           
     

U.S. government sponsored

  $ 972   $ (220 )       329     (236 ) $ 845     (198 )
     

Prime

    384     56         338     113     891     4  
     

Alt-A

    387     45         201     (282 )   351     11  
     

Subprime

    8,998     182         (601 )   (7,226 )   1,353     82  
     

Non-U.S. residential

    572     2         645     (878 )   341      
     

Commercial

    2,451     59         (126 )   (837 )   1,547     309  
                               
 

Total trading mortgage-backed securities

  $ 13,764   $ 124   $   $ 786   $ (9,346 ) $ 5,328   $ 208  
                               
 

U.S. Treasury and federal agencies securities

      $ 2   $   $ 47   $ 16   $ 65   $ (4 )
 

State and municipal

  $ 222     24         292     (233 )   305     17  
 

Foreign government

    459     17         (181 )   129     424     (19 )
 

Corporate

    8,620     161         (285 )   (2,124 )   6,372     7  
 

Equity securities

    640     30         350     (169 )   851     84  
 

Asset-backed securities

    3,006     (132 )       4,894     (265 )   7,503     (151 )
 

Other debt securities

    13,231     (16 )       (147 )   (11,975 )   1,093     8  
                               

Total trading securities

  $ 39,942   $ 210   $   $ 5,756   $ (23,967 ) $ 21,941   $ 150  
                               

Derivatives, net(4)

                                           
   

Interest rate contracts

  $ (374 ) $ 574   $   $ 300   $ (267 ) $ 233   $ 504  
   

Foreign exchange contracts

    (38 )   182         (36 )   23     131     173  
   

Equity contracts

    (1,110 )   (423 )       (5 )   297     (1,241 )   (774 )
   

Commodity and other contracts

    (529 )   (274 )       63     (59 )   (799 )   (107 )
   

Credit derivatives

    5,159     (1,242 )       (866 )   (1,321 )   1,730     (1,271 )
                               

Total derivatives, net(4)

  $ 3,108   $ (1,183 ) $   $ (544 ) $ (1,327 ) $ 54   $ (1,475 )
                               

Investments

                                           
 

Mortgage-backed securities

                                           
     

U.S. government-sponsored agency guaranteed

  $ 2   $   $ (1 ) $   $   $ 1   $  
     

Prime

    736         (35 )   (469 )   1     233     3  
     

Alt-A

    55         12     37     (82 )   22      
     

Subprime

    1         (2 )   1              
     

Non-U.S. Residential

                             
     

Commercial

    746       $ (438 )   2     241     551      
                               
 

Total investment mortgage-backed debt securities

  $ 1,540   $   $ (464 ) $ (429 ) $ 160   $ 807   $ 3  
                               

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Table of Contents

 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars   December 31,
2009
  Principal
transactions
  Other(1)(2)   Sept. 30,
2010
 

U.S. Treasury and federal agencies securities

                                           
 

Agency obligations

  $ 21   $   $ (21 ) $   $ 18   $ 18   $ (1 )
                               

Total U.S. Treasury and federal agencies securities

  $ 21   $   $ (21 ) $   $ 18   $ 18   $ (1 )
                               
 

State and municipal

  $ 217   $   $ 7   $   $ (224 ) $   $  
 

Foreign government

    270         21     11     37     339     5  
 

Corporate

    1,257         (33 )   (58 )   (255 )   911     6  
 

Equity securities

    2,513         25     78     (490 )   2,126     (79 )
 

Asset-backed securities

    8,272         (70 )   (100 )   (943 )   7,159     (133 )
 

Other debt securities

    560         (14 )   6     373     925     29  
 

Non-marketable equity securities

    6,753         333     (65 )   (731 )   6,290     277  
                               

Total investments

  $ 21,403   $   $ (216 ) $ (557 ) $ (2,055 ) $ 18,575   $ 107  
                               

Loans

  $ 213   $   $ (178 ) $ 993   $ 2,893   $ 3,921   $ (168 )

MSRs

    6,530         (1,976 )       (578 )   3,976     (1,976 )

Other financial assets measured on a recurring basis

    1,101         (20 )   2,027     (410 )   2,698     (20 )
                               

Liabilities

                                           

Interest-bearing deposits

  $ 28   $   $ (8 ) $ (41 ) $ 166   $ 161   $ (36 )

Federal funds purchased and securities loaned or sold under agreements to repurchase

    2,056   $ (138 )       (973 )   189     1,410     (5 )

Trading account liabilities

                                           
 

Securities sold, not yet purchased

    774     46         (103 )   158     783     13  

Short-term borrowings

    231     (18 )       245     323     817     (16 )

Long-term debt

    9,654     85     78     670     371     10,532     (121 )

Other financial liabilities measured on a recurring basis

    13         (20 )       (33 )        
                               

 

 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars   June 30,
2009
  Principal
transactions
  Other(1)(2)   Sept. 30,
2009
 

Assets

                                           

Trading securities

                                           
 

Trading mortgage-backed securities

                                           
   

U.S. government sponsored

  $ 1,244   $ (71 ) $   $ 127   $ (138 ) $ 1,162   $ (116 )
   

Prime

    623     (76 )       (39 )   (50 )   458     (37 )
   

Alt-A

    777     18         (75 )   (158 )   562     18  
   

Subprime

    10,001     1,752         (515 )   (1,480 )   9,758     1,785  
   

Non-U.S. residential

    345     (3 )       (142 )   90     290     (3 )
   

Commercial

    2,808     (1 )       114     (190 )   2,731     2  
                               
 

Total trading mortgage-backed securities

  $ 15,798   $ 1,619   $   $ (530 ) $ (1,926 ) $ 14,961   $ 1,649  
                               
 

U.S. Treasury and federal agencies securities

                                           
   

U.S. Treasury

  $   $   $   $   $   $   $  
   

Agency obligations

    49     9         5     16     79     9  
                               
 

Total U.S. Treasury and federal agencies securities

  $ 49   $ 9   $   $ 5   $ 16   $ 79   $ 9  
                               
 

State and municipal

  $ 109   $ (49 ) $   $ 300   $ 92   $ 452   $ (49 )
 

Foreign government

    590     24         (134 )   (36 )   444     4  
 

Corporate

    9,435     404         (764 )   (446 )   8,629     431  
 

Equity securities

    1,866     161         (899 )   27     1,155     25  
 

Other debt securities

    16,846     1,133         (1,122 )   (491 )   16,366     1,018  
                               

Total trading securities

  $ 44,693   $ 3,301   $   $ (3,144 ) $ (2,764 ) $ 42,086   $ 3,087  
                               

Derivatives, net(4)

  $ 1,180   $ (2,407 ) $   $ (1,107 ) $ 2,866   $ 532   $ (3,064 )
                               

Investments

                                           
 

Mortgage-backed securities

                                           
   

U.S. government sponsored

  $ 78   $   $ 1   $   $ (79 ) $   $ 1  
   

Prime

    775         50     99     (51 )   873     59  
   

Alt-A

    271         11     (114 )   (101 )   67     16  

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Table of Contents


 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars   June 30,
2009
  Principal
transactions
  Other(1)(2)   Sept. 30,
2009
 
   

Subprime

    17             2         19      
   

Commercial

    719         62     2     (19 )   764     14  
                               
 

Total investment mortgage-backed debt securities

  $ 1,860   $   $ 124   $ (11 ) $ (250 ) $ 1,723   $ 90  
                               
 

U.S. Treasury and federal agencies securities

                                           
   

U.S. Treasury

  $   $   $   $   $   $   $  
   

Agency obligations

    9                 (5 )   4      
                               
 

Total U.S. Treasury and federal agencies securities

  $ 9   $   $   $   $ (5 ) $ 4   $  
                               
 

State and municipal

  $ 252   $   $ 2   $   $   $ 254   $  
 

Foreign government

    168             89     14     271      
 

Corporate

    1,688         3     (86 )   (200 )   1,405   $ 5  
 

Equity securities

    2,818         (15 )   (22 )   (239 )   2,542     10  
 

Other debt securities

    8,429         523     (194 )   (156 )   8,602     454  
 

Non-marketable equity securities

    7,800         (40 )   (8 )   (106 )   7,646     (226 )
                               

Total investments

  $ 23,024   $   $ 597   $ (232 ) $ (942 ) $ 22,447   $ 333  
                               

Loans

  $ 196   $   $ 24   $   $ (5 ) $ 215   $ 24  

MSRs

  $ 6,770   $   $ (444 ) $   $ (98 ) $ 6,228   $ (444 )

Other financial assets measured on a recurring basis

    1,645         (347 )   (67 )   (47 )   1,184   $ (347 )
                               

Liabilities

                                           

Interest-bearing deposits

  $ 112   $   $ 63   $   $ (18 ) $ 31   $ 63  

Federal funds purchased and securities loaned or sold under agreements to repurchase

    7,204     (32 )       1,622     (375 )   8,483     (40 )

Trading account liabilities

                                           
 

Securities sold, not yet purchased

    961     (14 )       (166 )   410     1,219     15  

Short-term borrowings

    377         9     (75 )   (134 )   159     9  

Long-term debt

    11,201         (385 )   414     (894 )   11,106     (456 )

Other financial liabilities measured on a recurring basis

    19         (2 )       (20 )   1     (1 )
                               

 

 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars
  December 31,
2008
  Principal
transactions
  Other(1)(2)   Sept. 30,
2009
 

Assets

                                           

Trading securities

                                           
 

Trading mortgage-backed securities

                                           
   

U.S. government sponsored

  $ 1,325   $ 145   $   $ 137   $ (445 ) $ 1,162   $ 89  
   

Prime

    147     (131 )       400     42     458     (83 )
   

Alt-A

    1,153     (101 )       (262 )   (228 )   562     (101 )
   

Subprime

    13,844     56         (1,225 )   (2,917 )   9,758     2,262  
   

Non-U.S. residential

    858     (77 )       (632 )   141     290     12  
   

Commercial

    2,949     (196 )       273     (295 )   2,731     (207 )
                               
 

Total trading mortgage-backed securities

  $ 20,276   $ (304 ) $   $ (1,309 ) $ (3,702 ) $ 14,961   $ 1,972  
                               
 

U.S. Treasury and federal agencies securities

                                           
   

U.S. Treasury

  $   $   $   $   $   $   $  
   

Agency obligations

    59             2     18     79     2  
                               
 

Total U.S. Treasury and federal agencies securities

  $ 59   $   $   $ 2   $ 18   $ 79   $ 2  
                               
 

State and municipal

  $ 233   $ (71 ) $   $ 220   $ 70   $ 452   $ (49 )
 

Foreign government

    1,261     120         (501 )   (436 )   444     29  
 

Corporate

    13,027     (299 )       (1,556 )   (2,543 )   8,629     457  
 

Equity securities

    1,387     252         (778 )   294     1,155     90  
 

Other debt securities

    14,530     1,144         (2,320 )   3,012     16,366     1,044  
                               

Total trading securities

  $ 50,773   $ 842   $   $ (6,242 ) $ (3,287 ) $ 42,086   $ 3,545  
                               

Derivatives, net(4)

  $ 3,586   $ (4,783 ) $   $ (1,824 ) $ 3,553   $ 532   $ (3,026 )
                               

Investments

                                           
 

Mortgage-backed securities

                                           
   

U.S. government sponsored

  $   $   $ 1   $ 75   $ (76 ) $   $ 3  

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Table of Contents

 
   
  Net realized/ unrealized
gains (losses) included in
   
   
   
   
 
 
   
  Transfers
in and/or
out of
Level 3
  Purchases,
issuances
and
settlements
   
  Unrealized
gains
(losses)
still held(3)
 
In millions of dollars
  December 31,
2008
  Principal
transactions
  Other(1)(2)   Sept. 30,
2009
 
   

Prime

    1,163         211     132     (633 )   873     213  
   

Alt-A

    111         44     (51 )   (37 )   67     17  
   

Subprime

    25         (9 )   (8 )   11     19      
   

Commercial

    964         71     (461 )   190     764     29  
                               
 

Total investment mortgage-backed debt securities

  $ 2,263   $   $ 318   $ (313 ) $ (545 ) $ 1,723   $ 262  
                               
 

U.S. Treasury and federal agencies securities

                                           
   

U.S. Treasury

  $   $   $   $   $   $   $  
   

Agency obligations

                9     (5 )   4      
                               
 

Total U.S. Treasury and federal agencies securities

  $   $   $   $ 9   $ (5 ) $ 4   $  
                               
 

State and municipal

  $ 222   $   $ 2   $ 30   $   $ 254   $  
 

Foreign government

    571             (313 )   13     271     (1 )
 

Corporate

    1,019         47     568     (229 )   1,405     40  
 

Equity securities

    3,807         (495 )   (152 )   (618 )   2,542     (34 )
 

Other debt securities

    11,324         96     (1,142 )   (1,676 )   8,602     643  
 

Non-Marketable equity securities

    9,067         (746 )   (247 )   (428 )   7,646     (238 )
                               

Total investments

  $ 28,273   $   $ (778 ) $ (1,560 ) $ (3,488 ) $ 22,447   $ 672  
                               

Loans

  $ 160   $   $ 43   $   $ 12   $ 215   $ 24  

Mortgage servicing rights

  $ 5,657   $   $ 996   $   $ (425 ) $ 6,228   $ 996  

Other financial assets measured on a recurring basis

    359         205     689     (69 )   1,184   $ 205  
                               

Liabilities

                                           

Interest-bearing deposits

  $ 54   $   $ 4   $   $ (19 ) $ 31   $ 49  

Federal funds purchased and securities loaned or sold under agreements to repurchase

    11,167     276         (2,098 )   (310 )   8,483     (320 )

Trading account liabilities

                                           
 

Securities sold, not yet purchased

    653     30         (181 )   777     1,219     25  

Short-term borrowings

    1,329         (56 )   (821 )   (405 )   159     (72 )

Long-term debt

    11,198         (349 )   88     (529 )   11,106     (215 )

Other financial liabilities measured on a recurring basis

    1         (45 )       (45 )   1      
                               

(1)
Changes in fair value for available-for-sale investments (debt securities) are recorded in Accumulated other comprehensive income, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income.

(2)
Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income.

(3)
Represents the amount of total gains or losses for the period included in earnings (and Accumulated other comprehensive income for changes in fair value for available-for-sale investments) that is attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2010 and 2009.

(4)
Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

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Table of Contents

        The following is a discussion of the changes to the Level 3 balances for each of the roll-forward tables presented above.

The significant changes from June 30, 2010 to September 30, 2010 in Level 3 assets and liabilities are due to:

The significant changes from December 31, 2009 to September 30, 2010 in Level 3 assets and liabilities are due to:

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Table of Contents

The significant changes from June 30, 2009 to September 30, 2009 Level 3 assets and liabilities are due to:

The significant changes from December 31, 2008 to September 30, 2009 Level 3 assets and liabilities are due to:

Transfers between Level 1 and Level 2 of the Fair Value Hierarchy

        The Company did not have any significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy during the third quarter of 2010.

Items Measured at Fair Value on a Nonrecurring Basis

        Certain assets and liabilities are measured at fair value on a non-recurring basis and therefore are not included in the tables above.

        These include assets measured at cost that have been written down to fair value during these periods as a result of an impairment. In addition, these assets include loans held-for-sale (HFS) that are measured at lower of cost or market (LOCOM), that were recognized at fair value below cost at the end of the period.

        The fair value of loans measured on a LOCOM basis is determined where possible using quoted secondary-market prices. Such loans are generally classified as Level 2 of the fair-value hierarchy given the level of activity in the market and the frequency of available quotes. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan.

        The following table presents all loans HFS that are carried at LOCOM as of September 30, 2010 and December 31, 2009 (in billions):

 
  Aggregate
cost
  Fair value   Level 2   Level 3  

September 30, 2010

  $ 4.1   $ 3.6   $ 0.5   $ 3.1  
                   

December 31, 2009

  $ 2.5   $ 1.6   $ 0.3   $ 1.3  
                   

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Table of Contents

17.    FAIR VALUE ELECTIONS

        The Company may elect to report most financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings. The election is made upon the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair-value election may not be revoked once an election is made. The changes in fair value are recorded in current earnings. Additional discussion regarding the applicable areas in which fair value elections were made is presented in Note 16 to the Consolidated Financial Statements.

        All servicing rights must now be recognized initially at fair value. The Company has elected fair-value accounting for its mortgage and student loan classes of servicing rights. See Note 14 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.

        The following table presents, as of September 30, 2010 and December 31, 2009, the fair value of those positions selected for fair-value accounting, as well as the changes in fair value for the nine months ended September 30, 2010 and 2009:

 
  Fair value at   Changes in fair value gains
(losses) for the nine months ended
September 30,
 
In millions of dollars   September 30,
2010
  December 31,
2009(1)
  2010   2009(1)  

Assets

                         

Federal funds sold and securities borrowed or purchased under agreements to resell

                         
 

Selected portfolios of securities purchased under agreements to resell, securities borrowed(2)

  $ 94,190   $ 87,812   $ 669   $ (1,284 )

Trading account assets

    13,573     16,725     356     7,044  

Investments

    496     574     32     (135 )

Loans

                         
 

Certain corporate loans(3)

    2,755     1,405     (140 )   80  
 

Certain consumer loans(3)

    2,400     34     208     (2 )
                   

Total loans

  $ 5,155   $ 1,439   $ 68   $ 78  
                   

Other assets

                         
 

MSRs

  $ 3,976   $ 6,530   $ (1,976 ) $ 996  
 

Certain mortgage loans (HFS)

    6,720     3,338     188     81  
 

Certain equity method investments

    252     598     (36 )   174  
                   

Total other assets

  $ 10,948   $ 10,466   $ (1,824 ) $ 1,251  
                   

Total assets

  $ 124,362   $ 117,016   $ (699 ) $ 6,954  
                   

Liabilities

                         

Interest-bearing deposits

  $ 1,170   $ 1,545   $ 10   $ (562 )

Federal funds purchased and securities loaned or sold under agreements to repurchase

                         
 

Selected portfolios of securities sold under agreements to repurchase, securities loaned(2)

    119,984     104,030     53     213  

Trading account liabilities

    4,078     5,325     (223 )   (1,761 )

Short-term borrowings

    2,494     639     36     (67 )

Long-term debt

    26,640     25,942     (435 )   (1,738 )
                   

Total

  $ 154,366   $ 137,481   $ (559 ) $ (3,915 )
                   

(1)
Reclassified to conform to current period's presentation.

(2)
Reflects netting of the amounts due from securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase.

(3)
Includes mortgage loans held by mortgage loan securitization VIEs consolidated upon the adoption of SFAS 166/167 on January 1, 2010.

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Own Credit Valuation Adjustment

        The fair value of debt liabilities for which the fair value option is elected (other than non-recourse and similar liabilities) is impacted by the narrowing or widening of the Company's credit spreads. The estimated change in the fair value of these debt liabilities due to such changes in the Company's own credit risk (or instrument-specific credit risk) was a loss of $233 million and $1.019 billion for the three months ended September 30, 2010 and 2009, respectively, and a gain of $217 million and a loss of $2.447 billion for the nine months ended September 30, 2010 and 2009, respectively. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating the Company's current observable credit spreads into the relevant valuation technique used to value each liability as described above.

The Fair Value Option for Financial Assets and Financial Liabilities

Selected portfolios of securities purchased under agreements to resell, securities borrowed, securities sold under agreements to repurchase, securities loaned and certain non-collateralized short-term borrowings

        The Company elected the fair value option for certain portfolios of fixed-income securities purchased under agreements to resell and fixed-income securities sold under agreements to repurchase (and certain non-collateralized short-term borrowings) on broker-dealer entities in the United States, United Kingdom and Japan. In each case, the election was made because the related interest-rate risk is managed on a portfolio basis, primarily with derivative instruments that are accounted for at fair value through earnings.

        Changes in fair value for transactions in these portfolios are recorded in Principal transactions. The related interest revenue and interest expense are measured based on the contractual rates specified in the transactions and are reported as interest revenue and expense in the Consolidated Statement of Income.

Selected letters of credit and revolving loans hedged by credit default swaps or participation notes

        The Company has elected the fair value option for certain letters of credit that are hedged with derivative instruments or participation notes. Citigroup elected the fair value option for these transactions because the risk is managed on a fair value basis and mitigates accounting mismatches.

        The notional amount of these unfunded letters of credit was $1.8 billion as of September 30, 2010 and December 31, 2009. The amount funded was insignificant with no amounts 90 days or more past due or on non-accrual status at September 30, 2010 and December 31, 2009.

        These items have been classified in Trading account assets or Trading account liabilities on the Consolidated Balance Sheet. Changes in fair value of these items are classified in Principal transactions in the Company's Consolidated Statement of Income.

Certain loans and other credit products

        Citigroup has elected the fair value option for certain originated and purchased loans, including certain unfunded loan products, such as guarantees and letters of credit, executed by Citigroup's trading businesses. None of these credit products is a highly leveraged financing commitment. Significant groups of transactions include loans and unfunded loan products that are expected to be either sold or securitized in the near term, or transactions where the economic risks are hedged with derivative instruments such as purchased credit default swaps or total return swaps where the Company pays the total return on the underlying loans to a third party. Citigroup has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications. Fair value was not elected for most lending transactions across the Company, including where management objectives would not be met.

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        The following table provides information about certain credit products carried at fair value at September 30, 2010 and December 31, 2009:

 
  September 30, 2010   December 31, 2009  
In millions of dollars   Trading
assets
  Loans   Trading
assets
  Loans  

Carrying amount reported on the Consolidated Balance Sheet

  $ 13,533   $ 1,638   $ 14,338   $ 945  

Aggregate unpaid principal balance in excess of fair value

    392     (199 )   390     (44 )

Balance of non-accrual loans or loans more than 90 days past due

    249         312      

Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due

    101         267      
                   

        In addition to the amounts reported above, $441 million and $200 million of unfunded loan commitments related to certain credit products selected for fair value accounting was outstanding as of September 30, 2010 and December 31, 2009, respectively.

        Changes in fair value of funded and unfunded credit products are classified in Principal transactions in the Company's Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue on Trading account assets or loan interest depending on the balance sheet classifications of the credit products. The changes in fair value for the nine months ended September 30, 2010 and 2009 due to instrument-specific credit risk totaled to a gain of $19 million and a loss of $32 million, respectively.

Certain investments in private equity and real estate ventures and certain equity method investments

        Citigroup invests in private equity and real estate ventures for the purpose of earning investment returns and for capital appreciation. The Company has elected the fair value option for certain of these ventures, because such investments are considered similar to many private equity or hedge fund activities in Citi's investment companies, which are reported at fair value. The fair value option brings consistency in the accounting and evaluation of certain of these investments. All investments (debt and equity) in such private equity and real estate entities are accounted for at fair value. These investments are classified as Investments on Citigroup's Consolidated Balance Sheet.

        Citigroup also holds various non-strategic investments in leveraged buyout funds and other hedge funds for which the Company elected fair value accounting to reduce operational and accounting complexity. Since the funds account for all of their underlying assets at fair value, the impact of applying the equity method to Citigroup's investment in these funds was equivalent to fair value accounting. These investments are classified as Other assets on Citigroup's Consolidated Balance Sheet.

        Changes in the fair values of these investments are classified in Other revenue in the Company's Consolidated Statement of Income.

Certain mortgage loans (HFS)

        Citigroup has elected the fair value option for certain purchased and originated prime fixed-rate and conforming adjustable-rate first mortgage loans HFS. These loans are intended for sale or securitization and are hedged with derivative instruments. The Company has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications.

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        The following table provides information about certain mortgage loans HFS carried at fair value at September 30, 2010 and December 31, 2009:

In millions of dollars   September 30, 2010   December 31, 2009  

Carrying amount reported on the Consolidated Balance Sheet

  $ 6,720   $ 3,338  

Aggregate fair value in excess of unpaid principal balance

    278     55  

Balance of non-accrual loans or loans more than 90 days past due

    1     4  

Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due

    1     3  
           

        The changes in fair values of these mortgage loans are reported in Other revenue in the Company's Consolidated Statement of Income. The changes in fair value during the nine months ended September 30, 2010 and 2009 due to instrument-specific credit risk resulted in a $1 million loss and $4 million loss, respectively. Related interest income continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.

Certain Consolidated VIEs

        The Company has elected the fair value option for all qualified assets and liabilities of certain VIEs that were consolidated upon the adoption of SFAS 166/167 on January 1, 2010, including certain private label mortgage securitizations, mutual fund deferred sales commissions and collateralized loan obligation VIEs. The Company elected the fair value option for these VIEs as the Company believes this method better reflects the economic risks, since substantially all of the Company's retained interests in these entities are carried at fair value.

        With respect to the consolidated mortgage VIEs, the Company determined the fair value for the mortgage loans and long-term debt utilizing internal valuation techniques. The fair value of the long-term debt measured using internal valuation techniques is verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar securities when no price is observable. Security pricing associated with long-term debt that is verified is classified as Level 2 and non-verified debt is classified as Level 3. The fair value of mortgage loans of each VIE is derived from the security pricing. When substantially all of the long-term debt of a VIE is valued using Level 2 inputs, the corresponding mortgage loans are classified as Level 2. Otherwise, the mortgage loans of a VIE are classified as Level 3.

        With respect to the consolidated mortgage VIEs for which the fair value option was elected, the mortgage loans are classified as Loans on Citigroup's Consolidated Balance Sheet. The changes in fair value of the loans are reported as Other revenue in the Company's Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue in the Company's Consolidated Statement of Income. Information about these mortgage loans is included in the table below. The change in fair value of these loans due to instrument-specific credit risk was a gain of $138 million for the three months ended September 30, 2010.

        The debt issued by these consolidated VIEs is classified as long-term debt on Citigroup's Consolidated Balance Sheet. The changes in fair value for the majority of these liabilities are reported in Other revenue in the Company's Consolidated Statement of Income. Related interest expense is measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income. The aggregate unpaid principal balance of long-term debt of these consolidated VIEs exceeded the aggregate fair value by $1.3 billion as of September 30, 2010.

        The following table provides information about corporate and consumer loans of consolidated VIEs carried at fair value:

 
  September 30, 2010  
In millions of dollars   Corporate
Loans
  Consumer
Loans
 

Carrying amount reported on the Consolidated Balance Sheet

  $ 648   $ 2,372  

Aggregate unpaid principal balance in excess of fair value

    630     705  

Balance of non-accrual loans or loans more than 90 days past due

    88     197  

Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due

    133     203  
           

Mortgage servicing rights

        The Company accounts for mortgage servicing rights (MSRs) at fair value. Fair value for MSRs is determined using an option-adjusted spread valuation approach. This approach consists of projecting servicing cash flows under multiple interest-rate scenarios and discounting these cash flows using risk-adjusted rates. The model assumptions used in the valuation of MSRs include mortgage prepayment speeds and discount rates. The fair value of MSRs is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. In managing this risk, the Company hedges a significant portion of the values of its MSRs through the use of interest-rate derivative contracts, forward-purchase commitments of mortgage-backed securities, and purchased securities classified as trading. See Note14 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.

        These MSRs, which totaled $3.976 billion and $6.530 billion as of September 30, 2010 and December 31, 2009, respectively, are classified as Mortgage servicing rights on Citigroup's Consolidated Balance Sheet. Changes in fair value of MSRs are recorded in Other revenue in the Company's Consolidated Statement of Income.

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Certain structured liabilities

        The Company has elected the fair value option for certain structured liabilities whose performance is linked to structured interest rates, inflation, currency, equity, referenced credit or commodity risks (structured liabilities). The Company elected the fair value option, because these exposures are considered to be trading-related positions and, therefore, are managed on a fair value basis. These positions will continue to be classified as debt, deposits or derivatives (Trading account liabilities) on the Company's Consolidated Balance Sheet according to their legal form.

        The change in fair value for these structured liabilities is reported in Principal transactions in the Company's Consolidated Statement of Income. Changes in fair value for structured debt with embedded equity, referenced credit or commodity underlyings includes an economic component for accrued interest. For structured debt that contains embedded interest rate, inflation or currency risks, related interest expense is measured based on the contracted interest rates and reported as such in the Consolidated Statement of Income.

Certain non-structured liabilities

        The Company has elected the fair value option for certain non-structured liabilities with fixed and floating interest rates (non-structured liabilities). The Company has elected the fair value option where the interest-rate risk of such liabilities is economically hedged with derivative contracts or the proceeds are used to purchase financial assets that will also be accounted for at fair value through earnings. The election has been made to mitigate accounting mismatches and to achieve operational simplifications. These positions are reported in Short-term borrowings and Long-term debt on the Company's Consolidated Balance Sheet. The change in fair value for these non-structured liabilities is reported in Principal transactions in the Company's Consolidated Statement of Income.

        Related interest expense continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.

        The following table provides information about long-term debt, excluding the debt issued by the consolidated VIEs at September 30, 2010, carried at fair value at September 30, 2010 and December 31, 2009:

In millions of dollars   September 30, 2010   December 31, 2009  

Carrying amount reported on the Consolidated Balance Sheet

  $ 21,847   $ 25,942  

Aggregate unpaid principal balance in excess of fair value

    2,676     3,399  

        The following table provides information about short-term borrowings carried at fair value:

In millions of dollars   September 30, 2010   December 31, 2009  

Carrying amount reported on the Consolidated Balance Sheet

  $ 2,494   $ 639  

Aggregate unpaid principal balance in excess of fair value

    6     53  

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18.    FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated Fair Value of Financial Instruments

        The table below presents the carrying value and fair value of Citigroup's financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contract-holder fund amounts exclude certain insurance contracts. Also as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup's financial position and the value of its net assets.

        The fair value represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans not accounted for at fair value, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectability, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the cash flows. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.

 
  September 30, 2010   December 31, 2009  
In billions of dollars   Carrying
value
  Estimated
fair value
  Carrying
value
  Estimated
fair value
 

Assets

                         

Investments

  $ 340.3   $ 341.9   $ 306.1   $ 307.6  

Federal funds sold and securities borrowed or purchased under agreements to resell

    240.1     240.1     222.0     222.0  

Trading account assets

    337.1     337.1     342.8     342.8  

Loans(1)

    608.2     593.2     552.5     542.8  

Other financial assets(2)

    281.7     281.6     290.9     290.9  
                   

 

 
  September 30, 2010   December 31, 2009  
In billions of dollars   Carrying
value
  Estimated
fair value
  Carrying
value
  Estimated
fair value
 

Liabilities

                         

Deposits

  $ 850.1   $ 848.2   $ 835.9   $ 834.5  

Federal funds purchased and securities loaned or sold under agreements to repurchase

    192.1     192.1     154.3     154.3  

Trading account liabilities

    142.0     142.0     137.5     137.5  

Long-term debt

    387.3     385.6     364.0     354.8  

Other financial liabilities(3)

    185.4     185.4     175.8     175.8  
                   

(1)
The carrying value of loans is net of the Allowance for loan losses of $43.7 billion and $36.0 billion for September 30, 2010 and December 31, 2009, respectively. In addition, the carrying values exclude $2.5 billion and $2.9 billion of lease finance receivables at September 30, 2010 and December 31, 2009, respectively.

(2)
Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable, MSRs, separate and variable accounts and other financial instruments included in Other assets on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

(3)
Includes brokerage payables, separate and variable accounts, short-term borrowings and other financial instruments included in Other liabilities on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

        Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.

        The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by the Allowance for loan losses) exceeded the estimated fair values of Citigroup's loans, in aggregate, by $14.9 billion and $9.7 billion at September 30, 2010 and December 31, 2009, respectively. At September 30, 2010, the carrying values, net of allowances, exceeded the estimated values by $12.2 billion and $2.7 billion for consumer loans and corporate loans, respectively.

        The estimated fair values of the Company's corporate unfunded lending commitments at September 30, 2010 and December 31, 2009 were $6.3 billion and $5.0 billion, respectively. The Company does not estimate the fair values of consumer unfunded lending commitments, which are generally cancellable by providing notice to the borrower.

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19.    GUARANTEES

        The Company provides a variety of guarantees and indemnifications to Citigroup customers to enhance their credit standing and enable them to complete a wide variety of business transactions. For certain contracts meeting the definition of a guarantee, the guarantor must recognize, at inception, a liability for the fair value of the obligation undertaken in issuing the guarantee.

        In addition, the guarantor must disclose the maximum potential amount of future payments the guarantor could be required to make under the guarantee, if there were a total default by the guaranteed parties. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts bear no relationship to the anticipated losses, if any, on these guarantees.

        The following tables present information about the Company's guarantees at September 30, 2010 and December 31, 2009:

 
  Maximum potential amount of future payments  
In billions of dollars at September 30,
except carrying value in millions
  Expire within
1 year
  Expire after
1 year
  Total amount
outstanding
  Carrying value
(in millions)
 

2010

                         

Financial standby letters of credit

  $ 21.5   $ 72.6   $ 94.1   $ 251.8  

Performance guarantees

    8.4     5.0     13.4     33.6  

Derivative instruments considered to be guarantees

    3.4     4.6     8.0     929.4  

Loans sold with recourse

        0.3     0.3     73.6  

Securities lending indemnifications(1)

    73.0         73.0      

Credit card merchant processing(1)

    62.7         62.7      

Custody indemnifications and other

        34.0     34.0     253.8  
                   

Total

  $ 169.0   $ 116.5   $ 285.5   $ 1,542.2  
                   

(1)
The carrying values of securities lending indemnifications and credit card merchant processing are not material, as the Company has determined that the amount and probability of potential liabilities arising from these guarantees are not significant.

 
  Maximum potential amount of future payments  
In billions of dollars at December 31,
except carrying value in millions
  Expire within
1 year
  Expire after
1 year
  Total amount
outstanding
  Carrying value
(in millions)
 

2009

                         

Financial standby letters of credit

  $ 41.4   $ 48.0   $ 89.4   $ 438.8  

Performance guarantees

    9.4     4.5     13.9     32.4  

Derivative instruments considered to be guarantees

    4.1     3.6     7.7     569.2  

Loans sold with recourse

        0.3     0.3     76.6  

Securities lending indemnifications(1)

    64.5         64.5      

Credit card merchant processing(1)

    59.7         59.7      

Custody indemnifications and other

        33.5     33.5     121.4  
                   

Total

  $ 179.1   $ 89.9   $ 269.0   $ 1,238.4  
                   

(1)
The carrying values of securities lending indemnifications and credit card merchant processing are not material, as the Company has determined that the amount and probability of potential liabilities arising from these guarantees are not significant.

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Financial standby letters of credit

        Citigroup issues standby letters of credit which substitute its own credit for that of the borrower. If a letter of credit is drawn down, the borrower is obligated to repay Citigroup. Standby letters of credit protect a third party from defaults on contractual obligations. Financial standby letters of credit include guarantees of payment of insurance premiums and reinsurance risks that support industrial revenue bond underwriting and settlement of payment obligations to clearing houses, and also support options and purchases of securities or are in lieu of escrow deposit accounts. Financial standbys also backstop loans, credit facilities, promissory notes and trade acceptances.

Performance guarantees

        Performance guarantees and letters of credit are issued to guarantee a customer's tender bid on a construction or systems-installation project or to guarantee completion of such projects in accordance with contract terms. They are also issued to support a customer's obligation to supply specified products, commodities, or maintenance or warranty services to a third party.

Derivative instruments considered to be guarantees

        Derivatives are financial instruments whose cash flows are based on a notional amount or an underlying instrument, where there is little or no initial investment, and whose terms require or permit net settlement. Derivatives may be used for a variety of reasons, including risk management, or to enhance returns. Financial institutions often act as intermediaries for their clients, helping clients reduce their risks. However, derivatives may also be used to take a risk position.

        The derivative instruments considered to be guarantees, which are presented in the tables above, include only those instruments that require Citi to make payments to the counterparty based on changes in an underlying that is related to an asset, a liability, or an equity security held by the guaranteed party. More specifically, derivative instruments considered to be guarantees include certain over-the-counter written put options where the counterparty is not a bank, hedge fund or broker-dealer (such counterparties are considered to be dealers in these markets and may therefore not hold the underlying instruments). However, credit derivatives sold by the Company are excluded from this presentation, as they are disclosed separately in Note 15. In addition, non-credit derivative contracts that are cash settled and for which the Company is unable to assert that it is probable the counterparty held the underlying instrument at the inception of the contract also are excluded from the disclosure above.

        In instances where the Company's maximum potential future payment is unlimited, the notional amount of the contract is disclosed.

Loans sold with recourse

        Loans sold with recourse represent the Company's obligations to reimburse the buyers for loan losses under certain circumstances. Recourse refers to the clause in a sales agreement under which a lender will fully reimburse the buyer/investor for any losses resulting from the purchased loans. This may be accomplished by the seller's taking back any loans that become delinquent.

Securities lending indemnifications

        Owners of securities frequently lend those securities for a fee to other parties who may sell them short or deliver them to another party to satisfy some other obligation. Banks may administer such securities lending programs for their clients. Securities lending indemnifications are issued by the bank to guarantee that a securities lending customer will be made whole in the event that the security borrower does not return the security subject to the lending agreement and collateral held is insufficient to cover the market value of the security.

Credit card merchant processing

        Credit card merchant processing guarantees represent the Company's indirect obligations in connection with the processing of private label and bankcard transactions on behalf of merchants.

        Citigroup's primary credit card business is the issuance of credit cards to individuals. In addition, the Company: (a) provides transaction processing services to various merchants with respect to its private-label cards and (b) has potential liability for transaction processing services provided by a third-party related to previously transferred merchant credit card processing contracts. The nature of the liability in either case arises as a result of a billing dispute between a merchant and a cardholder that is ultimately resolved in the cardholder's favor. The merchant is liable to refund the amount to the cardholder. In general, if the credit card processing company is unable to collect this amount from the merchant the credit card processing company bears the loss for the amount of the credit or refund paid to the cardholder.

        With regard to (a) above, the Company continues to have the primary contingent liability with respect to its portfolio of private-label merchants. The risk of loss is mitigated as the cash flows between the Company and the merchant are settled on a net basis and the Company has the right to offset any payments with cash flows otherwise due to the merchant. To further mitigate this risk the Company may delay settlement, require a merchant to make an escrow deposit, include event triggers to provide the Company with more financial and operational control in the event of the financial deterioration of the merchant, or require various credit enhancements (including letters of credit and bank guarantees). In the unlikely event that a private-label merchant is unable to deliver products, services or a refund to its private-label cardholders, the Company is contingently liable to credit or refund cardholders.

        With regard to (b) above, the company has a potential liability for bankcard transactions with merchants whose contracts were previously transferred by the Company to a third party credit card processor, should that processor fail to perform.

        The Company's maximum potential contingent liability related to both bankcard and private-label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid chargeback transactions at any given time. At September 30, 2010 and

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December 31, 2009, this maximum potential exposure was estimated to be $63 billion and $60 billion, respectively.

        However, the Company believes that the maximum exposure is not representative of the actual potential loss exposure based on the Company's historical experience and its position as a secondary guarantor (in the case of previously transferred merchant credit card processing contracts). In both cases, this contingent liability is unlikely to arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants. The Company assesses the probability and amount of its contingent liability related to merchant processing based on the financial strength of the primary guarantor, the extent and nature of unresolved charge-backs and its historical loss experience. At September 30, 2010 and December 31, 2009, the estimated losses incurred and the carrying amounts of the Company's contingent obligations related to merchant processing activities were immaterial.

Custody indemnifications

        Custody indemnifications are issued to guarantee that custody clients will be made whole in the event that a third-party subcustodian or depository institution fails to safeguard clients' assets.

Other

        Citigroup has an accrual related to certain of Visa USA's litigation matters. As of September 30, 2010 and December 31, 2009, the carrying value of the accrual was $254 million and $121 million, respectively, and the amount is included in Other liabilities on the Consolidated Balance Sheet.

Other guarantees and indemnifications

        The Company, through its credit card business, provides various cardholder protection programs on several of its card products, including programs that provide insurance coverage for rental cars, coverage for certain losses associated with purchased products, price protection for certain purchases and protection for lost luggage. These guarantees are not included in the table, since the total outstanding amount of the guarantees and the Company's maximum exposure to loss cannot be quantified. The protection is limited to certain types of purchases and certain types of losses and it is not possible to quantify the purchases that would qualify for these benefits at any given time. The Company assesses the probability and amount of its potential liability related to these programs based on the extent and nature of its historical loss experience. At September 30, 2010 and December 31, 2009, the actual and estimated losses incurred and the carrying value of the Company's obligations related to these programs were immaterial.

        In the normal course of business, the Company provides standard representations and warranties to counterparties in contracts in connection with numerous transactions and also provides indemnifications that protect the counterparties to the contracts in the event that additional taxes are owed due either to a change in the tax law or an adverse interpretation of the tax law. Counterparties to these transactions provide the Company with comparable indemnifications. While such representations, warranties and tax indemnifications are essential components of many contractual relationships, they do not represent the underlying business purpose for the transactions. The indemnification clauses are often standard contractual terms related to the Company's own performance under the terms of a contract and are entered into in the normal course of business based on an assessment that the risk of loss is remote. Often these clauses are intended to ensure that terms of a contract are met at inception (for example, that loans transferred to a counterparty in a sales transaction did in fact meet the conditions specified in the contract at the transfer date). No compensation is received for these standard representations and warranties, and it is not possible to determine their fair value because they rarely, if ever, result in a payment. In many cases, there are no stated or notional amounts included in the indemnification clauses and the contingencies potentially triggering the obligation to indemnify have not occurred and are not expected to occur. These indemnifications are not included in the table above. In addition, the repurchase reserve for Consumer mortgages representations and warranties was $952 million and $295 million at September 30, 2010 and December 31, 2009, respectively, and these amounts are included in Other liabilities on the Consolidated Balance Sheet.

        In addition, the Company is a member of or shareholder in hundreds of value-transfer networks (VTNs) (payment clearing and settlement systems as well as securities exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to backstop the net effect on the VTNs of a member's default on its obligations. The Company's potential obligations as a shareholder or member of VTN associations are excluded from the scope of FIN 45, since the shareholders and members represent subordinated classes of investors in the VTNs. Accordingly, the Company's participation in VTNs is not reported in the table and there are no amounts reflected on the Consolidated Balance Sheet as of September 30, 2010 or December 31, 2009 for potential obligations that could arise from the Company's involvement with VTN associations.

        In the sale of an insurance subsidiary, the Company provided an indemnification to an insurance company for policyholder claims and other liabilities relating to a book of long-term care (LTC) business (for the entire term of the LTC policies) that is fully reinsured by another insurance company. The reinsurer has funded two trusts with securities whose fair value (approximately $3.7 billion and $3.3 billion at September 30, 2010 and December 31, 2009, respectively) is designed to cover the insurance company's statutory liabilities for the LTC policies. The assets in these trusts are evaluated and adjusted periodically to ensure that the fair value of the assets continues to cover the estimated statutory liabilities related to the LTC policies, as those statutory liabilities change over time. If the reinsurer fails to perform under the reinsurance agreement for any reason, including insolvency, and the assets in the two trusts are insufficient or unavailable to the ceding insurance company, then Citigroup must indemnify the ceding insurance company for any losses actually incurred in connection with the LTC policies. Since

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both events would have to occur before Citi would become responsible for any payment to the ceding insurance company pursuant to its indemnification obligation and the likelihood of such events occurring is currently not probable, there is no liability reflected in the Consolidated Balance Sheet as of September 30, 2010 and December 31, 2009 related to this indemnification.

        At September 30, 2010 and December 31, 2009, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the table amounted to approximately $1.5 billion and $1.2 billion, respectively. The carrying value of derivative instruments is included in either Trading account liabilities or Other liabilities, depending upon whether the derivative was entered into for trading or non-trading purposes. The carrying value of financial and performance guarantees is included in Other liabilities. For loans sold with recourse, the carrying value of the liability is included in Other liabilities. In addition, at September 30, 2010 and December 31, 2009, Other liabilities on the Consolidated Balance Sheet include an allowance for credit losses of $1.102 billion and $1.157 billion relating to letters of credit and unfunded lending commitments, respectively.

Collateral

        Cash collateral available to the Company to reimburse losses realized under these guarantees and indemnifications amounted to $34 billion at September 30, 2010 and $31 billion at December 31, 2009. Securities and other marketable assets held as collateral amounted to $49 billion and $43 billion, respectively, the majority of which collateral is held to reimburse losses realized under securities lending indemnifications. Additionally, letters of credit in favor of the Company held as collateral amounted to $1.7 billion at September 30, 2010 and $1.4 billion at December 31, 2009. Other property may also be available to the Company to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.

Performance risk

        Citigroup evaluates the performance risk of its guarantees based on the assigned referenced counterparty internal or external ratings. Where external ratings are used, investment-grade ratings are considered to be Baa/BBB and above, while anything below is considered non-investment grade. The Citigroup internal ratings are in line with the related external rating system. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits are included in the not rated category. The maximum potential amount of the future payments related to guarantees and credit derivatives sold is determined to be the notional amount of these contracts, which is the par amount of the assets guaranteed.

        Presented in the tables below are the maximum potential amounts of future payments classified based upon internal and external credit ratings as of September 30, 2010 and December 31, 2009. As previously mentioned, the determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts bear no relationship to the anticipated losses, if any, on these guarantees.

 
  Maximum potential amount of future payments  
In billions of dollars as of September 30, 2010   Investment
grade
  Non-investment grade   Not rated   Total  

Financial standby letters of credit

  $ 56.8   $ 12.5   $ 24.8   $ 94.1  

Performance guarantees

    6.2     3.5     3.7     13.4  

Derivative instruments deemed to be guarantees

            8.0     8.0  

Loans sold with recourse

            0.3     0.3  

Securities lending indemnifications

            73.0     73.0  

Credit card merchant processing

            62.7     62.7  

Custody indemnifications and other

    27.9     6.1         34.0  
                   

Total

  $ 90.9   $ 22.1   $ 172.5   $ 285.5  
                   

 

 
  Maximum potential amount of future payments  
In billions of dollars as of December 31, 2009   Investment
grade
  Non-investment
grade
  Not rated   Total  

Financial standby letters of credit

  $ 49.2   $ 13.5   $ 26.7   $ 89.4  

Performance guarantees

    6.5     3.7     3.7     13.9  

Derivative instruments deemed to be guarantees

            7.7     7.7  

Loans sold with recourse

            0.3     0.3  

Securities lending indemnifications

            64.5     64.5  

Credit card merchant processing

            59.7     59.7  

Custody indemnifications and other

    27.7     5.8         33.5  
                   

Total

  $ 83.4   $ 23.0   $ 162.6   $ 269.0  
                   

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Credit Commitments and Lines of Credit

        The table below summarizes Citigroup's credit commitments as of September 30, 2010 and December 31, 2009:

In millions of dollars   U.S.   Outside of
U.S.
  September 30,
2010
  December 31,
2009
 

Commercial and similar letters of credit

  $ 1,543   $ 6,824   $ 8,367   $ 7,211  

One- to four-family residential mortgages

    1,824     366     2,190     1,070  

Revolving open-end loans secured by one- to four-family residential properties

    18,562     2,964     21,526     23,916  

Commercial real estate, construction and land development

    1,421     371     1,792     1,704  

Credit card lines

    588,951     122,110     711,061     785,495  

Commercial and other consumer loan commitments

    117,805     88,787     206,592     257,342  
                   

Total

  $ 730,106   $ 221,422   $ 951,528   $ 1,076,738  
                   

        The majority of unused commitments are contingent upon customers' maintaining specific credit standards. Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if exercise is deemed remote, amortized over the commitment period.

Commercial and similar letters of credit

        A commercial letter of credit is an instrument by which Citigroup substitutes its credit for that of a customer to enable the customer to finance the purchase of goods or to incur other commitments. Citigroup issues a letter on behalf of its client to a supplier and agrees to pay the supplier upon presentation of documentary evidence that the supplier has performed in accordance with the terms of the letter of credit. When a letter of credit is drawn, the customer is then required to reimburse Citigroup.

One- to four-family residential mortgages

        A one- to four-family residential mortgage commitment is a written confirmation from Citigroup to a seller of a property that the bank will advance the specified sums enabling the buyer to complete the purchase.

Revolving open-end loans secured by one- to four-family residential properties

        Revolving open-end loans secured by one- to four-family residential properties are essentially home equity lines of credit. A home equity line of credit is a loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt outstanding for the first mortgage.

Commercial real estate, construction and land development

        Commercial real estate, construction and land development include unused portions of commitments to extend credit for the purpose of financing commercial and multifamily residential properties as well as land development projects.

        Both secured-by-real-estate and unsecured commitments are included in this line, as well as undistributed loan proceeds, where there is an obligation to advance for construction progress payments. However, this line only includes those extensions of credit that, once funded, will be classified as Total loans, net on the Consolidated Balance Sheet.

Credit card lines

        Citigroup provides credit to customers by issuing credit cards. The credit card lines are unconditionally cancellable by the issuer.

Commercial and other consumer loan commitments

        Commercial and other consumer loan commitments include overdraft and liquidity facilities, as well as commercial commitments to make or purchase loans, to purchase third-party receivables, to provide note issuance or revolving underwriting facilities and to invest in the form of equity. Amounts include $76 billion and $126 billion with an original maturity of less than one year at September 30, 2010 and December 31, 2009, respectively.

        In addition, included in this line item are highly leveraged financing commitments, which are agreements that provide funding to a borrower with higher levels of debt (measured by the ratio of debt capital to equity capital of the borrower) than is generally considered normal for other companies. This type of financing is commonly employed in corporate acquisitions, management buy-outs and similar transactions.

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20.    CONTINGENCIES

        In accordance with ASC 450 (formerly SFAS 5), Citigroup establishes accruals for litigation and regulatory matters when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. In view of the inherent unpredictability of litigation and regulatory matters, particularly where the damages sought are substantial or indeterminate, the investigations or proceedings are in the early stages, or the matters involve novel legal theories or a large number of parties, Citigroup cannot at this time estimate the possible loss or range of loss, if any, in excess of the amounts accrued for these matters or predict the timing of their eventual resolution, and the actual costs of resolving litigation and regulatory matters may be substantially higher or lower than the amounts accrued for those matters.

        Subject to the foregoing, it is the opinion of Citigroup's management, based on current knowledge and after taking into account its current accruals, that the eventual outcome of these matters would not be likely to have a material adverse effect on the consolidated financial condition of Citi. Nonetheless, given the inherent unpredictability of litigation and the substantial or indeterminate amounts sought in certain of these matters, an adverse outcome in certain of these matters could, from time to time, have a material adverse effect on Citi's consolidated results of operations or cash flows in particular quarterly or annual periods.

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21.    CITIBANK, N.A. STOCKHOLDER'S EQUITY

Statement of Changes in Stockholder's Equity

 
  Citibank, N.A. and Subsidiaries  
 
  Nine Months Ended September 30,  
In millions of dollars, except shares   2010   2009  

Common stock ($20 par value)

             

Balance, beginning of period—shares: 37,534,553 in 2010 and 2009

  $ 751   $ 751  
           

Balance, end of period

  $ 751   $ 751  
           

Surplus

             

Balance, beginning of period

  $ 107,923   $ 74,767  

Capital contribution from parent company

    858     30,492  

Employee benefit plans

    385     34  
           

Balance, end of period

  $ 109,166   $ 105,293  
           

Retained earnings

             

Balance, beginning of period

  $ 19,457   $ 21,735  

Adjustment to opening balance, net of taxes(1)(2)

    (288 )   402  
           

Adjusted balance, beginning of period

  $ 19,169   $ 22,137  

Net income

    6,419     (2,270 )

Dividends(3)

    9     4  

Other(4)

        117  
           

Balance, end of period

  $ 25,597   $ 19,988  
           

Accumulated other comprehensive income (loss)

             

Balance, beginning of period

  $ (11,532 ) $ (15,895 )

Adjustment to opening balance, net of taxes(1)

        (402 )
           

Adjusted balance, beginning of period

  $ (11,532 ) $ (16,297 )

Net change in unrealized gains (losses) on investment securities available-for-sale, net of taxes

    2,237     3,758  

Net change in foreign currency translation adjustment, net of taxes

    (134 )   850  

Net change in cash flow hedges, net of taxes

    143     281  

Pension liability adjustment, net of taxes

    31     (7 )
           

Net change in accumulated other comprehensive income (loss)

  $ 2,277   $ 4,882  
           

Balance, end of period

  $ (9,255 ) $ (11,415 )
           

Total Citibank stockholder's equity

  $ 126,259   $ 114,617  
           

Noncontrolling interest

             

Balance, beginning of period

  $ 1,294   $ 1,082  

Initial origination of a noncontrolling interest

    (75 )   123  

Transactions between Citigroup and the noncontrolling interest shareholders

    (1 )    

Net income attributable to noncontrolling interest shareholders

    15     46  

Dividends paid to noncontrolling interest shareholders

    (40 )   (16 )

Accumulated other comprehensive income—Net change in unrealized gains and losses on investment securities, net of tax

    6     7  

Accumulated other comprehensive income—Net change in FX translation adjustment, net of tax

    (20 )   15  

All other

    (110 )   (155 )
           

Net change in noncontrolling interest

  $ (225 ) $ 20  
           

Balance, end of period

  $ 1,069   $ 1,102  
           

Total equity

  $ 127,328   $ 115,719  
           

Comprehensive income (loss)

             

Net income (loss) before attribution of noncontrolling interest

  $ 6,434   $ (2,224 )

Net change in accumulated other comprehensive income (loss)

    2,263     4,904  
           

Total comprehensive income (loss)

  $ 8,697   $ 2,680  

Comprehensive income attributable to the noncontrolling interest

    1     68  
           

Comprehensive income attributable to Citibank

  $ 8,696   $ 2,612  
           

(1)
The adjustment to the opening balances for Retained earnings and Accumulated other comprehensive income (loss) in 2009 represents the cumulative effect of initially adopting ASC 320-10-35-34 (FSP FAS 115-2 and FAS 124-2).

(2)
The adjustment to the opening balance for Retained earnings in 2010 represents the cumulative effect of initially adopting ASC 810, Consolidation (formerly FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities) and ASU 2010-11 (Scope Exception Related to Embedded Credit Derivatives). See Note 1 to the Consolidated Financial Statements.

(3)
Common dividends represent a reversal of dividends accrued on forfeitures of previously issued but unvested employee stock awards related to employees who have left Citigroup.

(4)
Represents the accounting for the transfers of assets and liabilities between Citibank, N.A. and other affiliates under the common control of Citigroup.

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22.    SUBSEQUENT EVENTS

        The Company has evaluated subsequent events through November 5, 2010, which is the date its Consolidated Financial Statements were issued.

23.    CONDENSED CONSOLIDATING FINANCIAL STATEMENTS SCHEDULES

        These condensed Consolidating Financial Statements schedules are presented for purposes of additional analysis but should be considered in relation to the Consolidated Financial Statements of Citigroup taken as a whole.

Citigroup Parent Company

        The holding company, Citigroup Inc.

Citigroup Global Markets Holdings Inc. (CGMHI)

        Citigroup guarantees various debt obligations of CGMHI as well as all of the outstanding debt obligations under CGMHI's publicly issued debt.

Citigroup Funding Inc. (CFI)

        CFI is a first-tier subsidiary of Citigroup, which issues commercial paper, medium-term notes and structured equity-linked and credit-linked notes, all of which are guaranteed by Citigroup.

CitiFinancial Credit Company (CCC)

        An indirect wholly owned subsidiary of Citigroup. CCC is a wholly owned subsidiary of Associates. Citigroup has issued a full and unconditional guarantee of the outstanding indebtedness of CCC.

Associates First Capital Corporation (Associates)

        A wholly owned subsidiary of Citigroup. Citigroup has issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates. In addition, Citigroup guaranteed various debt obligations of Citigroup Finance Canada Inc. (CFCI), a wholly owned subsidiary of Associates. CFCI continues to issue debt in the Canadian market supported by a Citigroup guarantee. Associates is the immediate parent company of CCC.

Other Citigroup Subsidiaries

        Includes all other subsidiaries of Citigroup, intercompany eliminations, and income/loss from discontinued operations.

Consolidating Adjustments

        Includes Citigroup parent company elimination of distributed and undistributed income of subsidiaries, investment in subsidiaries and the elimination of CCC, which is included in the Associates column.

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Condensed Consolidating Statements of Income

 
  Three Months Ended September 30, 2010  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries,
eliminations
and income
from
discontinued
operations
  Consolidating
adjustments
  Citigroup
consolidated
 

Revenues

                                                 

Dividends from subsidiary banks and bank holding companies

  $ 1,650   $   $   $   $   $   $ (1,650 ) $  

Interest revenue

  $ 65   $ 1,569   $ 8   $ 1,255   $ 1,439   $ 16,290   $ (1,255 ) $ 19,371  

Interest revenue—intercompany

    963     661     741     22     97     (2,462 )   (22 )    

Interest expense

    2,138     522     508     18     66     2,891     (18 )   6,125  

Interest expense—intercompany

    (218 )   903     347     463     384     (1,416 )   (463 )    
                                   

Net interest revenue

  $ (892 ) $ 805   $ (106 ) $ 796   $ 1,806   $ 12,353   $ (796 ) $ 13,246  
                                   

Commissions and fees

  $   $ 1,062   $   $ 14   $ 34   $ 2,152   $ (14 ) $ 3,248  

Commissions and fees—intercompany

        31         37     41     (72 )   (37 )    

Principal transactions

    (194 )   2,231     (639 )       2     128         1,528  

Principal transactions—intercompany

    (3 )   (1,727 )   653         1     1,076          

Other income

    (3,915 )   170     114     171     178     6,169     (171 )   2,716  

Other income—intercompany

    4,146     47     (58 )       38     (4,173 )        
                                   

Total non-interest revenues

  $ 34   $ 1,814   $ 70   $ 222   $ 294   $ 5,280   $ (222 ) $ 7,492  
                                   

Total revenues, net of interest expense

  $ 792   $ 2,619   $ (36 ) $ 1,018   $ 1,380   $ 17,633   $ (2,668 ) $ 20,738  
                                   

Provisions for credit losses and for benefits and claims

  $   $ (5 ) $   $ 550   $ 586   $ 5,338   $ (550 ) $ 5,919  
                                   

Expenses

                                                 

Compensation and benefits

  $ 15   $ 1,454   $   $ 121   $ 162   $ 4,486   $ (121 ) $ 6,117  

Compensation and benefits—intercompany

    2     54         30     30     (86 )   (30 )    

Other expense

    50     653     2     2,999     3,032     1,666     (2,999 )   5,403  

Other expense—intercompany

    84     130     1     151     160     (375 )   (151 )    
                                   

Total operating expenses

  $ 151   $ 2,291   $ 3   $ 3,301   $ 3,384   $ 5,691   $ (3,301 ) $ 11,520  
                                   

Income (loss) before taxes and equity in undistributed income of subsidiaries

  $ 641   $ 333   $ (39 ) $ (2,833 ) $ (2,590 ) $ 6,604   $ 1,183   $ 3,299  

Income taxes (benefits)

    (430 )   68     (10 )   (829 )   (747 )   1,817     829     698  

Equities in undistributed income of subsidiaries

    1,097                         (1,097 )    
                                   

Income (loss) from continuing operations

  $ 2,168   $ 265   $ (29 ) $ (2,004 ) $ (1,843 ) $ 4,787   $ (743 ) $ 2,601  

Income (loss) from discontinued operations, net of taxes

                        (374 )       (374 )
                                   

Net income (loss) before attrition of noncontrolling interest

  $ 2,168   $ 265   $ (29 ) $ (2,004 ) $ (1,843 ) $ 4,413   $ (743 ) $ 2,227  
                                   

Net income (loss) attributable to noncontrolling interests

        15                 44         59  
                                   

Citigroup's net income (loss)

  $ 2,168   $ 250   $ (29 ) $ (2,004 ) $ (1,843 ) $ 4,369   $ (743 ) $ 2,168  
                                   

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Condensed Consolidating Statements of Income

 
  Nine Months Ended September 30, 2010  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries,
eliminations
and income
from
discontinued
operations
  Consolidating
adjustments
  Citigroup
consolidated
 

Revenues

                                                 

Dividends from subsidiary banks and bank holding companies

  $ 13,254   $   $   $   $   $   $ (13,254 ) $  

Interest revenue

  $ 208   $ 4,620   $ 8   $ 3,983   $ 4,568   $ 51,237   $ (3,983 ) $ 60,641  

Interest revenue—intercompany

    2,010     1,657     2,378     62     288     (6,333 )   (62 )    

Interest expense

    6,489     1,619     1,774     65     213     8,700     (65 )   18,795  

Interest expense—intercompany

    (623 )   1,979     139     1,488     1,024     (2,519 )   (1,488 )    
                                   

Net interest revenue

  $ (3,648 ) $ 2,679   $ 473   $ 2,492   $ 3,619   $ 38,723   $ (2,492 ) $ 41,846  
                                   

Commissions and fees

  $   $ 3,274   $   $ 37   $ 109   $ 6,739   $ (37 ) $ 10,122  

Commissions and fees—intercompany

        112         114     127     (239 )   (114 )    

Principal transactions

    (263 )   8,278     (138 )       (4 )   25         7,898  

Principal transactions—intercompany

    (6 )   (4,672 )   496         (122 )   4,304          

Other income

    (4,253 )   571     114     385     551     11,381     (385 )   8,364  

Other income—intercompany

    4,651     52     (58 )       54     (4,699 )        
                                   

Total non-interest revenues

  $ 129   $ 7,615   $ 414   $ 536   $ 715   $ 17,511   $ (536 ) $ 26,384  
                                   

Total revenues, net of interest expense

  $ 9,735   $ 10,294   $ 887   $ 3,028   $ 4,334   $ 56,234   $ (16,282 ) $ 68,230  
                                   

Provisions for credit losses and for benefits and claims

  $   $ 22   $   $ 1,853   $ 2,038   $ 19,142   $ (1,853 ) $ 21,202  
                                   

Expenses

                                                 

Compensation and benefits

  $ 115   $ 4,317   $   $ 405   $ 551   $ 13,257   $ (405 ) $ 18,240  

Compensation and benefits—intercompany

    5     160         97     97     (262 )   (97 )    

Other expense

    255     2,170     2     3,234     3,351     10,886     (3,234 )   16,664  

Other expense—intercompany

    239     322     5     471     500     (1,066 )   (471 )    
                                   

Total operating expenses

  $ 614   $ 6,969   $ 7   $ 4,207   $ 4,499   $ 22,815   $ (4,207 ) $ 34,904  
                                   

Income (loss) before taxes and equity in undistributed income of subsidiaries

  $ 9,121   $ 3,303   $ 880   $ (3,032 ) $ (2,203 ) $ 14,277   $ (10,222 ) $ 12,124  

Income taxes (benefits)

    (1,906 )   1,053     308     (901 )   (633 )   3,724     901     2,546  

Equities in undistributed income of subsidiaries

    (1,734 )                       1,734      
                                   

Income (loss) from continuing operations

  $ 9,293   $ 2,250   $ 572   $ (2,131 ) $ (1,570 ) $ 10,553   $ (9,389 ) $ 9,578  

Income (loss) from discontinued operations, net of taxes

                        (166 )       (166 )
                                   

Net income (loss) before attrition of noncontrolling interest

  $ 9,293   $ 2,250   $ 572   $ (2,131 ) $ (1,570 ) $ 10,387   $ (9,389 ) $ 9,412  
                                   

Net income (loss) attributable to noncontrolling interests

        31                 88         119  
                                   

Citigroup's net income (loss)

  $ 9,293   $ 2,219   $ 572   $ (2,131 ) $ (1,570 ) $ 10,299   $ (9,389 ) $ 9,293  
                                   

197


Table of Contents

Condensed Consolidating Statements of Income

 
  Three Months Ended September 30, 2009  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries,
eliminations
  Consolidating
adjustments
  Citigroup
consolidated
 

Revenues

                                                 

Dividends from subsidiary banks and bank holding companies

  $ 1,005   $   $   $   $   $   $ (1,005 ) $  

Interest revenue

  $ 57     1,682   $   $ 1,526   $ 1,759   $ 15,180   $ (1,526 ) $ 18,678  

Interest revenue—intercompany

    477     (90 )   1,053     1,689     96     (1,536 )   (1,689 )    

Interest expense

    2,495     644     400     17     84     3,057     (17 )   6,680  

Interest expense—intercompany

    (137 )   (165 )   260     2,212     377     (335 )   (2,212 )    
                                   

Net interest revenue

  $ (1,824 ) $ 1,113   $ 393   $ 986   $ 1,394   $ 10,922   $ (986 ) $ 11,998  
                                   

Commissions and fees

  $   $ 1,229   $   $ 16   $ 36   $ 2,433   $ (16 ) $ 3,698  

Commissions and fees—intercompany

        188         51     63     (251 )   (51 )    

Principal transactions

    317     2,431     (610 )       2     (797 )       1,343  

Principal transactions—intercompany

    (493 )   (1,380 )   192         (13 )   1,694          

Other income

    (1,158 )   676     (100 )   112     142     3,791     (112 )   3,351  

Other income—intercompany

    2,485     23     77         5     (2,590 )        
                                   

Total non-interest revenues

  $ 1,151   $ 3,167   $ (441 ) $ 179   $ 235   $ 4,280   $ (179 ) $ 8,392  
                                   

Total revenues, net of interest expense

  $ 332   $ 4,280   $ (48 ) $ 1,165   $ 1,629   $ 15,202   $ (2,170 ) $ 20,390  
                                   

Provisions for credit losses and for benefits and claims

  $   $ 58   $   $ 770   $ 875   $ 8,162   $ (770 ) $ 9,095  
                                   

Expenses

                                                 

Compensation and benefits

  $ (44 ) $ 1,471   $   $ 134   $ 179   $ 4,530   $ (134 ) $ 6,136  

Compensation and benefits— intercompany

    2     68         35     35     (105 )   (35 )    

Other expense

    192     683     1     169     209     4,603     (169 )   5,688  

Other expense—intercompany

    163     198     2     143     160     (523 )   (143 )    
                                   

Total operating expenses

  $ 313   $ 2,420   $ 3   $ 481   $ 583   $ 8,505   $ (481 ) $ 11,824  
                                   

Income (loss) before taxes and equity in undistributed income of subsidiaries

  $ 19   $ 1,802   $ (51 ) $ (86 ) $ 171   $ (1,465 ) $ (919 ) $ (529 )

Income taxes (benefits)

    (392 )   608     (18 )   (53 )   37     (1,357 )   53     (1,122 )

Equities in undistributed income of subsidiaries

    (310 )                       310      
                                   

Income (loss) from continuing operations

  $ 101   $ 1,194   $ (33 ) $ (33 ) $ 134   $ (108 ) $ (662 ) $ 593  

Income from discontinued operations, net of taxes

                        (418 )       (418 )
                                   

Net income (loss) before attribution of noncontrolling interests

  $ 101   $ 1,194   $ (33 ) $ (33 ) $ 134   $ (526 ) $ (662 ) $ 175  
                                   

Net income (loss) attributable to noncontrolling interests

        19                 55         74  
                                   

Citigroup's net income (loss)

  $ 101   $ 1,175   $ (33 ) $ (33 ) $ 134   $ (581 ) $ (662 ) $ 101  
                                   

198


Table of Contents

Condensed Consolidating Statements of Income

 
  Nine Months Ended September 30, 2009  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries,
eliminations
  Consolidating
adjustments
  Citigroup
consolidated
 

Revenues

                                                 

Dividends from subsidiary banks and bank holding companies

  $ 1,040   $   $   $   $   $   $ (1,040 ) $  

Interest revenue

  $ 234   $ 5,881   $ 1   $ 4,732   $ 5,418   $ 47,398   $ (4,732 ) $ 58,932  

Interest revenue—intercompany

    1,833     2,079     3,143     46     325     (7,380 )   (46 )    

Interest expense

    6,707     2,060     1,365     63     303     10,744     (63 )   21,179  

Interest expense—intercompany

    (667 )   1,635     699     1,677     1,242     (2,909 )   (1,677 )    
                                   

Net interest revenue

  $ (3,973 ) $ 4,265   $ 1,080   $ 3,038   $ 4,198   $ 32,183   $ (3,038 ) $ 37,753  
                                   

Commissions and fees

  $   $ 4,711   $   $ 38   $ 95   $ 6,960   $ (38 ) $ 11,766  

Commissions and fees—intercompany

        247         86     107     (354 )   (86 )    

Principal transactions

    434     1,302     (869 )       2     6,175         7,044  

Principal transactions—intercompany

    (714 )   2,530     133         (99 )   (1,850 )        

Other income

    3,514     13,296     (25 )   321     489     1,043     (321 )   18,317  

Other income—intercompany

    (1,906 )   (12 )   16     2     37     1,865     (2 )    
                                   

Total non-interest revenues

  $ 1,328   $ 22,074   $ (745 ) $ 447   $ 631   $ 13,839   $ (447 ) $ 37,127  
                                   

Total revenues, net of interest expense

  $ (1,605 ) $ 26,339   $ 335   $ 3,485   $ 4,829   $ 46,022   $ (4,525 ) $ 74,880  
                                   

Provisions for credit losses and for benefits and claims

  $   $ 96   $   $ 2,708   $ 3,044   $ 28,938   $ (2,708 ) $ 32,078  
                                   

Expenses

                                                 

Compensation and benefits

  $ (89 ) $ 5,144   $   $ 393   $ 514   $ 13,161   $ (393 ) $ 18,730  

Compensation and benefits— intercompany

    5     403         106     106     (514 )   (106 )    

Other expense

    600     2,011     2     358     471     13,694     (358 )   16,778  

Other expense—intercompany

    260     538     7     416     465     (1,270 )   (416 )    
                                   

Total operating expenses

  $ 776   $ 8,096   $ 9   $ 1,273   $ 1,556   $ 25,071   $ (1,273 ) $ 35,508  
                                   

Income (loss) before taxes and equity in undistributed income of subsidiaries

  $ (2,381 ) $ 18,147   $ 326   $ (496 ) $ 229   $ (7,987 ) $ (544 ) $ 7,294  

Income taxes (benefits)

    (1,437 )   6,772     97     (201 )   52     (4,864 )   201     620  

Equities in undistributed income of subsidiaries

    6,917                         (6,917 )    
                                   

Income (loss) from continuing operations

  $ 5,973   $ 11,375   $ 229   $ (295 ) $ 177   $ (3,123 ) $ (7,662 ) $ 6,674  

Income from discontinued operations, net of taxes

                        (677 )       (677 )
                                   

Net income (loss) before attribution of noncontrolling interests

  $ 5,973   $ 11,375   $ 229   $ (295 ) $ 177   $ (3,800 ) $ (7,662 ) $ 5,997  
                                   

Net income (loss) attributable to noncontrolling interests

        (32 )               56         24  
                                   

Citigroup's net income (loss)

  $ 5,973   $ 11,407   $ 229   $ (295 ) $ 177   $ (3,856 ) $ (7,662 ) $ 5,973  
                                   

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Table of Contents

Condensed Consolidating Balance Sheet

 
  September 30, 2010  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries
and
eliminations
  Consolidating
adjustments
  Citigroup
consolidated
 

Assets

                                                 

Cash and due from banks

  $   $ 1,798   $ 1   $ 203   $ 276   $ 24,267   $ (203 ) $ 26,342  

Cash and due from banks—intercompany

    9     2,935     1     150     168     (3,113 )   (150 )    

Federal funds sold and resale agreements

        195,153                 44,904         240,057  

Federal funds sold and resale agreements—intercompany

        18,254                 (18,254 )        

Trading account assets

    10     142,688             8     194,392         337,098  

Trading account assets—intercompany

    66     13,161     121             (13,348 )        

Investments

    23,824     193         2,537     2,629     313,604     (2,537 )   340,250  

Loans, net of unearned income

        376         34,480     39,513     614,422     (34,480 )   654,311  

Loans, net of unearned income—intercompany

            93,278     3,464     8,131     (101,409 )   (3,464 )    

Allowance for loan losses

        (48 )       (3,379 )   (3,702 )   (39,924 )   3,379     (43,674 )
                                   

Total loans, net

  $   $ 328   $ 93,278   $ 34,565   $ 43,942   $ 473,089   $ (34,565 ) $ 610,637  

Advances to subsidiaries

    133,365                     (133,365 )        

Investments in subsidiaries

    207,181                         (207,181 )    

Other assets

    18,033     70,567     604     4,323     5,332     302,951     (4,323 )   397,487  

Other assets—intercompany

    16,646     40,751     2,397     1     1,877     (61,671 )   (1 )    

Assets of discontinued operations held for sale

                        31,409         31,409  
                                   

Total assets

  $ 399,134   $ 485,828   $ 96,402   $ 41,779   $ 54,232   $ 1,154,865   $ (248,960 ) $ 1,983,280  
                                   

Liabilities and equity

                                                 

Deposits

  $   $   $   $   $   $ 850,095   $   $ 850,095  

Federal funds purchased and securities loaned or sold

        155,069                 36,996         192,065  

Federal funds purchased and securities loaned or sold—intercompany

    185     7,862                 (8,047 )        

Trading account liabilities

        85,351     135             56,519         142,005  

Trading account liabilities—intercompany

    66     10,887     20             (10,973 )        

Short-term borrowings

    18     3,005     10,967     1     783     72,240     (1 )   87,013  

Short-term borrowings—intercompany

        66,666     30,413     10,747     2,914     (99,993 )   (10,747 )    

Long-term debt

    197,591     10,249     50,214     899     4,202     125,074     (899 )   387,330  

Long-term debt—intercompany

    357     59,352     2,575     24,820     39,754     (102,038 )   (24,820 )    

Advances from subsidiaries

    22,657                     (22,657 )        

Other liabilities

    5,359     56,611     276     1,882     2,204     65,265     (1,882 )   129,715  

Other liabilities—intercompany

    9,988     14,502     189     578     414     (25,093 )   (578 )    

Liabilities of discontinued operations held for sale

                        29,874         29,874  
                                   

Total liabilities

  $ 236,221   $ 469,554   $ 94,789   $ 38,927   $ 50,271   $ 967,262   $ (38,927 ) $ 1,818,097  
                                   

Citigroup stockholders' equity

    162,913     15,808     1,613     2,852     3,961     185,799     (210,033 )   162,913  

Noncontrolling interest

        466                 1,804         2,270  
                                   

Total equity

  $ 162,913   $ 16,274   $ 1,613   $ 2,852   $ 3,961   $ 187,603   $ (210,033 ) $ 165,183  
                                   

Total liabilities and equity

  $ 399,134   $ 485,828   $ 96,402   $ 41,779   $ 54,232   $ 1,154,865   $ (248,960 ) $ 1,983,280  
                                   

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Table of Contents

Condensed Consolidating Balance Sheet

 
  December 31, 2009  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries
and
eliminations
  Consolidating
adjustments
  Citigroup
consolidated
 

Assets

                                                 

Cash and due from banks

  $   $ 1,801   $   $ 198   $ 297   $ 23,374   $ (198 ) $ 25,472  

Cash and due from banks—intercompany

    5     3,146     1     145     168     (3,320 )   (145 )    

Federal funds sold and resale agreements

        199,760                 22,262         222,022  

Federal funds sold and resale agreements—intercompany

        20,626                 (20,626 )        

Trading account assets

    26     140,777     71         17     201,882         342,773  

Trading account assets—intercompany

    196     6,812     788             (7,796 )        

Investments

    13,318     237         2,293     2,506     290,058     (2,293 )   306,119  

Loans, net of unearned income

        248         42,739     48,821     542,435     (42,739 )   591,504  

Loans, net of unearned income—intercompany

            129,317     3,387     7,261     (136,578 )   (3,387 )    

Allowance for loan losses

        (83 )       (3,680 )   (4,056 )   (31,894 )   3,680     (36,033 )
                                   

Total loans, net

  $   $ 165   $ 129,317   $ 42,446   $ 52,026   $ 373,963   $ (42,446 ) $ 555,471  

Advances to subsidiaries

    144,497                     (144,497 )        

Investments in subsidiaries

    210,895                         (210,895 )    

Other assets

    14,196     69,907     1,186     6,440     7,317     312,183     (6,440 )   404,789  

Other assets—intercompany

    10,412     38,047     3,168     47     1,383     (53,010 )   (47 )    
                                   

Total assets

  $ 393,545   $ 481,278   $ 134,531   $ 51,569   $ 63,714   $ 994,473   $ (262,464 ) $ 1,856,646  
                                   

Liabilities and equity

                                                 

Deposits

  $   $   $   $   $   $ 835,903   $   $ 835,903  

Federal funds purchased and securities loaned or sold

        124,522                 29,759         154,281  

Federal funds purchased and securities loaned or sold—intercompany

    185     18,721                 (18,906 )        

Trading account liabilities

        82,905     115             54,492         137,512  

Trading account liabilities—intercompany

    198     7,495     1,082             (8,775 )        

Short-term borrowings

    1,177     4,593     10,136         379     52,594         68,879  

Short-term borrowings—intercompany

        69,306     62,336     3,304     33,818     (165,460 )   (3,304 )    

Long-term debt

    197,804     13,422     55,499     2,893     7,542     89,752     (2,893 )   364,019  

Long-term debt—intercompany

    367     62,050     1,039     37,600     14,278     (77,734 )   (37,600 )    

Advances from subsidiaries

    30,275                     (30,275 )        

Other liabilities

    5,985     70,477     585     1,772     1,742     62,290     (1,772 )   141,079  

Other liabilities—intercompany

    4,854     7,911     198     1,080     386     (13,349 )   (1,080 )    
                                   

Total liabilities

  $ 240,845   $ 461,402   $ 130,990   $ 46,649   $ 58,145   $ 810,291   $ (46,649 ) $ 1,701,673  
                                   

Citigroup stockholders' equity

    152,700     19,448     3,541     4,920     5,569     182,337     (215,815 )   152,700  

Noncontrolling interest

        428                 1,845         2,273  
                                   

Total equity

  $ 152,700   $ 19,876   $ 3,541   $ 4,920   $ 5,569   $ 184,182   $ (215,815 ) $ 154,973  
                                   

Total liabilities and equity

  $ 393,545   $ 481,278   $ 134,531   $ 51,569   $ 63,714   $ 994,473   $ (262,464 ) $ 1,856,646  
                                   

201


Table of Contents

Condensed Consolidating Statements of Cash Flows

 
  Nine Months Ended September 30, 2010  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries
and
eliminations
  Consolidating
adjustments
  Citigroup
Consolidated
 

Net cash provided by (used in) operating activities

  $ 10,821   $ 16,902   $ 1,023   $ 2,249   $ 3,161   $ (7,626 ) $ (2,249 ) $ 24,281  
                                   

Cash flows from investing activities

                                                 

Change in loans

  $   $ 26   $ 35,753   $ 2,439   $ 3,210   $ 17,426   $ (2,439 ) $ 56,415  

Proceeds from sales and securitizations of loans

        102         1,864     1,864     5,304     (1,864 )   7,270  

Purchases of investments

    (23,026 )   (11 )       (472 )   (477 )   (310,854 )   472     (334,368 )

Proceeds from sales of investments

    2,565     32         98     208     126,666     (98 )   129,471  

Proceeds from maturities of investments

    10,323             261     270     143,076     (261 )   153,669  

Changes in investments and advances—intercompany

    11,330     3,536         (77 )   (870 )   (13,996 )   77      

Business acquisitions

    (20 )                   20          

Other investing activities

        (5,245 )       (22 )   (22 )   23,461     22     18,194  
                                   

Net cash provided by (used in) investing activities

  $ 1,172   $ (1,560 ) $ 35,753   $ 4,091   $ 4,183   $ (8,897 ) $ (4,091 ) $ 30,651  
                                   

Cash flows from financing activities

                                                 

Dividends paid

  $   $   $   $   $   $   $   $  

Dividends paid-intercompany

        (5,850 )   (1,500 )           7,350          

Issuance of common stock

    3,750                     (3,750 )        

Issuance of preferred stock

                                 

Treasury stock acquired

    (5 )                           (5 )

Proceeds/(Repayments) from issuance of long-term debt—third-party, net

    (6,748 )   (2,570 )   (4,792 )   (994 )   (2,340 )   (18,317 )   994     (34,767 )

Proceeds/(Repayments) from issuance of long-term debt—intercompany, net

        (2,908 )       (12,780 )   25,476     (22,568 )   12,780      

Change in deposits

                        14,192         14,192  

Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party

    11     (1,588 )   870         404     (36,818 )       (37,121 )

Net change in short-term borrowings and other advances—intercompany

    (8,211 )   (2,640 )   (31,353 )   7,444     (30,904 )   73,108     (7,444 )    

Capital contributions from parent

                                 

Other financing activities

    (786 )                   3,750         2,964  
                                   

Net cash used in financing activities

  $ (11,989 ) $ (15,556 ) $ (36,775 ) $ (6,330 ) $ (7,364 ) $ 16,947   $ 6,330   $ (54,737 )
                                   

Effect of exchange rate changes on cash and due from banks

  $   $   $   $   $   $ 624   $   $ 624  
                                   

Net cash provided by discontinued operations

  $   $   $   $   $   $ 51   $   $ 51  
                                   

Net increase (decrease) in cash and due from banks

  $ 4   $ (214 ) $ 1   $ 10   $ (20 ) $ 1,099   $ (10 ) $ 870  

Cash and due from banks at beginning of period

    5     4,947     1     343     464     20,055     (343 )   25,472  
                                   

Cash and due from banks at end of period

  $ 9   $ 4,733   $ 2   $ 353   $ 444   $ 21,154   $ (353 ) $ 26,342  
                                   

Supplemental disclosure of cash flow information

                                                 

Cash paid during the year for:

                                                 

Income taxes

  $ (332 ) $ 172   $ 392   $ (55 ) $ 37   $ 3,123   $ 55   $ 3,392  

Interest

    6,941     3,926     761     1,998     1,189     4,472     (1,998 )   17,289  

Non-cash investing activities:

                                                 

Transfers to repossessed assets

  $   $ 220   $   $ 996   $ 1,042   $ 796   $ (996 ) $ 2,058  
                                   

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Condensed Consolidating Statements of Cash Flows

 
  Nine Months Ended September 30, 2009  
In millions of dollars   Citigroup
parent
company
  CGMHI   CFI   CCC   Associates   Other
Citigroup
subsidiaries
and
eliminations
  Consolidating
adjustments
  Citigroup
Consolidated
 

Net cash (used in) provided by operating activities

  $ (1,854 ) $ 18,928   $ 2,185   $ 3,312   $ 3,757   $ (36,538 ) $ (3,312 ) $ (13,522 )
                                   

Cash flows from investing activities

                                                 

Change in loans

  $   $   $ (9,324 ) $ 1,528   $ 1,504   $ (119,841 ) $ (1,528 ) $ (127,661 )

Proceeds from sales and securitizations of loans

        163                 185,279         185,442  

Purchases of investments

    (13,777 )   (13 )       (531 )   (579 )   (152,746 )   531     (167,115 )

Proceeds from sales of investments

    6,892             398     435     59,563     (398 )   66,890  

Proceeds from maturities of investments

    20,209             230     309     69,700     (230 )   90,218  

Changes in investments and advances—intercompany

    (20,968 )           (290 )   4,202     16,766     290      

Business acquisitions

                                 

Other investing activities

        (775 )               (42,291 )       (43,066 )
                                   

Net cash (used in) provided by investing activities

  $ (7,644 ) $ (625 ) $ (9,324 ) $ 1,335   $ 5,871   $ 16,430   $ (1,335 ) $ 4,708  
                                   

Cash flows from financing activities

                                                 

Dividends paid

  $ (3,235 ) $   $   $   $   $   $     (3,235 )

Dividends paid-intercompany

    (122 )   (1,000 )               1,122          

Issuance of common stock

                                 

Issuance of preferred stock

                                 

Treasury stock acquired

    (3 )                           (3 )

Proceeds/(Repayments) from issuance of long-term debt—third-party, net

    12,235     (2,406 )   14,020     (537 )   (1,985 )   (15,250 )   537     6,614  

Proceeds/(Repayments) from issuance of long-term debt-intercompany, net

        (14,450 )       (2,854 )   (2,202 )   16,652     2,854      

Change in deposits

                        58,418         58,418  

Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party

    (1,339 )   (4,181 )   (20,932 )   (1,225 )   (226 )   (29,465 )   1,225     (56,143 )

Net change in short-term borrowings and other advances—intercompany

    2,081     3,583     14,056         (5,154 )   (14,566 )        

Capital contributions from parent

                                 

Other financing activities

    (116 )       (5 )       (41 )   46         (116 )
                                   

Net cash provided by (used in) financing activities

  $ 9,501   $ (18,454 ) $ 7,139   $ (4,616 ) $ (9,608 ) $ 16,957   $ 4,616   $ 5,535  
                                   

Effect of exchange rate changes on cash and due from banks

  $                   $ 582       $ 582  
                                   

Net cash used in discontinued operations

  $                   $ (74 )     $ (74 )
                                   

Net increase (decrease) in cash and due from banks

  $ 3   $ (151 ) $   $ 31   $ 20   $ (2,643 ) $ (31 ) $ (2,771 )

Cash and due from banks at beginning of period

    13     4,557     1     290     396     24,286     (290 )   29,253  
                                   

Cash and due from banks at end of period

  $ 16   $ 4,406   $ 1   $ 321   $ 416   $ 21,643   $ (321 ) $ 26,482  
                                   

Supplemental disclosure of cash flow information

                                                 

Cash paid during the year for:

                                                 

Income taxes

  $ 613   $ (743 ) $ 422   $ 96   $ 381   $ (1,924 ) $ (96 ) $ (1,251 )

Interest

    6,190     6,006     2,232     2,454     469     6,441     (2,454 )   21,338  

Non-cash investing activities:

                                                 

Transfers to repossessed assets

  $   $   $   $ 1,217   $ 1,261   $ 888   $ (1,217 ) $ 2,149  
                                   

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

        The following information supplements and amends our discussion set forth under Part I, Item 3 "Legal Proceedings" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (2009 Form 10-K), as updated by our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.

Credit-Crisis-Related Litigation and Other Matters

        As discussed at pages 263-265 of our 2009 Form 10-K, Citigroup and its affiliates continue to defend lawsuits and arbitrations asserting claims for damages and other relief for losses arising from the global financial credit and subprime-mortgage crisis that began in 2007. These actions, which assert a variety of claims under federal and state law, include, among other matters, class actions brought on behalf of putative classes of investors in various securities issued by Citigroup as well as actions asserted by individual investors and counterparties to various transactions, and are pending in various state and federal courts as well as before arbitration tribunals. These actions are at various procedural stages.

        In addition to these litigations and arbitrations, Citigroup continues to cooperate fully in response to subpoenas and requests for information from the Securities and Exchange Commission (SEC), the Federal Housing Finance Agency, state attorneys general, and other government agencies in connection with various formal and informal inquiries concerning Citigroup's subprime and other mortgage-related conduct and business activities, as well as other business activities affected by the credit crisis. These business activities include, but are not limited to, Citigroup's sponsorship, packaging, issuance, servicing and underwriting of residential mortgage-backed securities and collateralized debt obligations and its origination, sale or other transfer, servicing, and foreclosure of residential mortgages. On October 19, 2010, the United States District Court for the District of Columbia entered a Final Judgment approving Citigroup's settlement of the SEC's investigation into certain of Citigroup's 2007 disclosures concerning its subprime-related business activities, pursuant to which Citigroup agreed to pay a $75 million civil penalty and maintain certain disclosure policies, practices and procedures for a three-year period. Additional information relating to this action is publicly available in court filings under the docket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).

        In accordance with ASC 450 (formerly SFAS 5), Citigroup establishes accruals for all litigation and regulatory matters, including matters related to the credit crisis, when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of loss ultimately incurred in relation to those matters may be substantially higher or lower than the amounts accrued for those matters.

        Certain of these matters assert claims for substantial or indeterminate damages. The claims asserted in these matters typically are broad, often spanning a multi-year period and sometimes a wide range of business activities, and the plaintiffs' alleged damages typically are not quantified or factually supported in the complaint. Many of the most significant of these matters remain in very preliminary stages, with few or no substantive legal decisions by the court or tribunal defining the scope of the claims, the class (if any), or the potentially available damages, and fact discovery is still in progress or has not yet begun. In many of these matters, Citigroup has not yet answered the complaint or asserted its defenses. For all these reasons, Citigroup cannot at this time estimate the possible loss or range of loss, if any, for these matters or predict the timing of their eventual resolution.

Subprime and Other Mortgage-Related Litigation and Other Matters

        Securities Actions:    On September 30, 2010, the district court entered a scheduling order in IN RE CITIGROUP INC. BOND LITIGATION, and fact discovery has commenced.

        ERISA Actions:    On September 28, 2010, the Second Circuit held oral argument on Plaintiffs' appeal from the district court's dismissal of IN RE CITIGROUP INC. ERISA LITIGATION. Additional information relating to this action is publicly available in court filings under the consolidated lead docket number 07 Civ. 9790 (S.D.N.Y.) (Stein, J.) and under GRAY v. CITIGROUP INC., 09 Civ. 3804 (2d Cir.).

        Derivative Actions and Related Proceedings:    On the basis of an investigation, report, and recommendation from an independent committee of Citigroup's Board of Directors, the Board refused certain shareholder demands raising subprime issues. Amended pleadings were filed in two of the pending derivative actions. Additional information relating to these actions is publicly available in court filings under the index number 650417/09 (N.Y. Super. Ct.) (Fried, J.) and the consolidated lead docket number 07 Civ. 9841 (S.D.N.Y.) (Stein, J.).

        Counterparty and Investor Actions:    An arbitration hearing has been scheduled for May 2011 in connection with statutory and common law claims asserted by the Abu Dhabi Investment Authority arising out of its $7.5 billion investment in Citigroup. Discovery in this matter is ongoing.

        In addition, beginning in July 2010, several investors, including Cambridge Place Investment Management, The Charles Schwab Corporation, the Federal Home Loan Bank of Chicago and the Federal Home Loan Bank of Indianapolis, have filed lawsuits against Citigroup and certain of its affiliates alleging actionable misstatements or omissions in connection with the issuance and underwriting of residential mortgage-backed securities. As a general matter, the plaintiffs in these actions are seeking rescission of their investments or other damages. Additional information relating to these actions is publicly available in court filings under the docket numbers 10 Civ. 11376 (D. Mass.) (Gorton, J.), 10 Civ. 4030 (N.D. Cal.) (Illston, J.), 10 CH 45033 (Ill. Cook County Cir. Ct.), LC 091499 (Cal. L.A. County Super. Ct.) and 10 PL 045071 (Ind. Marion County Super. Ct.).

        The subprime-mortgage-related proceedings described above are in their preliminary stages. Accordingly, Citigroup cannot at this time estimate the possible loss or range of loss, if any, for these actions or predict the timing of their eventual resolution.

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Auction Rate Securities-Related Litigation and Other Matters

        On the basis of an investigation, report, and recommendation from an independent committee of Citigroup's Board of Directors, the Board refused a shareholder demand raising issues related to auction rate securities.

Research Analyst Litigation

        In HOLMES v. GRUBMAN, No. 10-409 (U.S.), petitioners-plaintiffs submitted a petition for certiorari to the United States Supreme Court seeking review of the United States Court of Appeals for the Second Circuit's decision affirming dismissal of the action.

        In DISHER v. CITIGROUP GLOBAL MARKETS INC., oral argument on Citigroup Global Markets Inc.'s motion to dismiss has been scheduled for November 16, 2010. Additional information relating to this action is publicly available in court filings under docket number 04-L-265 (Cir. Ct. 3d Jud. Cir. Madison County Ill.).

Adelphia Litigation

        On September 22, 2010, the Adelphia Recovery Trust agreed in principle to settle its claims against numerous pre-petition lenders and investment banks, including Citigroup, in the action entitled ADELPHIA RECOVERY TRUST v. BANK OF AMERICA N.A., ET AL., 05 Civ. 9050 (S.D.N.Y.) (McKenna, J.). The agreement in principle is subject to execution of a final settlement agreement and court approval.

Terra Firma Litigation

        On September 15, 2010, the district court issued an order granting in part and denying in part Citigroup's motion for summary judgment. Plaintiffs' claims for negligent misrepresentation and tortious interference were dismissed. On October 18, 2010, a jury trial commenced on plaintiffs' remaining claims for fraudulent misrepresentation and fraudulent concealment. The court dismissed the fraudulent concealment claim before sending the case to the jury. On November 4, 2010, the jury returned a verdict on the fraudulent misrepresentation claim in favor of Citi. Additional information regarding the action is publicly available in court filings under docket number 09 Civ. 10459 (S.D.N.Y.) (Rakoff, J.).

Student Loan Corporation Litigation

        Beginning in September, three shareholders of Student Loan Corporation (SLC) filed putative class actions in Delaware and Connecticut against SLC and its Board of Directors, CBNA, Citigroup Inc., and Discover Financial Services seeking to enjoin the SLM Transaction, the DFS Merger and the CBNA Transaction. Among other things, plaintiffs allege that the individual defendants and CBNA breached their fiduciary duties by failing to maximize the value to be received by SLC's stockholders, and that Citigroup Inc. aided and abetted the other defendants' breaches of fiduciary duties. Plaintiffs in these actions are seeking, among other things, preliminary and permanent injunctive relief against the consummation of the Transactions by the defendants, compensatory damages, and costs and disbursements. Although it is the opinion of Citigroup's management, based on current knowledge, that the eventual outcome of these matters would not be likely to have a material adverse effect on the consolidated financial condition of Citi, in the event an order preliminarily or permanently enjoining the transactions were entered, the benefits to Citigroup of the SLM Transaction, the DFS Merger and the CBNA Transaction would be delayed or not achieved.



        Payments required in settlement agreements described above have been made or are covered by existing accruals. Additional lawsuits containing claims similar to those described above may be filed in the future.

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Item 1A.    Risk Factors

        For a discussion of the risk factors affecting Citigroup, see "Risk Factors" in Part I, Item 1A of Citi's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

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Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

        None.

Share Repurchases

        Under its long-standing repurchase program, Citigroup may buy back common shares in the market or otherwise from time to time. This program is used for many purposes, including offsetting dilution from stock-based compensation programs.

        The following table summarizes Citigroup's share repurchases during the first nine months of 2010:

In millions, except per share amounts   Total shares
purchased(1)
  Average
price paid
per share
  Approximate dollar
value of shares that
may yet be purchased
under the plan or
programs
 

First quarter 2010

                   
 

Open market repurchases(1)

      $   $ 6,739  
 

Employee transactions(2)

    12.5     3.57     N/A  

Total first quarter 2010

    12.5   $ 3.57   $ 6,739  
               

Second quarter 2010

                   
 

Open market repurchases(1)

      $   $ 6,739  
 

Employee transactions(2)

    121.2     4.93     N/A  

Total second quarter 2010

    121.2   $ 4.93   $ 6,739  
               

July 2010

                   
 

Open market repurchases(1)

      $   $ 6,739  
 

Employee transactions(2)

    0.3     3.99     N/A  

August 2010

                   
 

Open market repurchases(1)

      $   $ 6,739  
 

Employee transactions(2)

    0.1     4.01     N/A  

September 2010

                   
 

Open market repurchases(1)

      $   $ 6,739  
 

Employee transactions(2)

    13.9     3.95     N/A  
               

Third quarter 2010

                   
 

Open market repurchases(1)

      $   $ 6,739  
 

Employee transactions(2)

    14.3     3.95     N/A  
               

Total third quarter 2010

    14.3   $ 3.95   $ 6,739  
               

Year-to-date 2010

                   
 

Open market repurchases(1)

      $   $ 6,739  
               
 

Employee transactions(2)

    148.0     4.72     N/A  
               

Total year-to-date 2010

    148.0   $ 4.72   $ 6,739  
               

(1)
Open market repurchases would be transacted under an existing authorized share repurchase plan. Since 2000, the Board of Directors has authorized the repurchase of shares in the aggregate amount of $40 billion under Citi's existing share repurchase plan.

(2)
Consists of shares added to treasury stock related to activity on employee stock option program exercises, where the employee delivers existing shares to cover the option exercise, or under Citi's employee restricted or deferred stock program, where shares are withheld to satisfy tax requirements.

N/A Not applicable

        For so long as the U.S. government holds any Citigroup common stock or trust preferred securities, Citigroup has generally agreed not to acquire, repurchase or redeem any Citigroup equity or trust preferred securities, other than pursuant to administrating its employee benefit plans or other customary exceptions, or with the consent of the U.S. government.

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Item 6.    Exhibits

        See Exhibit Index.

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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, on the 5th day of November, 2010.


 

 

CITIGROUP INC.
    (Registrant)

 

 

By

 

/s/ JOHN C. GERSPACH

John C. Gerspach
Chief Financial Officer
(Principal Financial Officer)

 

 

By

 

/s/ JEFFREY R. WALSH

Jeffrey R. Walsh
Controller and Chief Accounting Officer
(Principal Accounting Officer)

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EXHIBIT INDEX

  2.01   Amended and Restated Joint Venture Contribution and Formation Agreement, dated May 29, 2009, by and among Citigroup Inc. (the Company), Morgan Stanley and Morgan Stanley Smith Barney Holdings LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 3, 2009 (File No. 1-9924).

 

2.02

 

Share Purchase Agreement, dated May 1, 2009, by and among Nikko Citi Holdings Inc., Nikko Cordial Securities Inc., Nikko Citi Business Services Inc., Nikko Citigroup Limited, and Sumitomo Mitsui Banking Corporation, incorporated by reference to Exhibit 2.02 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009 (File No. 1-9924).

 

2.03

 

Share Purchase Agreement, dated July 11, 2008, by and between Citigroup Global Markets Finance Corporation & Co. Beschrankt Haftende KG, CM Akquisitions GmbH, and Banque Federative du Credit Mutuel S.A., incorporated by reference to Exhibit 2.01 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2008 (File No. 1-9924).

 

3.01

 

Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2009 (File No. 1-9924).

 

3.02

 

By-Laws of the Company, as amended, effective December 15, 2009, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed December 16, 2009 (File No. 1-9924).

 

4.01

 

Warrant, dated October 28, 2008, issued by the Company to the United States Department of the Treasury (the UST), incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed October 30, 2008 (File No. 1-9924).

 

4.02

 

Warrant, dated December 31, 2008, issued by the Company to the UST, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed December 31, 2008 (File No. 1-9924).

 

4.03

 

Warrant, dated January 15, 2009, issued by the Company to the UST, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed January 16, 2009 (File No. 1-9924).

 

4.04

 

Tax Benefits Preservation Plan, dated June 9, 2009, between the Company and Computershare Trust Company, N.A., incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed June 10, 2009 (File No. 1-9924).

 

4.05

 

Capital Securities Guarantee Agreement, dated as of July 30, 2009, between the Company, as Guarantor, and The Bank of New York Mellon, as Guarantee Trustee, incorporated by reference to Exhibit 4.03 to the Company's Current Report on Form 8-K filed July 30, 2009 (File No. 1-9924).

 

10.01+

 

Form of Citigroup Equity or Deferred Cash Award Agreement (effective November 1, 2010).

 

10.02+

 

Form of 2010 Citi Stock Payment Program Notification for Awards Granted on September 30, 2010.

 

10.03+

 

Form of 2010 Citi Stock Payment Program Notification for Awards Granted in October, November and December 2010.

 

10.04+

 

Form of Citi Long-Term Restricted Stock Award Agreement (effective November 1, 2010).

 

12.01+

 

Calculation of Ratio of Income to Fixed Charges.

 

12.02+

 

Calculation of Ratio of Income to Fixed Charges (including preferred stock dividends).

 

31.01+

 

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.02+

 

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.01+

 

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.01+

 

Financial statements from the Quarterly Report on Form 10-Q of Citigroup Inc. for the quarter ended September 30, 2010, filed on November 5, 2010, formatted in XBRL: (i) the Consolidated Statement of Income, (ii) the Consolidated Balance

 

 

 

 

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      Sheet, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statement of Cash Flows and (v) the Notes to Consolidated Financial Statements.

The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such instrument to the Securities and Exchange Commission upon request.

+
Filed herewith

211