FORM 8-K Citigroup Inc.

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

FORM 8-K

CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) June 17, 2016

Citigroup Inc.

(Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization)

1-9924 (Commission File Number)

52-1568099 (I.R.S. Employer Identification No.)

388 Greenwich Street, New York, NY (Address of principal executive offices)

10013 (Zip code) (212) 559-1000 (Registrant's telephone number, including area code)

Check the appropriate box below if the Form filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule

under the Exchange Act (17 CFR

communications pursuant to Rule communications pursuant to Rule

under the Exchange Act (17 CFR under the Exchange Act (17 CFR

CITIGROUP INC. Current Report on Form 8-K Item 8.01

Other Events.

As previously disclosed, effective in the first quarter of 2016, certain reclassifications, including a realignment of certain businesses, were made to the prior periods’ financial statements of Citigroup Inc. (Citi) to conform to the first quarter of 2016 presentation. For additional information on these reclassifications, see Note 3 to the Consolidated Financial Statements in Citi’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 (First Quarter 2016 Form 10-Q) filed with the U.S. Securities and Exchange Commission (SEC) on May 2, 2016 and Citi’s Current Report on Form 8-K furnished to the SEC on April 12, 2016. These reclassifications were reflected in Citi’s First Quarter 2016 Form 10-Q. In accordance with ASC 280, Segment Reporting, attached as Exhibit 99.02 to this Form 8-K are the historical audited consolidated financial statements for Citi’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (2015 Form 10-K), conformed to reflect these reclassifications. Citi’s consolidated results remain unchanged for all periods presented as a result of these reclassifications. These reclassifications have also been reflected in Exhibits 99.01 and 101 to this Form 8K. The information included in this Form 8-K should be read in conjunction with Citi’s 2015 Form 10-K and First Quarter 2016 Form 10-Q. This Form 8-K does not reflect events occurring after Citi filed its 2015 Form 10-K and does not modify or update the disclosures therein in any way, other than to illustrate the realignment of its organizational structure as described above. For developments subsequent to the filing of the 2015 Form 10-K, refer to Citi's First Quarter 2016 Form 10-Q. Exhibit 99.02 will serve as Citi’s historical audited consolidated financial statements as of December 31, 2015 and 2014 and for the three years ended December 31, 2015 for existing and future filings made pursuant to the Securities Act of 1933, as amended, until Citi files its Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Item 9.01

Financial Statements and Exhibits.

(d) Exhibits. Exhibit Number 99.01

Segment and Business Income (loss) and Revenues of Citigroup Inc. for the three years ended December 31, 2015.

99.02

Historical Audited Consolidated Financial Statements of Citigroup Inc. as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, reflecting the above-referenced reclassifications. Also included is the Report of Independent Registered Public Accounting Firm dated February 26, 2016, except as to Notes 3, 15, 16, 17 and 22 which are as of June 17, 2016.

99.03

Consent of KPMG LLP, Independent Registered Public Accounting Firm.

101

Historical Audited Consolidated Financial Statements of Citigroup Inc. as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, formatted in XBRL: (i) the Consolidated Statement of Income, (ii) the Consolidated Statement of Comprehensive Income (iii) the Consolidated Balance Sheet, (iv) the Consolidated Statement of Changes in Stockholders' Equity, (v) the Consolidated Statement of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

SIGNATURE 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 hereunto duly authorized. CITIGROUP INC. Dated: June 17, 2016 /s/ JEFFREY R. WALSH Jeffrey R. Walsh By: Controller and Chief Accounting Officer

Exhibit Index Exhibit Number 99.01

Segment and Business Income (loss) and Revenues of Citigroup Inc. for the three years ended December 31, 2015.

99.02

Historical Audited Consolidated Financial Statements of Citigroup Inc. as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, reflecting the above-referenced reclassifications. Also included is the Report of Independent Registered Public Accounting Firm dated February 26, 2016, except as to Notes 3, 15, 16, 17 and 22 which are as of June 17, 2016.

99.03

Consent of KPMG LLP, Independent Registered Public Accounting Firm.

101

Historical Audited Consolidated Financial Statements of Citigroup Inc. as of December 31, 2015 and 2014 and for the three years ended December 31, 2015, formatted in XBRL: (i) the Consolidated Statement of Income, (ii) the Consolidated Statement of Comprehensive Income (iii) the Consolidated Balance Sheet, (iv) the Consolidated Statement of Changes in Stockholders' Equity, (v) the Consolidated Statement of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

EXHIBIT 99.1 SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES The following tables show the income (loss) and revenues for Citigroup on a segment and business view: CITIGROUP INCOME

2014

2015

In millions of dollars

% Change 2015 vs. 2014

2013

% Change 2014 vs. 2013

Income (loss) from continuing operations CITICORP Global Consumer Banking North America

$

Latin America Asia(1)

4,311 $

4,488 $

3,976

(4)%

13 %

868

993

1,115

(13)%

(11)%

1,197

1,221

1,402

(2)%

(13)%

$

6,376 $

6,702 $

6,493

(5)%

3%

$

3,517 $

4,155 $

3,079

(15)%

35 %

EMEA

2,340

2,060

2,558

14 %

(19)%

Latin America

1,393

1,401

1,652

(1)%

(15)%

2,279

2,029

2,184

12 %

(7)%

9,529 $

9,645 $

9,473

(1)%

2%

Total Institutional Clients Group North America

Asia Total

$

Corporate/Other

$

496 $

(5,373) $

Total Citicorp

$

16,401 $

10,974 $

Citi Holdings

$

985 $

Income from continuing operations

$

17,386 $

Discontinued operations

$

(54) $

Net income attributable to noncontrolling interests Citigroup’s net income

$

NM

NM

15,452

49 %

(29)%

(3,470) $

(1,836)

NM

(89)%

7,504 $

13,616

NM

(45)%

(2) $

270

NM

(101)%

227

(53)%

(15)%

NM

(46)%

90

192

17,242 $

7,310 $

(514)

13,659

(1) For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. NM Not meaningful

CITIGROUP REVENUES 2014

2015

In millions of dollars

% Change 2015 vs. 2014

2013

% Change 2014 vs. 2013

CITICORP Global Consumer Banking North America

$

Latin America

5,770

(1)

19,948 $ 6,557

(1)%

(1)%

6,481

(12)%

1%

7,839

(10)%

(1)%

32,495 $

34,296 $

34,395

(5)%

—%

$

12,980 $

13,002 $

11,432

—%

14 %

7,007

7,791

20,075

$

Asia

Total

19,718 $

Institutional Clients Group North America EMEA

9,958

9,511

10,153

5%

(6)%

Latin America

4,051

4,218

4,843

(4)%

(13)%

7,152

6%

(8)%

33,580

2%

(1)%

Asia

7,002 33,991 $

6,581 33,312 $

Total

$

Corporate/Other

$

908 $

303 $

322

NM

(6)%

Total Citicorp

$

67,394 $

67,911 $

68,297

(1)%

(1)%

Citi Holdings

$

8,960 $

9,308 $

8,427

(4)%

10 %

Total Citigroup net revenues

$

76,354 $

77,219 $

76,724

(1)%

1%

(1) For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. NM Not meaningful

EXHIBIT 99.02 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM— CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and Stockholders Citigroup Inc.: We have audited the accompanying consolidated balance sheet of Citigroup Inc. and subsidiaries (the “Company” or “Citigroup”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citigroup as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Citigroup’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. /s/ KPMG LLP New York, New York February 26, 2016, except as to Notes 3, 15, 16, 17 and 22 which are as of June 17, 2016.

FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Income— For the Years Ended December 31, 2015, 2014 and 2013

3

Consolidated Statement of Comprehensive Income— For the Years Ended December 31, 2015, 2014 and 2013

5

Consolidated Balance Sheet—December 31, 2015 and 2014

6

Consolidated Statement of Changes in Stockholders’ Equity —For the Years Ended December 31, 2015, 2014 and 2013

8

Consolidated Statement of Cash Flows— For the Years Ended December 31, 2015, 2014 and 2013

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Summary of Significant Accounting Policies

12

Note 16—Allowance for Credit Losses

85

Note 2—Discontinued Operations and Significant Disposals

24

Note 17—Goodwill and Intangible Assets

88

Note 3—Business Segments

26

Note 18—Debt

91

Note 4—Interest Revenue and Expense

27

Note 19—Regulatory Capital

93

Note 5—Commissions and Fees

28

Note 6—Principal Transactions

29

Note 20—Changes in Accumulated Other Comprehensive Income (Loss)

94

Note 7—Incentive Plans

30

Note 21—Preferred Stock

97

Note 22—Securitizations and Variable Interest Entities

99

Note 8—Retirement Benefits

34

Note 9—Income Taxes Note 10—Earnings per Share

50 55

Note 23—Derivatives Activities

112

Note 24—Concentrations of Credit Risk

126

Note 25—Fair Value Measurement

127

56

Note 26—Fair Value Elections

150

Note 12—Brokerage Receivables and Brokerage Payables Note 13—Trading Account Assets and Liabilities

59

154

Note 14—Investments

60

Note 27—Pledged Assets, Collateral, Guarantees and Commitments Note 28—Contingencies

Note 11—Federal Funds, Securities Borrowed, Loaned and Subject to Repurchase Agreements

Note 15—Loans

59 72

2

160

Note 29—Condensed Consolidating Financial Statements Note 30—Subsequent Event

171

Note 31—Selected Quarterly Financial Data (Unaudited)

182

181

CONSOLIDATED FINANCIAL STATEMENTS Citigroup Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

Years ended December 31, 2014

2015

In millions of dollars, except per share amounts

2013

Revenues(1) Interest revenue

$

Interest expense

58,551 $

61,683 $

62,970

11,921

13,690

16,177

Net interest revenue

$

46,630 $

47,993 $

46,793

Commissions and fees

$

11,848 $

13,032 $

12,941

Principal transactions

6,008

6,698

7,302

Administration and other fiduciary fees

3,648

4,013

4,089

682

570

748

(265)

(432)

(633)

Realized gains on sales of investments, net Other-than-temporary impairment losses on investments Gross impairment losses Less: Impairments recognized in AOCI



8

98

Net impairment (losses) recognized in earnings

$

(265) $

(424) $

Insurance premiums

$

1,845 $

2,110 $

Total non-interest revenues

$

29,724 $

29,226 $

29,931

Total revenues, net of interest expense

$

76,354 $

77,219 $

76,724

$

7,108 $

6,828 $

7,604

731

801

Other revenue

5,958

3,227

(535) 2,280 3,106

Provisions for credit losses and for benefits and claims Provision for loan losses Policyholder benefits and claims Provision (release) for unfunded lending commitments Total provisions for credit losses and for benefits and claims

830

74

(162)

$

7,913 $

7,467 $

8,514

80

$

21,769 $

23,959 $

23,967

Operating expenses(1) Compensation and benefits Premises and equipment

2,878

3,178

3,165

Technology/communication

6,581

6,436

6,136

Advertising and marketing Other operating

1,547

1,844

1,888

10,840

19,634

13,252

Total operating expenses

$

43,615 $

55,051 $

48,408

Income from continuing operations before income taxes

$

24,826 $

14,701 $

19,802

$

17,386 $

7,504 $

$

(83) $

10 $

Provision for income taxes Income from continuing operations

7,440

7,197

6,186 13,616

Discontinued operations Income (loss) from discontinued operations Gain on sale Provision (benefit) for income taxes

(242)





268

(29)

12

(244)

Income (loss) from discontinued operations, net of taxes

$

(54) $

(2) $

270

Net income before attribution of noncontrolling interests

$

17,332 $

7,502 $

13,886

90

192

$

17,242 $

7,310 $

13,659

5.43 $

2.21 $

4.26



0.09

Noncontrolling interests Citigroup’s net income

227

Basic earnings per share(2) Income from continuing operations

$

Income (loss) from discontinued operations, net of taxes Net income

(0.02) 5.41 $

$

Weighted average common shares outstanding

3,004.0

3

2.21 $ 3,031.6

4.35 3,035.8

Diluted earnings per share(2) Income from continuing operations

5.42 $

$

Income (loss) from discontinued operations, net of taxes Net income

(0.02) 5.40 $

$

Adjusted weighted average common shares outstanding (1) (2)

3,007.7

2.20 $

4.25



0.09

2.20 $ 3,037.0

4.34 3,041.6

Certain prior-period revenue and expense lines and totals were reclassified to conform to the current period’s presentation. See Note 3 to the Consolidated Financial Statements. Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.

The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.

4

Citigroup Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Years ended December 31, 2014

2015

In millions of dollars

Net income before attribution of noncontrolling interests

2013

$

17,332 $

7,502 $

13,886

$

(964) $

1,697 $

(2,237)

336

1,048

Add: Citigroup’s other comprehensive income (loss) Net change in unrealized gains and losses on investment securities, net of taxes Net change in cash flow hedges, net of taxes

292

Benefit plans liability adjustment, net of taxes(1)

43

Net change in foreign currency translation adjustment, net of taxes and hedges

(1,170)

1,281

(5,499)

(4,946)

(2,329)

Citigroup’s total other comprehensive income (loss)

$

(6,128) $

(4,083) $

(2,237)

Total comprehensive income before attribution of noncontrolling interests

$

11,204 $

3,419 $

11,649

90

192

11,114 $

3,227 $

Less: Net income attributable to noncontrolling interests Citigroup’s comprehensive income (1)

$

227 11,422

Reflects adjustments based on the actuarial valuations of the Company’s pension and postretirement plans, including changes in the mortality assumptions at December 31, 2014, and amortization of amounts previously recognized in Accumulated other comprehensive income (loss). See Note 8 to the Consolidated Financial Statements.

The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.

5

Citigroup Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEET

December 31, 2015

In millions of dollars

2014

Assets $

Cash and due from banks (including segregated cash and other deposits) Deposits with banks Federal funds sold and securities borrowed or purchased under agreements to resell (including $137,964 and $144,191 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Brokerage receivables Trading account assets (including $92,123 and $106,217 pledged to creditors at December 31, 2015 and December 31, 2014, respectively) Investments: Available for sale (including $10,698 and $13,808 pledged to creditors as of December 31, 2015 and December 31, 2014, respectively) Held to maturity (including $3,630 and $2,974 pledged to creditors as of December 31, 2015 and December 31, 2014, respectively)

Non-marketable equity securities (including $2,088 and $2,758 at fair value as of December 31, 2015 and December 31, 2014, respectively) $ Total investments Loans: Consumer (including $34 and $43 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Corporate (including $4,971 and $5,858 as of December 31, 2015 and December 31, 2014, respectively, at fair value) $ Loans, net of unearned income Allowance for loan losses $ Total loans, net Goodwill Intangible assets (other than MSRs) Mortgage servicing rights (MSRs) Other assets (including $6,121 and $7,762 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Total assets

20,900 $ 112,197

32,108 128,089

219,675 27,683

242,570 28,419

249,956

296,786

299,136

300,143

36,215

23,921

7,604 342,955 $

9,379 333,443

325,785

365,943

291,832 617,617 $ (12,626) 604,991 $ 22,349 3,721 1,781

278,692 644,635 (15,994) 628,641 23,592 4,566 1,845

125,002

122,122

1,731,210 $

$

1,842,181

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 those assets that can only be used to settle obligations of consolidated VIEs, presented on the following page, and are in excess of those obligations. Additionally, the assets in the table below include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. December 31, 2015

In millions of dollars

Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs Cash and due from banks Trading account assets Investments Loans, net of unearned income Consumer Corporate Loans, net of unearned income Allowance for loan losses Total loans, net Other assets Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs

Statement continues on the next page.

6

$

$ $ $

2014 153 $ 583 5,263 58,772 22,008 80,780 $ (2,135) 78,645 $ 150 84,794 $

300 671 8,014 66,383 29,596 95,979 (2,793) 93,186 619 102,790

CONSOLIDATED BALANCE SHEET

Citigroup Inc. and Subsidiaries

(Continued) December 31, 2015

In millions of dollars, except shares and per share amounts

Liabilities Non-interest-bearing deposits in U.S. offices

$

Interest-bearing deposits in U.S. offices (including $923 and $994 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Non-interest-bearing deposits in offices outside the U.S. Interest-bearing deposits in offices outside the U.S. (including $667 and $690 as of December 31, 2015 and December 31, 2014, respectively, at fair value) $ Total deposits Federal funds purchased and securities loaned or sold under agreements to repurchase (including $36,843 and $36,725 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Brokerage payables Trading account liabilities

139,249 $

128,958

280,234 71,577

284,978 70,925

416,827 907,887 $

414,471 899,332

146,496 53,722 117,512

173,438 52,180 139,036

21,079

58,335

201,275

223,080

Short-term borrowings (including $1,207 and $1,496 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Long-term debt (including $25,293 and $26,180 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Other liabilities (including $1,624 and $1,776 as of December 31, 2015 and December 31, 2014, respectively, at fair value) Total liabilities Stockholders’ equity Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: 668,720 as of December 31, 2015 and 418,720 as of December 31, 2014, at aggregate liquidation value Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: 3,099,482,042 as of December 31, 2015 and 3,082,037,568 as of December 31, 2014 Additional paid-in capital Retained earnings Treasury stock, at cost: December 31, 2015—146,203,311 shares and December 31, 2014—58,119,993 shares Accumulated other comprehensive income (loss) Total Citigroup stockholders’ equity Noncontrolling interest Total equity Total liabilities and equity

2014

$

60,147 1,508,118 $

85,084 1,630,485

$

16,718 $

10,468

$ $ $

31 108,288 133,841

31 107,979 117,852

(7,677) (29,344) 221,857 $ 1,235 223,092 $ 1,731,210 $

(2,929) (23,216) 210,185 1,511 211,696 1,842,181

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. December 31, 2015

In millions of dollars

2014

Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup Short-term borrowings Long-term debt

$

Other liabilities

11,965 $ 31,273 2,099

Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup

$

45,337 $

The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.

7

20,254 40,078 901 61,233

Citigroup Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Years ended December 31, Amounts 2014

2015

In millions of dollars, except shares in thousands

Preferred stock at aggregate liquidation value Balance, beginning of year Issuance of new preferred stock Redemption of preferred stock Balance, end of period Common stock and additional paid-in capital Balance, beginning of year Employee benefit plans Preferred stock issuance expense

$

2013

419 250 — 669

270 149 — 419

$ 108,010 $ 107,224 $ 106,421 357 798 878 (23) (31) (78)

3,082,038 17,438 —

3,062,099 19,928 —

Other

6,738 $ 3,730 — 10,468 $

19

102 171 (3) 270 3,043,153 18,930 —

3

6

11

16

$ 108,319 $ 108,010 $ 107,224

3,099,482

3,082,038

3,062,099

(25)

Balance, end of period

2014

2015

2,562 4,270 (94) 6,738

$

10,468 $ 6,250 — 16,718 $

Shares 2013

Retained earnings Balance, beginning of year

$ 117,852 $ 110,821 $ (1)

Adjustment to opening balance, net of taxes Adjusted balance, beginning of period





$ 117,852 $ 110,821 $

Citigroup’s net income

17,242

7,310

97,809 (332) 97,477 13,659

Common dividends(2)

(484)

(122)

(120)

Preferred dividends

(769)

(511)

(194)

— —

353 1

Tax benefit Other Balance, end of period

— (1)

$ 133,841 $ 117,852 $ 110,821

Treasury stock, at cost Balance, beginning of year

$

(2,929) $

(1,658) $

(847)

(58,119)

704

(39)

26

13,318

Employee benefit plans(3) (4)

Treasury stock acquired Balance, end of period

(32,856)

(14,269)

(483)

(1,629)

(5,452)

(1,232)

(837)

(101,402)

(24,780)

(16,958)

$

(7,677) $

(2,929) $

(1,658)

(146,203)

(58,119)

(32,856)

$

(23,216) $

(19,133) $

(16,896)

(6,128)

(4,083)

(2,237)

Citigroup’s accumulated other comprehensive income (loss) Balance, beginning of year Citigroup’s total other comprehensive income (loss) Balance, end of period Total Citigroup common stockholders’ equity Total Citigroup stockholders’ equity

$ (29,344) $ (23,216) $ (19,133) $ 205,139 $ 199,717 $ 197,254 $ 221,857 $ 210,185 $ 203,992

Noncontrolling interests Balance, beginning of year

1,511 $

1,794 $

Initial origination of a noncontrolling interest





6

Transactions between noncontrolling-interest shareholders and the related consolidated subsidiary





(2)

Transactions between Citigroup and the noncontrolling-interest shareholders

(164)

(96)

(118)

Net income attributable to noncontrolling-interest shareholders

90

192

227

Dividends paid to noncontrolling-interest shareholders

(78)

(91)

(63)

Other comprehensive income (loss) attributable to noncontrolling-interest shareholders

(83)

(106)

(17)

Other

(41)

(182)

(187)

$

1,948

Net change in noncontrolling interests

$

(276) $

(283) $

Balance, end of period

$

1,235 $

1,511 $

Total equity

$ 223,092 $ 211,696 $ 205,786

8

(154) 1,794

2,953,279

3,023,919

3,029,243

(1)

(2) (3) (4)

Citi adopted ASU 2014-01 Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Affordable Housing, in the first quarter of 2015 on a retrospective basis. This adjustment to opening Retained earnings represents the impact to periods prior to January 1, 2013 and is shown as an adjustment to the opening balance since 2013 is the earliest period presented in this statement. See Note 1 to the Consolidated Financial Statements for additional information. Common dividends declared were $0.01 per share in the first quarter and $0.05 both in the second, third and fourth quarters of 2015 and $0.01 per share in each quarter of 2014. Includes treasury stock related to (i) certain activity on employee stock option program exercises where the employee delivers existing shares to cover the option exercise, or (ii) under Citi’s employee restricted or deferred stock programs where shares are withheld to satisfy tax requirements. For the twelve months ended December 31, 2015, 2014 and 2013, primarily consists of open market purchases under Citi’s Board of Directors-approved common stock repurchase program.

The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.

9

Citigroup Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS

Years ended December 31, 2014

2015

In millions of dollars

2013

Cash flows from operating activities of continuing operations Net income before attribution of noncontrolling interests

$

17,332 $ 90

192

$

17,242 $

7,310 $

Net income attributable to noncontrolling interests Citigroup’s net income Loss from discontinued operations, net of taxes Gain on sale, net of taxes Income from continuing operations—excluding noncontrolling interests

$

7,502 $

13,886 227 13,659

(54)

(2)

(90)





360

17,296 $

7,312 $

13,389

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations Gains on significant disposals(1)

(3,210)

(452)



Amortization of deferred policy acquisition costs and present value of future profits

191

210

194

Additions to deferred policy acquisition costs

(62)

(64)

(54)

Depreciation and amortization

3,506

3,589

3,303

Deferred tax provision

2,794

3,347

2,699

Provision for loan losses

7,108

6,828

7,604

Realized gains from sales of investments

(682)

Net impairment losses on investments, goodwill and intangible assets

318

Change in trading account assets Change in trading account liabilities Change in brokerage receivables net of brokerage payables Change in loans held-for-sale (HFS) Change in other assets

(570) 426

(748) 535

46,830

(10,858)

35,001

(21,524)

30,274

(6,787)

2,278

(4,272)

(6,490)

(7,207)

(1,144)

4,321

(32)

(1,690)

13,028

Change in other liabilities

(1,135)

7,973

(7,880)

Other, net

(6,732)

5,434

5,129

Total adjustments

$

22,441 $

39,031 $

49,855

Net cash provided by operating activities of continuing operations

$

39,737 $

46,343 $

63,244

$

15,488 $

40,916 $

(66,871)

22,895

14,467

4,274

1,353

1,170

(30,198)

Cash flows from investing activities of continuing operations Change in deposits with banks Change in federal funds sold and securities borrowed or purchased under agreements to resell Change in loans Proceeds from sales and securitizations of loans

9,610

Purchases of investments Proceeds from sales of investments Proceeds from maturities of investments (1)

Proceeds from significant disposals

Capital expenditures on premises and equipment and capitalized software Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets Net cash provided by (used in) investing activities of continuing operations

9,123

(258,992)

(220,823)

141,470

135,824

131,100

82,047

94,117

84,831

346



5,932

Payments due to transfers of net liabilities associated with significant disposals(1)(2)

4,752

(242,362)

(18,929)

(1,255)

(3,198)

(3,386)

577

623

$

14,883 $

28,582 $

$

(1,253) $

— (3,490) 716 (91,338)

Cash flows from financing activities of continuing operations Dividends paid Issuance of preferred stock

6,227

Redemption of preferred stock



Treasury stock acquired

(5,452)

Stock tendered for payment of withholding taxes Change in federal funds purchased and securities loaned or sold under agreements to repurchase

10

(633) $ 3,699 — (1,232)

(314) 4,192 (94) (837)

(428)

(508)

(452)

(26,942)

(30,074)

(7,724)

Issuance of long-term debt Payments and redemptions of long-term debt Change in deposits Change in short-term borrowings

44,619

66,836

54,405

(52,843)

(58,923)

(63,994)

8,555

(48,336)

37,713

(37,256)

(1,099)

199

Net cash provided by (used in) financing activities of continuing operations

$

(64,773) $

(70,270) $

23,094

Effect of exchange rate changes on cash and cash equivalents

$

(1,055) $

(2,432) $

(1,558)

Discontinued operations Net cash used in discontinued operations

$

— $

— $

(10)

Change in cash and due from banks

$

(11,208) $

2,223 $

(6,568)

32,108

29,885

36,453

$

20,900 $

32,108 $

29,885

$

4,978 $

4,632 $

4,495

Cash and due from banks at beginning of period Cash and due from banks at end of period Supplemental disclosure of cash flow information for continuing operations Cash paid during the year for income taxes Cash paid during the year for interest

12,031

14,001

15,655

Non-cash investing activities Change in loans due to consolidation/deconsolidation of VIEs

$

— $

(374) $

6,718

Decrease in net loans associated with significant disposals reclassified to HFS

(9,063)





Decrease in investments associated with significant disposals reclassified to HFS

(1,402)





(223)





Decrease in goodwill and intangible assets associated with significant disposals reclassified to HFS Decrease in deposits with banks with significant disposals reclassified to HFS





28,600

15,100

17,300

276

321

325

(404)

Transfers to loans HFS from loans Transfers to OREO and other repossessed assets Non-cash financing activities Decrease in long-term debt associated with significant disposals reclassified to HFS

$

(4,673) $

— $

Decrease in deposits associated with reclassification to HFS



Increase in short-term borrowings due to consolidation of VIEs



500

Decrease in long-term debt due to deconsolidation of VIEs



(864)



(20,605)

— 6,718

(1) See Note 1 to the Consolidated Financial Statements for the adoption of ASU No. 2014-08 in the second quarter of 2014 and Note 2 for further information on significant disposals. (2) The payments associated with significant disposals result primarily from the sale of deposit liabilities.

The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.

11



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In addition to variable interests held in consolidated VIEs, the Company has variable interests in other VIEs that are not consolidated because the Company is not the primary beneficiary. These include collateralized loan obligations (CLOs), many structured finance transactions and various investment funds. However, these VIEs and all other unconsolidated VIEs are monitored by the Company to assess whether any events have occurred to cause its primary beneficiary status to change. These events include:

Throughout these Notes, “Citigroup,” “Citi” and the “Company” refer to Citigroup Inc. and its consolidated subsidiaries. Certain reclassifications have been made to the prior periods’ financial statements and notes to conform to the current period’s presentation.



Principles of Consolidation The Consolidated Financial Statements include the accounts of Citigroup and its subsidiaries prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 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 in more detail in Note 22 to the Consolidated Financial Statements, Citigroup also 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 are included in Other revenue.

• • •

purchases or sales of variable interests by Citigroup or an unrelated third party, which cause Citigroup’s overall variable interest ownership to change; changes in contractual arrangements that reallocate expected losses and residual returns among the variable interest holders; changes in the party that has power to direct the activities of a VIE that most significantly impact the entity’s economic performance; and providing financial support to an entity that results in an implicit variable interest.

All other entities not deemed to be VIEs with which the Company has involvement are evaluated for consolidation under other subtopics of ASC 810. Foreign Currency Translation Assets and liabilities of Citi’s foreign operations are translated from their respective functional currencies into U.S. dollars using period-end spot foreign-exchange rates. The effects of those translation adjustments are reported in Accumulated other comprehensive income (loss), a component of stockholders’ equity, along with any related hedge and tax effects, until realized upon sale or substantial liquidation of the foreign operation. Revenues and expenses of Citi’s foreign operations are translated monthly from their respective functional currencies into U.S. dollars at amounts that approximate weighted average exchange rates. For transactions whose terms are denominated in a currency other than the functional currency, including transactions denominated in the local currencies of foreign operations with the U.S. dollar as their functional currency, the effects of changes in exchange rates are primarily included in Principal transactions, along with the related effects of any economic hedges. Instruments used to hedge foreign currency exposures include foreign currency forward, option and swap contracts and in certain instances, designated issues of non-U.S. dollar debt. Foreign operations in countries with highly inflationary economies designate the U.S. dollar as their functional currency, with the effects of changes in exchange rates primarily included in Other revenue.

Citibank Citibank, N.A. (Citibank) is a commercial bank and wholly owned subsidiary of Citigroup. Citibank’s principal offerings include: consumer finance, mortgage lending and retail banking (including commercial banking) products and services; investment banking, cash management and trade finance; and private banking products and services. Variable Interest Entities An entity is referred to as a variable interest entity (VIE) if it meets the criteria outlined in Accounting Standards Codification (ASC) Topic 810, Consolidation, which are: (i) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) the entity has equity investors that cannot make significant decisions about the entity’s operations or that do not absorb their proportionate share of the entity’s expected losses or expected returns. The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the VIE’s economic performance and a right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE (that is, Citi is the primary beneficiary). 12

Investment Securities Investments include fixed income and equity securities. Fixed income instruments include bonds, notes and redeemable preferred stocks, as well as certain loan-backed and structured securities that are subject to prepayment risk. Equity securities include common and nonredeemable preferred stock. Investment securities are classified and accounted for as follows: •







Trading Account Assets and Liabilities Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 26 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets. Trading account liabilities include securities sold, not yet purchased (short positions) and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value (as described in Note 26 to the Consolidated Financial Statements). Other than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities. Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is accounted for at fair value under the fair value option, as described in Note 26 to the Consolidated Financial Statements. Derivatives used for trading purposes include interest rate, currency, equity, credit, and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC 210-20, Balance Sheet—Offsetting, are met. See Note 23 to the Consolidated Financial Statements. The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 25 to the Consolidated Financial Statements.

Fixed income securities classified as “held-to-maturity” are securities that the Company has both the ability and the intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue. Fixed income securities and marketable equity securities classified as “available-for-sale” are carried at fair value with changes in fair value reported in Accumulated other comprehensive income (loss), a component of Stockholders’ equity, net of applicable income taxes and hedges. Realized gains and losses on sales are included in income primarily on a specific identification cost basis. Interest and dividend income on such securities is included in Interest revenue. Certain investments in non-marketable equity securities and certain investments that would otherwise have been accounted for using the equity method are carried at fair value, since the Company has elected to apply fair value accounting. Changes in fair value of such investments are recorded in earnings. Certain non-marketable equity securities are carried at cost and are periodically assessed for other-thantemporary impairment, as described in Note 14 to the Consolidated Financial Statements.

For investments in fixed income securities classified as held-to-maturity or available-for-sale, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will not be made as scheduled. Investment securities are subject to evaluation for otherthan-temporary impairment as described in Note 14 to the Consolidated Financial Statements. The Company uses a number of valuation techniques for investments carried at fair value, which are described in Note 25 to the Consolidated Financial Statements. Realized gains and losses on sales of investments are included in earnings.

13

Securities Borrowed and Securities Loaned Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 26 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate. The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection. As described in Note 25 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.

recognized as adjustments to income over the lives of the related loans. As described in Note 26 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate. Loans for which the fair value option has not been elected are classified upon origination or acquisition as either held-for-investment or held-for-sale. This classification is based on management’s initial intent and ability with regard to those loans. Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale, the loan is reclassified to held-for-sale, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.

Repurchase and Resale Agreements Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 26 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to the majority of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate. Where the conditions of ASC 210-20-45-11, Balance Sheet-Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet. The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection. As described in Note 25 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.

Consumer Loans Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Citi Holdings. Consumer Non-accrual and Re-aging Policies As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities discharged through Chapter 7 bankruptcy, other than FHAinsured loans, are classified as non-accrual. Commercial market loans are placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forwardlooking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due. Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from one to six) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of

Loans Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs except that credit card receivable balances also include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and 14

sustained payment performance (minimum six months of consecutive payments). For U.S. consumer loans, generally one of the conditions to qualify for modification is that a minimum number of payments (typically ranging from one to three) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain openended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For 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 may only be modified under those respective agencies’ guidelines and payments are not always required in order to re-age a modified loan to current.





• •

Corporate Loans Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectable. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of cost or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.

Consumer Charge-Off Policies Citi’s charge-off policies follow the general guidelines below: • • • • • •







or in accordance with Citi’s charge-off policy, whichever occurs earlier. Consistent with OCC guidance, real estate-secured loans that were discharged through Chapter 7 bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell. Other real estate-secured loans in bankruptcy are written down to the estimated value of the property, less costs to sell, at the later of 60 days after notification or 60 days contractually past due. Non-bank loans secured by real estate that are discharged through Chapter 7 bankruptcy are written down to the estimated value of the property, less costs to sell, at 60 days contractually past due. Non-bank unsecured personal loans in bankruptcy are charged off when they are 30 days contractually past due. Commercial market loans are written down to the extent that principal is judged to be uncollectable.

Unsecured installment loans are charged off at 120 days contractually past due. Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due. Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due. Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due. Real estate-secured loans are charged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans. Non-bank real estate-secured loans are charged off at the earlier of 180 days contractually past due, if there have been no payments within the last six months, or 360 days contractually past due, if a decision has been made not to foreclose on the loans. Non-bank loans secured by real estate are written down to the estimated value of the property, less costs to sell, at the earlier of the receipt of title, the initiation of foreclosure (a process that must commence when payments are 120 days contractually past due), when the loan is 180 days contractually past due if there have been no payments within the past six months or 360 days contractually past due. Non-bank unsecured personal loans are charged off at the earlier of 180 days contractually past due if there have been no payments within the last six months, or 360 days contractually past due. Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court

Loans Held-for-Sale Corporate and consumer loans that have been identified for sale are classified as loans held-for-sale and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as held-for-sale and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, held-for-sale loans are accounted for at the lower of cost or market value, with any 15

write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.

collateral less disposal costs. These expected cash flows incorporate modification program default rate assumptions. The original contractual effective rate for credit card loans is the pre-modification rate, which may include interest rate increases under the original contractual agreement with the borrower. Valuation allowances for commercial market loans, which are classifiably managed Consumer loans, are determined in the same manner as for Corporate loans and are described in more detail in the following section. Generally, an asset-specific component is calculated under ASC 310-10-35 on an individual basis for larger-balance, non-homogeneous loans that are considered impaired and the allowance for the remainder of the classifiably managed Consumer loan portfolio is calculated under ASC 450 using a statistical methodology that may be supplemented by management adjustment.

Allowance for Loan Losses Allowance for loan losses represents management’s best estimate of probable losses inherent in the portfolio, including probable losses related to large individually evaluated impaired loans and troubled debt restructurings. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable loan losses inherent in the overall portfolio. Additions to the allowance are made through the Provision for loan losses. Loan losses are deducted from the allowance and subsequent recoveries are added. Assets received in exchange for loan claims in a restructuring are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the provision.

Corporate Loans In the corporate portfolios, the Allowance for loan losses includes an asset-specific component and a statistically based component. The asset-specific component is calculated under ASC 310-10-35, on an individual basis for larger-balance, non-homogeneous loans, which are considered impaired. An asset-specific allowance is established when the discounted cash flows, collateral value (less disposal costs) or observable market price of the impaired loan are lower than its carrying value. This allowance considers the borrower’s overall financial condition, resources, and payment record, the prospects for support from any financially responsible guarantors (discussed further below) and, if appropriate, the realizable value of any collateral. The asset-specific component of the allowance for smaller balance impaired loans is calculated on a pool basis considering historical loss experience. The allowance for the remainder of the loan portfolio is determined under ASC 450 using a statistical methodology, supplemented by management judgment. The statistical analysis considers the portfolio’s size, remaining tenor and credit quality as measured by internal risk ratings assigned to individual credit facilities, which reflect probability of default and loss given default. The statistical analysis considers historical default rates and historical loss severity in the event of default, including historical average levels and historical variability. The result is an estimated range for inherent losses. The best estimate within the range is then determined by management’s quantitative and qualitative assessment of current conditions, including general economic conditions, specific industry and geographic trends, and internal factors including portfolio concentrations, trends in internal credit quality indicators, and current and past underwriting standards. For both the asset-specific and the statistically based components of the Allowance for loan losses, management may incorporate guarantor support. The financial wherewithal of the guarantor is evaluated, as applicable, based on net worth, cash flow statements and personal or company financial statements which are updated and reviewed at least annually. Citi seeks performance on

Consumer Loans For consumer loans, each portfolio of non-modified smallerbalance, homogeneous loans is independently evaluated for impairment by product type (e.g., residential mortgage, credit card, etc.) in accordance with ASC 450, Contingencies. The allowance for loan losses attributed to these loans is established via a process that estimates the probable losses inherent in the specific portfolio. This process includes migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses that reflect current and anticipated economic conditions, including changes in housing prices and unemployment trends. Citi’s allowance for loan losses under ASC 450 only considers contractual principal amounts due, except for credit card loans where estimated loss amounts related to accrued interest receivable are also included. Management also considers overall portfolio indicators, including historical credit losses, delinquent, non-performing and classified loans, trends in volumes and terms of loans, an evaluation of overall credit quality, the credit process, including lending policies and procedures, and economic, geographical, product and other environmental factors. Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a troubled debt restructuring (TDR). Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The allowance for loan losses for TDRs is determined in accordance with ASC 310-10-35, Receivables —Subsequent Measurement (formerly SFAS 114) 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 16

guarantee arrangements in the normal course of business. Seeking performance entails obtaining satisfactory cooperation from the guarantor or borrower 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. A guarantor’s reputation and willingness to work with Citigroup is evaluated based on the historical experience with the guarantor and the knowledge of the marketplace. In the rare event that the guarantor is unwilling or unable to perform or facilitate borrower cooperation, Citi pursues a legal remedy; however, enforcing a guarantee via legal action against the guarantor is not the primary means of resolving a troubled loan situation and rarely occurs. If Citi does not pursue a legal remedy, it is because Citi does not believe that the guarantor has the financial wherewithal to perform regardless of legal action or because there are legal limitations on simultaneously pursuing guarantors and foreclosure. A guarantor’s reputation does not impact Citi’s decision or ability to seek performance under the guarantee. In cases where a guarantee is a factor in the assessment of loan losses, it is included via adjustment to the loan’s internal risk rating, which in turn is the basis for the adjustment to the statistically based component of the Allowance for loan losses. To date, it is only in rare circumstances that an impaired commercial loan or commercial real estate loan is carried at a value in excess of the appraised value due to a guarantee. When Citi’s monitoring of the loan indicates that the guarantor’s wherewithal to pay is uncertain or has deteriorated, there is either no change in the risk rating, because the guarantor’s credit support was never initially factored in, or the risk rating is adjusted to reflect that uncertainty or deterioration. Accordingly, a guarantor’s ultimate failure to perform or a lack of legal enforcement of the guarantee does not materially impact the allowance for loan losses, as there is typically no further significant adjustment of the loan’s risk rating at that time. Where Citi is not seeking performance under the guarantee contract, it provides for loan losses as if the loans were non-performing and not guaranteed.

and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below: Estimated probable losses for non-performing, nonhomogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower. Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of expected future cash flows discounted at the loan’s original effective rate; (ii) the borrower’s overall financial condition, resources and payment record; and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the allowance for loan losses for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on the present value of expected future cash flows, the entire change in present value is recorded in the Provision for loan losses. Statistically calculated losses inherent in the classifiably managed portfolio for performing and de minimis nonperforming exposures. The calculation is based on: (i) Citi’s internal system of credit-risk ratings, which are analogous to the risk ratings of the major rating agencies; and (ii) historical default and loss data, including rating agency information regarding default rates from 1983 to 2014 and internal data dating to the early 1970s on severity of losses in the event of default. Adjustments may be made to this data. Such adjustments include: (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans, and the degree to which there are large obligor concentrations in the global portfolio; and (ii) adjustments made for specific known items, such as current environmental factors and credit trends. In addition, representatives from each of the risk management and finance staffs that cover business areas with delinquency-managed portfolios containing smallerbalance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each individual product within each geographic region in which these portfolios exist. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, the size and diversity of individual large credits, and the ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could

Reserve Estimates and Policies Management provides reserves for an estimate of probable losses inherent in the funded loan portfolio on the Consolidated Balance Sheet in the form of an allowance for loan losses. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with representatives from the risk management and finance staffs for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit-risk ratings are assigned (primarily ICG and GCB) or modified Consumer loans, where concessions were granted due to the borrowers’ financial difficulties. The above-mentioned representatives for these business areas present recommended reserve balances for their funded 17

have a direct impact on the credit costs in any period and could result in a change in the allowance.

reporting units. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit determined in step one over the fair value of the net assets and identifiable intangibles as if the reporting unit were being acquired. If the amount of the goodwill allocated to the reporting unit exceeds the implied fair value of the goodwill in the pro forma purchase price allocation, an impairment charge is recorded for the excess. A recognized impairment charge cannot exceed the amount of goodwill allocated to a reporting unit and cannot subsequently be reversed even if the fair value of the reporting unit recovers. Additional information on Citi’s goodwill impairment testing can be found in Note 17 to the Consolidated Financial Statements.

Allowance for Unfunded Lending Commitments A similar approach to the allowance for loan losses is used for calculating a reserve for the expected losses related to unfunded lending commitments and standby letters of credit. This reserve is classified on the balance sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in the Provision for unfunded lending commitments. Mortgage Servicing Rights Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income. Additional information on the Company’s MSRs can be found in Note 22 to the Consolidated Financial Statements.

Intangible Assets Intangible assets, including core deposit intangibles, present value of future profits, purchased credit card relationships, other customer relationships, and other intangible assets, but excluding MSRs, are amortized over their estimated useful lives. Intangible assets deemed to have indefinite useful lives, primarily certain asset management contracts and trade names, are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the intangible asset. Similar to the goodwill impairment analysis, in performing the annual impairment analysis for indefinitelived intangible assets, Citi may and has elected to bypass the optional qualitative assessment, choosing instead to perform a quantitative analysis.

Goodwill Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired. Goodwill is subject to annual impairment testing and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Under ASC 350, Intangibles—Goodwill and Other, the Company has an option to assess qualitative factors to determine if it is necessary to perform the goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not morelikely-than-not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, the Company determines that it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount, then the Company must perform the first step of the two-step goodwill impairment test. The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any reporting period and proceed directly to the first step of the goodwill impairment test. Furthermore, on any business dispositions, goodwill is allocated to the disposed business based on the ratio of the fair value of the disposed business to the fair value of the reporting unit. The first step requires a comparison of the fair value of the individual reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not to be impaired and no further analysis is necessary. If the carrying value of the reporting unit exceeds the fair value, this is an indication of potential impairment and a second step of testing is performed to measure the amount of impairment, if any, for that reporting unit. If required, the second step involves calculating the implied fair value of goodwill for each of the affected

Other Assets and Other Liabilities Other assets include, among other items, loans held-for-sale, deferred tax assets, equity method investments, interest and fees receivable, premises and equipment (including purchased and developed software), repossessed assets, and other receivables. Other liabilities include, among other items, accrued expenses and other payables, deferred tax liabilities, and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves, and other matters. Other Real Estate Owned and Repossessed Assets Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.

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Securitizations The Company primarily securitizes credit card receivables and mortgages. Other types of securitized assets include corporate debt instruments (in cash and synthetic form). There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be VIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated. Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, spread accounts and servicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on Citi’s Consolidated Balance Sheet. The securitized loans remain on the balance sheet. Substantially all of the Consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Mortgage servicing rights on Citigroup’s Consolidated Balance Sheet.

the Consolidated Balance Sheet and the sale proceeds are recognized as the Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, those opinions must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency. For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing. See Note 22 to the Consolidated Financial Statements for further discussion. Risk Management Activities—Derivatives Used for Hedging Purposes The Company manages its exposures to market rate movements outside its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest-rate swaps, futures, forwards, and purchased options, as well as foreignexchange contracts. These end-user derivatives are carried at fair value in Other assets, Other liabilities, Trading account assets and Trading account liabilities. To qualify as an accounting hedge under the hedge accounting rules (versus an economic hedge where hedge accounting is not sought), a derivative must be highly effective in offsetting the risk designated as being hedged. The hedge relationship must be formally documented at inception, detailing the particular risk management objective and strategy for the hedge. This includes the item and risk being hedged, the derivative being used and how effectiveness will be assessed and ineffectiveness measured. The effectiveness of these hedging relationships is evaluated both on a retrospective and prospective basis, typically using quantitative measures of correlation with hedge ineffectiveness measured and recorded in current earnings. If a hedge relationship is not highly effective, it no longer qualifies as an accounting hedge and hedge accounting may not be applied. Any gains or losses attributable to the derivatives, as well as subsequent changes in fair value, are recognized in Other revenue or Principal transactions with no offset to the hedged item, similar to trading derivatives. The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but are subject to various limits and controls. The underlying asset, liability or forecasted transaction may be an individual item or a portfolio of similar items.

Debt Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes at fair value, or the debt is in a fair value hedging relationship. Transfers of Financial Assets For a transfer of financial assets to be considered a sale: (i) the assets must have been legally isolated from the Company, even in bankruptcy or other receivership; (ii) the purchaser must have the right to pledge or sell the assets transferred or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell or pledge their beneficial interests; and (iii) the Company may not have an option or obligation to reacquire the assets. If these sale requirements are met, the assets are removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on 19

For fair value hedges, in which derivatives hedge the fair value of assets or liabilities, changes in the fair value of derivatives are reflected in Other revenue, together with changes in the fair value of the hedged item related to the hedged risk. These amounts are expected to, and generally do, offset each other. Any net amount, representing hedge ineffectiveness, is reflected in current earnings. Citigroup’s fair value hedges are primarily hedges of fixed-rate longterm debt and available-for-sale securities. For cash flow hedges, in which derivatives hedge the variability of cash flows related to floating- and fixed-rate assets, liabilities or forecasted transactions, the accounting treatment depends on the effectiveness of the hedge. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, the effective portion of the changes in the derivatives’ fair values will not be included in current earnings, but is reported in Accumulated other comprehensive income (loss). These changes in fair value will be included in earnings of future periods when the hedged cash flows impact earnings. To the extent these derivatives are not effective, changes in their fair values are immediately included in Other revenue. Citigroup’s cash flow hedges primarily include hedges of floating-rate debt and floating-rate assets, including loans and securities purchased under agreements to resell, as well as rollovers of short-term fixed-rate liabilities and floating-rate liabilities and forecasted debt issuances. For net investment hedges in which derivatives hedge the foreign currency exposure of a net investment in a foreign operation, the accounting treatment will similarly depend on the effectiveness of the hedge. The effective portion of the change in fair value of the derivative, including any forward premium or discount, is reflected in Accumulated other comprehensive income (loss) as part of the foreign currency translation adjustment. For those accounting hedge relationships that are terminated or when hedge designations are removed, the hedge accounting treatment described in the paragraphs above is no longer applied. Instead, the end-user derivative is terminated or transferred to the trading account. For fair value hedges, any changes in the fair value of the hedged item remain as part of the basis of the asset or liability and are ultimately reflected as an element of the yield. For cash flow hedges, any changes in fair value of the end-user derivative remain in Accumulated other comprehensive income (loss) and are included in earnings of future periods when the hedged cash flows impact earnings. However, if it becomes probable that some or all of the hedged forecasted transactions will not occur, any amounts that remain in Accumulated other comprehensive income (loss) related to these transactions are immediately reflected in Other revenue. End-user derivatives that are economic hedges, rather than qualifying for hedge accounting, are also carried at fair value, with changes in value included in Principal transactions or Other revenue. Citigroup often uses economic hedges when qualifying for hedge accounting would be too complex or operationally burdensome. Examples are hedges of the credit risk component of

commercial loans and loan commitments. Citigroup periodically evaluates its hedging strategies in other areas and may designate either a qualifying hedge or an economic hedge, after considering the relative costs and benefits. Economic hedges are also employed when the hedged item itself is marked to market through current earnings, such as hedges of commitments to originate one-to-four-family mortgage loans to be held for sale and MSRs. See Note 23 to the Consolidated Financial Statements for a further discussion of the Company’s hedging and derivative activities. Employee Benefits Expense Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits. For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements. Stock-Based Compensation The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by expected forfeitures. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s stock price. See Note 7 to the Consolidated Financial Statements. Income Taxes The Company is subject to the income tax laws of the U.S. and its states and municipalities, and the foreign jurisdictions in which it operates. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about the application of these inherently complex tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign. Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of 20

the various tax jurisdictions or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense. Deferred taxes are recorded for the future consequences of events that have been recognized for financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment that realization is more-likely-than-not. FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) (now incorporated into ASC 740, Income Taxes), sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is morelikely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is greater than 50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves. See Note 9 to the Consolidated Financial Statements for a further description of the Company’s tax provision and related income tax assets and liabilities.

estimates are used in connection with certain fair value measurements. See Note 25 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. Moreover, estimates are significant in determining the amounts of other-thantemporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and tax reserves. While management makes its best judgment, actual amounts or results could differ from those estimates. Current market conditions increase the risk and complexity of the judgments in these estimates. Cash Flows Cash equivalents are defined as those amounts included in Cash and due from banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities. Related Party Transactions The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business.

Commissions, Underwriting and Principal Transactions Commissions revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a tradedate basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for commissions and fees, and Note 6 to the Consolidated Financial Statements for details of principal transactions revenue.

ACCOUNTING CHANGES Debt Issuance Costs In April 2015, the FASB issued Accounting Standards Update (ASU) 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to conform the presentation of debt issuance costs to that of debt discounts and premiums. Thus, the ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The guidance is effective beginning on January 1, 2016; however, Citi elected to early adopt the ASU on July 1, 2015 which resulted in an approximately $150 million reclassification from Other assets to Long-term debt. The retrospective application was deemed immaterial and, as such, prior periods were not restated.

Earnings per Share Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation. Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of earnings to the participating securities.

Accounting for Investments in Tax Credit Partnerships In January 2014, the FASB issued ASU No. 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. Any transition adjustment is reflected as an adjustment to retained earnings in the earliest period presented (retrospective application). The ASU is applicable to Citi’s portfolio of low income housing tax credit (LIHTC) partnership interests. The new standard widens the scope of investments eligible to elect to apply a new alternative method, the proportional amortization method, under which the cost of the investment

Use of Estimates Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such 21

Discontinued Operations and Significant Disposals The FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 810) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08) in April 2014. ASU 2014-08 changes the criteria for reporting discontinued operations while enhancing disclosures. Under the ASU, only disposals representing a strategic shift having a major effect on an entity’s operations and financial results, such as a disposal of a major geographic area, a major line of business or a major equity method investment, may be presented as discontinued operations. Additionally, the ASU requires expanded disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. The Company early-adopted the ASU in the second quarter of 2014 on a prospective basis for all disposals (or classifications as held-for-sale) of components of an entity that occurred on or after April 1, 2014. As a result of the adoption of the ASU, fewer disposals will now qualify for reporting as discontinued operations; however, disclosure of the pretax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting is required. The impact of adopting the ASU was not material.

is amortized to tax expense in proportion to the amount of tax credits and other tax benefits received. Citi qualifies to elect the proportional amortization method under the ASU for its entire LIHTC portfolio. These investments were previously accounted for under the equity method, which resulted in losses (due to amortization of the investment) being recognized in Other revenue and tax credits and benefits being recognized in the Income tax expense line. In contrast, the proportional amortization method combines the amortization of the investment and receipt of the tax credits/ benefits into one line, Income tax expense. Citi adopted ASU 2014-01 in the first quarter of 2015. The adoption of this ASU was applied retrospectively and cumulatively reduced Retained earnings by approximately $349 million, Other assets by approximately $178 million, and deferred tax assets by approximately $171 million. Accounting for Repurchase-to-Maturity Transactions In June 2014, the FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The ASU changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The ASU also requires disclosures about transfers accounted for as sales in transactions that are economically similar to repurchase agreements (see Note 23 to the Consolidated Financial Statements) and about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings (see Note 11 to the Consolidated Financial Statements). The ASU’s provisions became effective for Citi in the first quarter of 2015, with the exception of the collateral disclosures which became effective in the second quarter of 2015. The effect of adopting the ASU is required to be reflected as a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. Adoption of the ASU did not have a material effect on the Company’s financial statements.

Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure In August 2014, the FASB issued ASU No. 2014-14, Receivables-Troubled Debt Restructuring by Creditors (Subtopic 310-40): Classification of Certain GovernmentGuaranteed Mortgage Loans upon Foreclosure, which requires that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met: (i) the loan has a government guarantee that is not separable from the loan before foreclosure; (ii) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (iii) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable is measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. Citi early adopted the ASU on a modified retrospective basis in the fourth quarter of 2014, which resulted in reclassifying approximately $130 million of foreclosed assets from Other Real Estate Owned to a separate other receivable that is included in Other assets. Given the modified retrospective approach to adoption, prior periods have not been restated.

Disclosures for Investments in Certain Entities That Calculate Net Asset Value (NAV) per Share In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which is intended to reduce diversity in practice related to the categorization of investments measured at NAV within the fair value hierarchy. The ASU removes the current requirement to categorize investments for which fair value is measured using the NAV per share practical expedient within the fair value hierarchy. Citi elected to early adopt the ASU in the second quarter of 2015. The adoption of the ASU was applied retrospectively and reduced Level 3 assets by $1.0 billion and $1.1 billion as of December 31, 2015 and December 31, 2014, respectively.

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FUTURE APPLICATION OF ACCOUNTING STANDARDS

recognition guidance in GAAP when it becomes effective on January 1, 2018. Early application is permitted for annual periods beginning after December 15, 2016; however, the Company does not expect to early adopt. The ASU is not applicable to financial instruments and, therefore, is not expected to impact a majority of the Company’s revenue, including net interest income. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.

Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This ASU will require entities to present separately in OCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (DVA) when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. It will also require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the current available-for-sale category. However, Federal Reserve Bank and Federal Home Loan Bank stock as well as exchange seats will continue to be presented at cost. As a practical expedient, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The guidance is effective beginning on January 1, 2018; however, early adoption is permitted only for the amendment in the ASU related to presentation of DVA for financial liabilities measured under the fair value option. Citi expects to early adopt this amendment as of January 1, 2016. The impact of adopting this amendment is not expected to be material to Citi’s balance sheet at January 1, 2016; however, in subsequent periods the changes in DVA are dependent on changes in Citi’s credit spreads and could be material in any given period.

Accounting for Financial Instruments—Credit Losses In December 2012, the FASB issued a proposed ASU, Financial Instruments—Credit Losses. This proposed ASU, or exposure draft, was issued for public comment in order to allow stakeholders the opportunity to review the proposal and provide comments to the FASB and does not constitute accounting guidance until a final ASU is issued. The exposure draft contains proposed guidance developed by the FASB with the goal of improving financial reporting about expected credit losses on loans, securities and other financial assets held by financial institutions and other organizations. The exposure draft proposes a new accounting model intended to require earlier recognition of credit losses, while also providing additional transparency about credit risk. The FASB’s proposed model would utilize an “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired and adjusted each period for changes in expected credit losses. For available-for-sale securities where fair value is less than cost, credit-related impairment would be recognized in an allowance for credit losses and adjusted each period for changes in credit risk. This would replace the multiple existing impairment models in GAAP, which generally require that a loss be incurred before it is recognized. The FASB’s proposed model represents a significant departure from existing GAAP, and may result in material changes to the Company’s accounting for financial instruments. The impact of the FASB’s final ASU on the Company’s financial statements will be assessed when it is issued. The Company expects that the final ASU will be effective for Citi as of January 1, 2019.

Consolidation In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which intended to improve certain areas of consolidation guidance for legal entities such as limited partnerships, limited liability companies, and securitization structures. The ASU reduced the number of consolidation models and became effective on January 1, 2016. Adoption of ASU 2015-02 did not have a material impact on the Company’s Consolidated Financial Statements.

Lease Accounting In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability of accounting for lease transactions. The ASU will require all leases to be recognized on the balance sheet as lease assets and lease liabilities and will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. Lessor accounting is largely unchanged. The guidance is effective beginning January 1, 2019 with an option to early adopt. The Company is evaluating whether to early adopt and the effect that ASU 2016-02 will have on its consolidated financial statements, regulatory capital and related disclosures.

Revenue Recognition In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue 23

2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS Discontinued Operations The following Discontinued operations are recorded within the Corporate/Other segment.

Combined Results for Discontinued Operations The following is summarized financial information for Credicard, CCA, Egg and previous Discontinued operations for which Citi continues to have minimal residual costs associated with the sales:

Sale of Brazil Credicard Business Citi sold its non-Citibank-branded cards and consumer finance business in Brazil (Credicard) in 2013 and reported it as Discontinued operations. Residual costs and resolution of certain contingencies from the disposal resulted in income from Discontinued operations, net of taxes, of $6 million and $52 million for 2015 and 2014, respectively.

2015

In millions of dollars (1)

2014

2013

Total revenues, net of interest expense

$

— $

74 $ 1,086

Income (loss) from discontinued operations

$

(83) $

10 $ (242)

Gain on sale Provision (benefit) for income taxes





268

(29)

12

(244)

(54) $

(2) $

Sale of Certain Citi Capital Advisors Business Citi sold its liquid strategies business within Citi Capital Advisors (CCA) pursuant to two separate transactions in 2013 and reported them as Discontinued operations. Residual costs from the disposals resulted in income and losses from Discontinued operations, net of taxes, of $1 million and $4 million for 2015 and 2014, respectively.

(1) Total revenues include gain or loss on sale, if applicable.

Sale of Egg Banking plc Credit Card Business Citi completed the sale of the Egg Banking plc (Egg) credit card business in 2011 and reported it as Discontinued operations. Residual costs from the disposal resulted in losses from Discontinued operations, net of taxes, of $61 million and $30 million for 2015 and 2014, respectively.

Significant Disposals The following sales completed during 2015 and 2014 were identified as significant disposals. The major classes of assets and liabilities derecognized from the Consolidated Balance Sheet at closing and the income (loss) before taxes related to each business until the disposal date are presented below.

Audit of Citi German Consumer Tax Group Citi completed the sale of its German retail banking operations in 2008 and reported them as Discontinued operations. During 2014, residual costs from the disposal resulted in a tax expense of $20 million.

Sale of OneMain Financial Business On November 15, 2015, Citi sold its OneMain Financial business, which was part of Citi Holdings, including 1,100 retail branches, 5,500 employees, and approximately 1.3 million customer accounts. One Main Financial had approximately $10.2 billion of assets, including $7.8 billion of loans (net of allowance), and $1.4 billion of available-for-sale securities. The total amount of liabilities sold was $8.4 billion, including $6.2 billion of long-term debt, and $1.1 billion of short-term borrowings. The transaction generated a pre-tax gain on sale of $2.6 billion, recorded in Other revenue ($1.6 billion after-tax). However, when combined with the loss on redemption of certain long-term debt supporting remaining Citi Holdings’ assets, the resulting net after-tax gain was $0.8 billion. Income before taxes, excluding the pretax gain on sale and loss on redemption of debt, is as follows:

Income (loss) from discontinued operations, net of taxes

$

270

Cash flows for the Discontinued operations were not material for all periods presented.

2015

In millions of dollars

Income before taxes

24

$

2014

2013

663 $ 890 $ 923

Sale of Japan Cards Business On December 14, 2015, Citi sold its Japan cards business, which was part of Citi Holdings, including $1,350 million of consumer loans (net of allowance), approximately 720,000 customer accounts and 840 employees. The transaction generated a pretax gain on sale of $180 million, recorded in Other revenue ($155 million after-tax). Income (loss) before taxes, excluding the pretax gain on sale, is as follows: 2014

2015

In millions of dollars

Income (loss) before taxes

(5) $

$

Sale of Greece Consumer Operations On September 30, 2014, Citi sold its consumer operations in Greece, which were part of Citi Holdings, including $353 million of consumer loans (net of allowance), $1.1 billion of assets under management, $1.2 billion of customer deposits, 20 branches, 85 ATMs and 719 employees, with the buyer assuming certain limited pension obligations related to Diners’ Club’s employees at closing. The transaction generated a pretax gain on sale of $209 million, recorded in Other revenue ($91 million after-tax). Income (loss) before taxes, excluding the pretax gain on sale, is as follows:

2013

— $

46

In millions of dollars

Income (loss) before taxes

Sale of Japan Retail Banking Business On November 1, 2015, Citi sold its Japan retail banking business, which was part of Citi Holdings, including $563 million of consumer loans (net of allowance), $20 billion of deposits, approximately 725,000 customer accounts, 1,600 employees and 32 branches. The transaction generated a pretax gain on sale of $446 million, recorded in Other revenue ($276 million after-tax). Income (loss) before taxes (benefits), excluding the pretax gain on sale, is as follows:

Income (loss) before taxes

2014

2015

In millions of dollars

$

(57) $

2013

(5) $

31

Sale of Spain Consumer Operations On September 22, 2014, Citi sold its consumer operations in Spain, which were part of Citi Holdings, including $1.7 billion of consumer loans (net of allowance), $3.4 billion of assets under management, $2.2 billion of customer deposits, 45 branches, 48 ATMs and 938 employees, with the buyer assuming the related current pension commitments at closing. The transaction generated a pretax gain on sale of $243 million, recorded in Other revenue ($131 million after-tax). Income before taxes, excluding the pretax gain on sale, is as follows: 2015

In millions of dollars

Income before taxes

$

2014

— $ 130 $

2013 59

25

2015 $

— $

2014

2013

(76) $ (113)

3. BUSINESS SEGMENTS Citigroup’s activities are conducted through the GCB, ICG, Corporate/Other and Citi Holdings business segments. GCB includes a global, full-service consumer franchise delivering a wide array of banking, including commercial banking, credit card lending and investment services through a network of local branches, offices and electronic delivery systems and is composed of four GCB businesses: North America, EMEA, Latin America and Asia. ICG is composed of Banking and Markets and securities services and provides corporate, institutional, public sector and high-net-worth clients in approximately 100 countries with a broad range of banking and financial products and services. Corporate/Other includes certain unallocated costs of global functions, other corporate expenses and net treasury results, unallocated corporate expenses, offsets to certain lineitem reclassifications and eliminations, the results of discontinued operations and unallocated taxes. Citi Holdings is composed of businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp businesses. The accounting policies of these reportable segments are the same as those disclosed in Note 1 to the Consolidated Financial Statements. The prior-period balances reflect reclassifications to conform the presentation to the presentation as of the first Revenues, net of interest expense(1) In millions of dollars, except identifiable assets in billions

2015

2014

2013

Global Consumer Banking $ 32,495 $ 34,296 $ 34,395 $ Institutional Clients 33,312 33,580 33,991 Group Corporate/Other Total Citicorp Citi Holdings Total (1) (2)

908

303

322

$ 67,394 $ 67,911 $ 68,297 $ 8,960

9,308

8,427

$ 76,354 $ 77,219 $ 76,724 $

quarter of 2016. Effective January 1, 2016, the historical financial data was reclassified from Citicorp to Citi Holdings for the consumer businesses in Argentina, Brazil and Colombia that Citi intends to exit. These businesses, which previously were reported as part of Latin America GCB, are now reported as part of Citi Holdings. While Citi does not intend to exit its consumer businesses in Venezuela, these businesses are not significant, lending predominantly to support ICG activities, and are now reported as part of ICG. Similarly, Citi’s remaining indirect investment in Banco de Chile is now reported as part of ICG. The following also reflects certain other regional reclassifications within ICG and certain other immaterial reclassifications. Citi’s consolidated results remain unchanged for all periods presented as a result of these reclassifications. In addition, as discussed in Note 1 to the Consolidated Financial Statements, Citi adopted ASU 2014-01 in the first quarter of 2015. The ASU is applicable to Citi’s portfolio of low income housing tax credit partnership interests. Citi’s disclosures reflect the retrospective application of the ASU and impacts Citi’s consolidated assets, revenues, provision for income taxes and net income for all periods presented. The following table presents certain information regarding the Company’s continuing operations by segment:

Provision (benefits) for income taxes 2015

2014

2013

3,430 $ 3,404 $ 4,129

4,426

(344)

(1,338)

6,518 $ 7,189 $ 8

922

Income (loss) from continuing operations(2)

7,440 $ 7,197 $

2015

2014

3,391 $

6,376 $ 6,702 $

4,197

9,529

(215)

496

9,645 (5,373)

Identifiable assets

2013 6,493 $ 9,473 (514)

7,373 $ 16,401 $ 10,974 $ 15,452 $ (1,187)

985

(3,470)

(1,836)

6,186 $ 17,386 $ 7,504 $ 13,616 $

2015 381 $ 1,217 52 1,650 $ 81 1,731 $

2014 393 1,261 50 1,704 138 1,842

Includes Citicorp (excluding Corporate/Other) total revenues, net of interest expense, in North America of $32.7 billion, $32.9 billion and $31.5 billion; in EMEA of $10.0 billion, $9.5 billion and $10.2 billion; in Latin America of $9.8 billion, and $10.8 billion and $11.3 billion; and in Asia of $14.0 billion, $14.4 billion and $15.0 billion in 2015, 2014 and 2013, respectively. Includes pretax provisions for credit losses and for benefits and claims in the GCB results of $5.5 billion, $5.5 billion and $6.1 billion; in the ICG results of $962 million, $47 million and $86 million; and in Citi Holdings results of $1.5 billion, $1.9 billion and $2.3 billion in 2015, 2014 and 2013, respectively.

26

4. INTEREST REVENUE AND EXPENSE Interest revenue and Interest expense consisted of the following: 2014

2015

In millions of dollars

2013

Interest revenue Loan interest, including fees

$

Deposits with banks

40,510 $

44,776 $

45,580

727

959

1,026

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

2,516

2,366

2,566

Investments, including dividends

7,017

7,195

6,919

Trading account assets(1)

5,942

5,880

6,277

(2)

Other interest

1,839

Total interest revenue

507

602

$

58,551 $

61,683 $

62,970

$

5,052 $

5,692 $

6,236

1,614

1,895

2,339

216

168

169

Interest expense Deposits(3) Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities(1) Short-term borrowings Long-term debt

522

580

597

4,517

5,355

6,836

Total interest expense

$

11,921 $

13,690 $

16,177

Net interest revenue

$

46,630 $

47,993 $

46,793

$

39,522 $

Provision for loan losses

7,108

Net interest revenue after provision for loan losses (1) (2) (3)

6,828 41,165 $

Interest expense on Trading account liabilities of ICG is reported as a reduction of interest revenue from Trading account assets. During 2015, interest earned related to assets of significant disposals (primarily OneMain Financial) were reclassified into Other interest. Includes deposit insurance fees and charges of $1,118 million and $1,038 million and $1,132 million for 2015, 2014 and 2013, respectively.

27

7,604 39,189

5. COMMISSIONS AND FEES Trading-related fees primarily include commissions and fees from the following: executing transactions for clients on exchanges and over-the-counter markets; sale of mutual funds, insurance and other annuity products; and assisting clients in clearing transactions, providing brokerage services and other such activities. Trading-related fees are recognized when earned in Commissions and fees. Gains or losses, if any, on these transactions are included in Principal transactions (see Note 6 to the Consolidated Financial Statements). Credit card and bank card fees are primarily composed of interchange revenue and certain card fees, including annual fees, reduced by reward program costs and certain partner payments. Interchange revenue and fees are recognized when earned. Annual card fees are deferred and amortized on a straight-line basis over a 12-month period. Reward costs are recognized when points are earned by the customers. The following table presents Commissions and fees revenue:

The primary components of Commissions and fees revenue are investment banking fees, trading-related fees, credit card and bank card fees and fees related to trade and securities services in ICG. Investment banking fees are substantially composed of underwriting and advisory revenues and are recognized when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the closing of the transaction. Underwriting revenue is recorded in Commissions and fees, net of both reimbursable and nonreimbursable expenses, consistent with the AICPA Audit and Accounting Guide for Brokers and Dealers in Securities (codified in ASC 940-605-05-1). Expenses associated with advisory transactions are recorded in Other operating expenses, net of client reimbursements. Out-of-pocket expenses are deferred and recognized at the time the related revenue is recognized. In general, expenses incurred related to investment banking transactions that fail to close (are not consummated) are recorded gross in Other operating expenses.

2014

2015

In millions of dollars

Investment banking

2013

3,423 $

3,687 $

3,315

Trading-related

2,345

2,503

2,563

Credit cards and bank cards

1,786

2,227

2,472

Trade and securities services

1,735

1,871

1,847

Other consumer

685

885

911

Corporate finance(2)

493

531

516

Checking-related

497

531

551

Loan servicing

404

380

500

$

(1)

Other Total commissions and fees (1) (2)

$

480

417

11,848 $

13,032 $

266 12,941

Primarily consists of fees for investment fund administration and management, third-party collections, commercial demand deposit accounts and certain credit card services. Consists primarily of fees earned from structuring and underwriting loan syndications.

28

6. PRINCIPAL TRANSACTIONS

net interest revenue related to trading activities. Principal transactions include CVA (credit valuation adjustments on derivatives), FVA (funding valuation adjustments) on overthe-counter derivatives and DVA (debt valuation adjustments on issued liabilities for which the fair value option has been elected). These adjustments are discussed further in Note 25 to the Consolidated Financial Statements. The following table presents principal transactions revenue:

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 and foreign exchange transactions which are managed on a portfolio basis characterized by primary risk. 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. See Note 4 to the Consolidated Financial Statements for information about

2014

2015

In millions of dollars

Global Consumer Banking

$

Institutional Clients Group

636 $ 5,823

2013 699 $ 5,905

762 6,489

(444)

(380)

$

6,015 $

6,224 $

(7)

474

Total Citigroup

$

6,008 $

6,698 $

7,302

Interest rate risks(1)

$

3,798 $

3,657 $

4,055

1,532

2,008

2,307

Corporate/Other Subtotal Citicorp Citi Holdings

Foreign exchange risks(2) (3)

Equity risks

Commodity and other risks(4) (5)

Credit products and risks Total (1) (2) (3) (4) (5)

$

(75) 7,176 126

(303)

(260)

319

750

590

277

231

703

6,008 $

6,698 $

344 7,302

Includes revenues from government securities and corporate debt, municipal securities, mortgage securities and other debt instruments. Also includes spot and forward trading of currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial futures, OTC options and forward contracts on fixed income securities. Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as FX translation gains and losses. Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes and exchange-traded and OTC equity options and warrants. Primarily includes revenues from crude oil, refined oil products, natural gas and other commodities trades. Includes revenues from structured credit products.

29

7. INCENTIVE PLANS

vesting condition pursuant to which amounts otherwise scheduled to vest will be reduced based on the amount of any pretax loss in the participant’s business in the calendar year preceding the scheduled vesting date. For CAP awards made in February 2013 and later, a minimum reduction of 20% applies for the first dollar of loss. In addition, deferred cash awards made to certain employees in February 2013 and later are subject to a discretionary performance-based vesting condition under which an amount otherwise scheduled to vest may be reduced in the event of a “material adverse outcome” for which a participant has “significant responsibility.” Deferred cash awards made to these employees in February 2014 and later are subject to an additional clawback provision pursuant to which unvested awards may be canceled if the employee engaged in misconduct or exercised materially imprudent judgment, or failed to supervise or escalate the behavior of other employees who did. Certain CAP and other stock-based awards, including those to participants in the EU that are subject to certain discretionary clawback provisions, are subject to variable accounting, pursuant to which the associated value of the award fluctuates with changes in Citigroup’s common stock price until the date that the award is settled, either in cash or shares. For these awards, the total amount that will be recognized as expense cannot be determined in full until the settlement date.

Discretionary Annual Incentive Awards Citigroup grants immediate cash bonus payments, deferred cash awards, stock payments and restricted and deferred stock awards as part of its discretionary annual incentive award program involving a large segment of Citigroup’s employees worldwide. Most of the shares of common stock issued by Citigroup as part of its equity compensation programs are to settle the vesting of the stock components of these awards. Discretionary annual incentive awards are generally awarded in the first quarter of the year based upon the previous year’s performance. Awards valued at less than U.S. $100,000 (or the local currency equivalent) are generally paid entirely in the form of an immediate cash bonus. Pursuant to Citigroup policy and/or regulatory requirements, certain employees and officers are subject to mandatory deferrals of incentive pay and generally receive 25% to 60% of their awards in a combination of restricted or deferred stock and deferred cash. Discretionary annual incentive awards to many employees in the EU are subject to deferral requirements regardless of the total award value, with 50% of the immediate incentive delivered in the form of a stock payment or stock unit award subject to a restriction on sale or transfer or hold back (generally, for six months). Deferred annual incentive awards may be delivered as two awards—a restricted or deferred stock award under Citi’s Capital Accumulation Program (CAP) and a deferred cash award. The applicable mix of CAP and deferred cash awards may vary based on the employee’s minimum deferral requirement and the country of employment. In some cases, the entire deferral will be in the form of either a CAP or deferred cash award. Subject to certain exceptions (principally, for retirementeligible employees), continuous employment within Citigroup is required to vest in CAP and deferred cash awards. Postemployment vesting by retirement-eligible employees and participants who meet other conditions is generally conditioned upon their refraining from competition with Citigroup during the remaining vesting period, unless the employment relationship has been terminated by Citigroup under certain conditions. Generally, the CAP and deferred cash awards vest in equal annual installments over three- or four-year periods. Vested CAP awards are delivered in shares of common stock. Deferred cash awards are payable in cash and earn a fixed notional rate of interest that is paid only if and when the underlying principal award amount vests. Generally, in the EU, vested CAP shares are subject to a restriction on sale or transfer after vesting, and vested deferred cash awards are subject to hold back (generally, for six months in each case). Unvested CAP and deferred cash awards made in January 2011 or later are subject to one or more clawback provisions that apply in certain circumstances, including in the case of employee risk-limit violations or other misconduct, or where the awards were based on earnings that were misstated. CAP awards made to certain employees in February 2013 and later, and deferred cash awards made to certain employees in January 2012, are subject to a formulaic performance-based

Sign-on and Long-Term Retention Awards Stock awards and deferred cash awards may be made at various times during the year as sign-on awards to induce new hires to join Citi or to high-potential employees as long-term retention awards. Vesting periods and other terms and conditions pertaining to these awards tend to vary by grant. Generally, recipients must remain employed through the vesting dates to vest in the awards, except in cases of death, disability or involuntary termination other than for “gross misconduct.” These awards do not usually provide for post-employment vesting by retirement-eligible participants.

30

Outstanding (Unvested) Stock Awards A summary of the status of unvested stock awards granted as discretionary annual incentive or sign-on and long-term retention awards is presented below:

Unvested at January 1, 2015

Weightedaverage grant date fair value per Shares share 50,004,393 $ 42.52

Granted(1)

17,815,456

50.33

Canceled

(2,005,875)

44.71

(23,953,683)

42.53

Unvested stock awards

(2)

Vested

Unvested at December 31, 2015 (1) (2)

41,860,291 $

PSUs are subject to variable accounting, pursuant to which the associated value of the award will fluctuate with changes in Citigroup’s stock price and the attainment of the specified performance goals for each award, until the award is settled solely in cash after the end of the performance period. The value of the award, subject to the performance goals, is estimated using a simulation model that incorporates multiple valuation assumptions, including the probability of achieving the specified performance goals of each award. The risk-free rate used in the model is based on the applicable U.S. Treasury yield curve. Other significant assumptions for the awards are as follows:

45.73

Valuation Assumptions

2015

2014

2013

Expected volatility

27.13%

39.12%

42.65%

0.08%

0.08%

0.12%

Expected dividend yield

The weighted-average fair value of the shares granted during 2014 and 2013 was $49.65 and $43.96, respectively. The weighted-average fair value of the shares vesting during 2015 was approximately $48.09 per share.

A summary of the performance share unit activity for 2015 is presented below:

Total unrecognized compensation cost related to unvested stock awards, excluding the impact of forfeiture estimates, was $634 million at December 31, 2015. The cost is expected to be recognized over a weighted-average period of 1.5 years. However, the value of the portion of these awards that is subject to variable accounting will fluctuate with changes in Citigroup’s common stock price.

Performance Share Units Outstanding, beginning of period Granted

(1)

Canceled

Performance Share Units Certain executive officers were awarded a target number of performance share units (PSUs) on February 19, 2013, for performance in 2012, and to a broader group of executives on February 18, 2014 and February 18, 2015, for performance in 2013 and 2014, respectively. PSUs will be earned only to the extent that Citigroup attains specified performance goals relating to Citigroup’s return on assets and relative total shareholder return against peers over the three-year period beginning with the year of award. The actual dollar amounts ultimately earned could vary from zero, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded. The value of each PSU is equal to the value of one share of Citi common stock. PSUs were granted on February 16, 2016, for performance in 2015. The 2016 PSUs are earned over a three-year performance period based on Citigroup’s relative total shareholder return as compared to peers. The actual dollar amounts ultimately earned could vary from zero, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded. The value of each PSU is equal to the value of one share of Citi common stock.

Payments Outstanding, end of period

Weightedaverage grant date fair value per unit

Units

843,793 $

46.28

513,464

44.07





— 1,357,257 $

— 45.45

(1) The weighted-average grant date fair value per unit awarded in 2014 and 2013 was $48.34 and $42.26, respectively.

Stock Option Programs Stock options have not been granted to Citi’s employees as part of the annual incentive award programs since 2009. All outstanding stock options are fully vested with the related expense recognized as a charge to income in prior periods. Generally, the stock options outstanding have a sixyear term, with some stock options subject to various transfer restrictions. Cash received from employee stock option exercises under this program for the year ended December 31, 2015 was approximately $634 million.

31

Information with respect to stock option activity under Citigroup’s stock option programs follows: 2014

2015

Options Outstanding, beginning of period Canceled Expired Exercised

Weightedaverage Intrinsic exercise value price per share

26,514,119 $

48.00 $

(7,901)

40.80

(1,646,581)

40.85

(18,203,048)

41.39

Outstanding, end of period

6,656,588 $

Exercisable, end of period

6,656,588

6.11

Options

Weightedaverage Intrinsic exercise value price per share

31,508,106 $

50.72 $

(28,257)

40.80



(602,093)

242.43

13.03

(4,363,637)

40.82

26,514,119 $

48.00 $



67.92 $



2013

1.39 —

Options

Weightedaverage Intrinsic exercise value price per share

35,020,397 $

51.20 $



(50,914)

212.35



(86,964)

528.40



11.37

(3,374,413)

40.81

9.54

31,508,106 $

50.72 $

1.39

6.11

26,514,119



30,662,588

The following table summarizes information about stock options outstanding under Citigroup’s stock option programs at December 31, 2015: Options outstanding Range of exercise prices

Number outstanding

Options exercisable

Weighted-average contractual life Weighted-average remaining exercise price

Number exercisable

Weighted-average exercise price

$39.00—$49.99

5,763,424

48.16

5,763,424 $

48.16

$50.00—$99.99

66,660

5.4 years

56.25

66,660

56.25

$100.00—$199.99

502,416

3.0 years

147.13

502,416

147.13

$200.00—$299.99

124,088

2.1 years

240.28

124,088

240.28

200,000

2.1 years

335.50

200,000

335.50

67.92

6,656,588 $

67.92

$300.00—$399.99 Total at December 31, 2015

1.0 year

6,656,588

$

1.3 years $

Other Variable Incentive Compensation Citigroup has various incentive plans globally that are used to motivate and reward performance primarily in the areas of sales, operational excellence and customer satisfaction. Participation in these plans is generally limited to employees who are not eligible for discretionary annual incentive awards.

the vesting period. Once a stock award vests, the shares are freely transferable, unless they are subject to a restriction on sale or transfer for a specified period. All equity awards granted since April 19, 2005, have been made pursuant to stockholder-approved stock incentive plans that are administered by the Personnel and Compensation Committee of the Citigroup Board of Directors, which is composed entirely of independent non-employee directors. At December 31, 2015, approximately 54.4 million shares of Citigroup common stock were authorized and available for grant under Citigroup’s 2014 Stock Incentive Plan, the only plan from which equity awards are currently granted. The 2014 Stock Incentive Plan and predecessor plans permit the use of treasury stock or newly issued shares in connection with awards granted under the plans. Newly issued shares were distributed to settle the vesting of the majority of annual deferred stock awards in 2012 to 2015. Treasury shares were used to settle vestings in the first quarter of 2016. The use of treasury stock or newly issued shares to settle stock awards does not affect the compensation expense recorded in the Consolidated Statement of Income for equity awards.

Summary Except for awards subject to variable accounting, the total expense recognized for stock awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period, other than for awards to retirement-eligible employees and immediately vested awards. Whenever awards are made or are expected to be made to retirement-eligible employees, the charge to income is accelerated based on when the applicable conditions to retirement eligibility were or will be met. If the employee is retirement eligible on the grant date, or the award is vested at grant date, the entire expense is recognized in the year prior to grant. Recipients of Citigroup stock awards generally do not have any stockholder rights until shares are delivered upon vesting or exercise, or after the expiration of applicable required holding periods. Recipients of restricted or deferred stock awards and stock unit awards, however, may be entitled to receive dividends or dividend-equivalent payments during the vesting period. Recipients of restricted stock awards generally are entitled to vote the shares in their award during 32

Incentive Compensation Cost The following table shows components of compensation expense, relating to certain of the above incentive compensation programs, recorded during 2015, 2014 and 2013: 2015

In millions of dollars

Charges for estimated awards to retirement-eligible employees Amortization of deferred cash awards, deferred cash stock units and performance stock units Immediately vested stock award expense(1) Amortization of restricted and deferred stock awards(2) Option expense Other variable incentive compensation Profit sharing plan Total (1)

(2)

$

2014

Future Expenses Associated with Outstanding (Unvested) Awards Citi expects to record compensation expense in future periods as a result of awards granted for performance in 2015 and prior years. Because the awards contain service or other conditions that will be satisfied in the future, the expense of these already-granted awards is recognized over those future period(s). Citi's expected future expenses, excluding the impact of forfeitures, cancellations, clawbacks and repositioning-related accelerations that have not yet occurred, are summarized in the table below. The portion of these awards that is subject to variable accounting will cause the expense amount to fluctuate with changes in Citigroup’s common stock price.

2013

541 $

525 $

468

325

311

323

61

51

54

461

668

862



1

10

773

803

1,076



1

78

2016 2017 Awards granted in 2015 and prior: In millions of dollars

2018

Deferred stock awards $ 339 $ 201 $ Deferred cash awards 215 121 Future expense related to awards already $ 554 $ 322 $ granted Future expense related to awards granted in 297 211 2016(3) Total $ 851 $ 533 $

$ 2,161 $ 2,360 $ 2,871

Represents expense for immediately vested stock awards that generally were stock payments in lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the year prior to grant. All periods include amortization expense for all unvested awards to nonretirement-eligible employees. Amortization is recognized net of estimated forfeitures of awards.

(1) (2) (3)

33

2019 and beyond(1)

88 $ 45

Total(2)

12 $ 4

640 385

133 $

16 $ 1,025

166 299 $

113 787 129 $ 1,812

Principally 2019. $1.6 billion of which is attributable to ICG. Refers to awards granted on or about February 16, 2016, as part of Citi's discretionary annual incentive awards for services performed in 2015.

8. RETIREMENT BENEFITS

to certain U.S. employees. With the exception of certain employees covered under the prior final pay plan formula, the benefits under these plans were frozen in prior years. The plan obligations, plan assets and periodic plan expense for the Company’s most significant pension and postretirement benefit plans (Significant Plans) are measured and disclosed quarterly, instead of annually. The Significant Plans captured approximately 90% of the Company’s global pension and postretirement plan obligations as of December 31, 2015. All other plans (All Other Plans) are measured annually with a December 31 measurement date.

Pension and Postretirement 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 U.S. The U.S. qualified defined benefit plan was frozen effective January 1, 2008 for most employees. Accordingly, no additional compensation-based contributions have been credited to the cash balance portion of the plan for existing plan participants after 2007. However, certain employees covered under the prior final pay plan formula 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 U.S. The Company also sponsors a number of noncontributory, nonqualified pension plans. These plans, which are unfunded, provide supplemental defined pension benefits

Net (Benefit) Expense The following table summarizes the components of net (benefit) expense recognized in the Consolidated Statement of Income for the Company’s pension and postretirement plans, for Significant Plans and All Other Plans, for the periods indicated.

Pension plans U.S. plans 2015

In millions of dollars

2014

Postretirement benefit plans

Non-U.S. plans 2013

2015

2014

U.S. plans

2013

2015

2014

Non-U.S. plans 2013

2015

2014

2013

Qualified plans Benefits earned during the year Interest cost on benefit obligation Expected return on plan assets

$

4 $

6 $

8

$ 168 $ 178 $ 210

$

— $

— $



$

12 $

15 $

43

553

541

538

317

376

384

33

33

33

108

120

146

(893)

(878)

(863)

(323)

(384)

(396)

(3)

(1)

(2)

(105)

(121)

(133)

(3)

(3)

(4)

Amortization of unrecognized Prior service (benefit) cost Net actuarial loss

2

1

4





(1)

(11)

(12)



139

105

104

73

77

95







43

39

45

14



21



14

4







(1)





Settlement loss (gain)







44

53

13











(1)

Special termination benefits(1)









9

8













30 $

32 $

30

46 $

41 $ 100

Curtailment loss (gain)(1) (1)

Net qualified plans (benefit) expense

$ (186) $ (229) $ (196) $ 281 $ 324 $ 322

$

$

Nonqualified plans expense

43

45

46



















Cumulative effect of change in accounting policy(2)





(23)

















3

30 $

32 $

30

46 $

41 $ 103

Total net (benefit) expense (1) (2)

$ (143) $ (184) $ (173) $ 281 $ 324 $ 322

$

$

Losses (gains) due to curtailment, settlement and special termination benefits relate to repositioning and divestiture actions. Cumulative effect of adopting quarterly measurement for Significant Plans.

The estimated net actuarial loss and prior service cost that will be amortized from Accumulated other comprehensive income (loss) into net expense in 2016 are approximately $226 million and $1 million, respectively, for defined benefit

pension plans. For postretirement plans, the estimated 2016 net actuarial loss and prior service cost (benefit) amortizations are approximately $35 million and $(11) million, respectively.

34

Contributions The Company’s funding practice for U.S. and non-U.S. pension and postretirement plans is generally to fund to minimum funding requirements in accordance with applicable local laws and regulations. The Company may increase its contributions above the minimum required contribution, if appropriate. In addition, management has the ability to change its funding practices. For the U.S. pension plans, there were no required minimum cash contributions for 2015 or 2014.

The following table summarizes the actual Company contributions for the years ended December 31, 2015 and 2014, as well as estimated expected Company contributions for 2016. Expected contributions are subject to change since contribution decisions are affected by various factors, such as market performance and regulatory requirements.

Summary of Company Contributions Pension plans(1) U.S. plans 2016

In millions of dollars

Contributions made by the Company

$

Benefits paid directly by the Company (1) (2)

(2)

Non-U.S. plans

2014

2015

Postretirement benefit plans(1)

— $

— $ 100

55

52

2016 $

58

U.S. plans

2014

2015

78 $

92 $ 130

59

42

2016 $

100

2015

Non-U.S. plans 2014

— $ 174 $





56

61

2016 $

2015

2014

3 $

4 $

6

6

5

6

Amounts reported for 2016 are expected amounts. The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.

Funded Status and Accumulated Other Comprehensive Income The following tables summarize the funded status and amounts recognized in the Consolidated Balance Sheet for the Company’s pension and postretirement plans. Net Amount Recognized Pension plans In millions of dollars

U.S. plans 2014

2015

Postretirement benefit plans

Non-U.S. plans

U.S. plans

2014

2015

2015

Non-U.S. plans

2014

2015

2014

Change in projected benefit obligation Qualified plans Projected benefit obligation at beginning of year Benefits earned during the year Interest cost on benefit obligation Plan amendments

$ 14,060 $ 12,137

$

7,252 $ 7,194

$

917 $

780

$

1,527 $ 1,411

4

6

168

178





12

15

553

541

317

376

33

33

108

120





Actuarial loss (gain)(1)

(649)

Benefits paid, net of participants’ contributions







(14)

(28)

790

(55)

184

(88)

262

6

2,077

2

(751)

(701)

(294)

(352)

(90)

(91)

(57)

(93)

Expected government subsidy









12

11





Divestitures





(147)

(18)







(1)

Settlement (gain) loss(2)





(61)

(184)









Curtailment (gain) loss(2)

14



(8)

(58)







(3)

Special termination benefits(2)







9













(211)

(170)

Foreign exchange impact and other Qualified plans Nonqualified plans Projected benefit obligation at year end (1) (2)

$ 13,231 $ 14,060 712

(671)

6,534 $ 7,252

$

6,534 $ 7,252

779

$ 13,943 $ 14,839

(685)

$



— $

817 $

$

817 $





2014 amounts for the U.S. plans include impact of the adoption of updated mortality tables (see “Mortality Tables” below). Curtailment, settlement (gains)/losses and special termination benefits relate to repositioning and divestiture activities.

35

— 917

$

1,291 $ 1,527

$

1,291 $ 1,527

— 917





Pension plans U.S. plans 2015

In millions of dollars

Postretirement benefit plans

Non-U.S. plans

2014

U.S. plans

2014

2015

Non-U.S. plans

2014

2015

2014

2015

Change in plan assets Qualified plans Plan assets at fair value at beginning of year

$ 13,071 $ 12,731

Actual return on plan assets

$ 7,057 $ 6,918

$

10 $

32

$ 1,384 $ 1,472

(183)

941

56

1,108

2

(5)

166

Company contributions



100

134

230

235

56

9

12

Plan participants’ contributions





Divestitures





Settlements Benefits paid, net of government subsidy Foreign exchange impact and other Qualified plans Plan assets at fair value at year end

5

49

51





(131)

(11)









5





(61)

(184)









(751)

(701)

(299)

(357)

(127)

(131)

(57)

(93)





(657)

(652)





(198)

(173)

$ 12,137 $ 13,071

Nonqualified plans

(1)

$ 6,104 $ 7,057





$ 12,137 $ 13,071



$

166 $

$

166 $

(195) $

(651) $



$ 6,104 $ 7,057



10

$ 1,133 $ 1,384

— 10





$ 1,133 $ 1,384

Funded status of the plans Qualified plans(2)

$ (1,094) $

Nonqualified plans(1) Funded status of the plans at year end

(712)

(989) $ (779)

(430) $ —

$ (1,806) $ (1,768) $

(430) $





(195) $

(651) $

(907) $ — (907) $

(158) $

(143)





(158) $

(143)

Net amount recognized Qualified plans Benefit asset

$

— $

Benefit liability

(1,094)

Qualified plans

$ (1,094) $

Nonqualified plans Net amount recognized on the balance sheet

(712)



$

(989)

726 $ (1,156)

(989) $ (779)

(430) $ —

$ (1,806) $ (1,768) $

921

$

(1,116) (195) $ —

— $



$

115 $

196

(651)

(907)

(273)

(339)

(651) $

(907) $

(158) $

(143)





(158) $

(143)





(430) $

(195) $

(651) $

(907) $

(1) $

(1) $

— $

13





125

157

3

(56)

(547)

(658)

3 $

(56) $

(422) $

(501)





(422) $

(501)

Amounts recognized in Accumulated other comprehensive income (loss) Qualified plans Net transition obligation Prior service benefit Net actuarial gain (loss) Qualified plans Nonqualified plans Net amount recognized in equity (pretax)

$

— $

— 3

— (6,107)

(5,819)

$

5 (1,613)

(1,690)

$ (6,107) $ (5,816) $ (1,609) $ (1,678) $ (266)

(325)







$ (6,373) $ (6,141) $ (1,609) $ (1,678) $

3 $



$

— (56) $

— $



Accumulated benefit obligation Qualified plans Nonqualified plans Accumulated benefit obligation at year end (1) (2)

$ 13,226 $ 14,050 706

771

$ 13,932 $ 14,821

$ 6,049 $ 6,699 —

$

817 $

$

817 $



$ 6,049 $ 6,699



917 — 917

$ 1,291 $ 1,527 —

The nonqualified plans of the Company are unfunded. The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2016 and no minimum required funding is expected for 2016.

36



$ 1,291 $ 1,527

The following table shows the change in Accumulated other comprehensive income (loss) related to Company’s pension and postretirement benefit plans (for Significant Plans and All Other Plans) for the years indicated. 2014

2015

In millions of dollars

Beginning of year balance, net of tax(1)(2) Cumulative effect of change in accounting policy(3) Actuarial assumptions changes and plan experience(4)

$

(5,159) — 898

Net asset gain (loss) due to difference between actual and expected returns

$

(3,989) — (3,404)

$

833

(1,457)

Net amortizations

2013

236

(5,270) (22) 2,380 (1,084)

202

271

Prior service (cost) credit

(6)

13

360

Curtailment/settlement gain(5)

57

67



291

459

74

24

660

(698)

Foreign exchange impact and other Change in deferred taxes, net Change, net of tax

$

End of year balance, net of tax(1)(2)

$

(1) (2) (3) (4) (5)

43 (5,116)

$

(1,170)

$

1,281

$

(5,159)

$

(3,989)

See Note 20 to the Consolidated Financial Statements for further discussion of net Accumulated other comprehensive income (loss) balance. Includes net-of-tax amounts for certain profit sharing plans outside the U.S. Represents the cumulative effect of the change in accounting policy due to adoption of quarterly measurement for Significant Plans. Includes $46 million, $(111) million and $58 million of actuarial gains (losses) related to the U.S. nonqualified pension plans for 2015, 2014 and 2013, respectively. Curtailment and settlement gains relate to repositioning and divestiture activities.

At December 31, 2015 and 2014, the aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation (ABO), and the aggregate fair value of plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets and for all defined benefit pension plans with an ABO in excess of plan assets as follows: PBO exceeds fair value of plan assets U.S. plans 2015

In millions of dollars

Projected benefit obligation

(1)

14,839

Accumulated benefit obligation

13,932

Fair value of plan assets

12,137

(1)

U.S. plans(1)

Non-U.S. plans

2014

13,943 $

$

ABO exceeds fair value of plan assets

2015

2014

3,918 $

2,756

14,821

3,488

13,071

2,762

$

2015 13,943 $

14,839

2,353

13,932

1,640

12,137

$

Non-U.S. plans

2014

2015

2014

2,369 $

2,570

14,821

2,047

2,233

13,071

1,243

1,495

$

At December 31, 2015 and 2014, for both the U.S. qualified plan and nonqualified plans, the aggregate PBO and the aggregate ABO exceeded plan assets.

At December 31, 2015 and 2014, combined ABO for the U.S. and non-U.S. qualified pension plans, were more than plan assets by $1 billion and $0.6 billion, respectively.

37

Plan Assumptions The Company utilizes a number of assumptions to determine plan obligations and expenses. Changes in one or a combination of these assumptions will have an impact on the Company’s pension and postretirement PBO, funded status and (benefit) expense. Changes in the plans’ funded status resulting from changes in the PBO and fair value of plan assets will have a corresponding impact on Accumulated other comprehensive income (loss). The actuarial assumptions at the respective years ended December 31 in the table below are used to measure the year-end PBO and the net periodic (benefit) expense for the subsequent year (period). Since Citi’s Significant Plans are measured on a quarterly basis, the year-end rates for those plans are used to calculate the net periodic (benefit) expense for the subsequent year’s first quarter. As a result of the quarterly measurement process, the net periodic (benefit) expense for the Significant Plans is calculated at each respective quarter end based on the preceding quarter-end rates (as shown below for the U.S. pension and postretirement plans). The actuarial assumptions for the nonU.S. pension and postretirement plans relate to the Significant Plans that are measured quarterly and All Other Plans that are measured annually. Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Company’s plans are shown in the following table: At year end

2015

During the year U.S. plans Qualified pension Nonqualified pension Postretirement

Range Weighted average

Range Weighted average

U.S. plans

Range

2014

Weighted average

4.35

3.90

U.S. plans

Postretirement

4.20

3.80

Non-U.S. pension plans

Non-U.S. pension plans

Range

0.25 to 42.00 1.00 to 32.50

Weighted average

4.74

Non-U.S. postretirement plans Weighted average

7.50

Range

Future compensation increase rate U.S. plans

N/A

Weighted average

N/A

Non-U.S. pension plans Range Weighted average

1.00 to 40.00 1.00 to 30.00 3.24

3.27

7.00

7.00

Expected return on assets U.S. plans Non-U.S. pension plans Range Weighted average

1.60 to 11.50 1.30 to 11.50 4.95

5.08

Non-U.S. postretirement plans Range Weighted average

8.00 to 10.70 8.50 to 10.40 8.01

3.90 3.60/3.60/ 4.40/ 4.30

1.00 to 32.50

1.60 to 29.25

1.50 to 28.00

4.74

5.60

5.24

2.25 to 12.00

3.50 to 11.90

3.50 to 10.00

7.50

8.65

7.46

N/A

N/A

N/A

0.75 to 30.00

1.00 to 26.00

1.20 to 26.00

3.27

3.40

3.93

7.00

7.00

7.00

1.30 to 11.50

1.20 to 11.50

0.90 to 11.50

5.08

5.68

5.76

8.50 to 10.40

8.50 to 8.90

8.50 to 9.60

8.51

8.50

8.50

Non-U.S. postretirement plans

2.00 to 13.20 2.25 to 12.00 7.90

4.75 4.35/4.15/ 3.95/4.00

Expected return on assets

Nonqualified pension

Range

3.90/3.70/ 4.30/4.25 3.80/3.65/ 4.20/4.10

Non-U.S. pension plans

4.00%

4.76

4.00%/3.85%/ 4.75%/4.55%/ 3.90%/4.20%/ 4.45%/4.35% 4.25%/4.25% 4.75%/ 4.80%

Future compensation increase rate

4.40%

Weighted average

2013

Non-U.S. postretirement plans

U.S. plans

Range

2014

Non-U.S. pension plans

Discount rate Qualified pension

2015

Discount rate

8.51

38

Discount Rate The discount rates for the U.S. pension and postretirement plans were selected by reference to a Citigroup-specific analysis using each plan’s specific cash flows and compared with high-quality corporate bond indices for reasonableness. The discount rates for the non-U.S. pension and postretirement plans are selected by reference to high-quality corporate bond rates in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds in certain countries. Effective in 2015, Citi rounds the discount rate for all the Significant Plans to the nearest 5 basis points. Discount rates for All Other Plans are rounded to the nearest 10 basis points for plans in the six largest nonU.S. countries and to the nearest 25 basis points for the remaining non-US countries.

The following table shows the expected rates of return used in determining the Company’s pension expense compared to the actual rate of return on plan assets during 2015, 2014 and 2013 for the U.S. pension and postretirement plans: 2015 Expected rate of return (1)

Actual rate of return (1)

7.00% (1.70)

2014

2013

7.00%

7.00%

7.80

6.00

Actual rates of return are presented net of fees.

For the non-U.S. pension plans, pension expense for 2015 was reduced by the expected return of $323 million, compared with the actual return of $56 million. Pension expense for 2014 and 2013 was reduced by expected returns of $384 million and $396 million, respectively. Mortality Tables At December 31, 2015, the Company maintained the Retirement Plan 2014 (RP-2014) mortality table and adopted Mortality Projection 2015 (MP-2015) projection table for the U.S. plans.

Expected Rate of Return The Company determines its assumptions for the expected rate of return on plan assets for its U.S. pension and postretirement plans using a “building block” approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted average range of nominal rates is then determined based on target allocations to each asset class. Market performance over a number of earlier years is evaluated covering a wide range of economic conditions to determine whether there are sound reasons for projecting any past trends. The Company considers the expected rate of return to be a long-term assessment of return expectations and does not anticipate changing this assumption unless there are significant changes in investment strategy or economic conditions. This contrasts with the selection of the discount rate and certain other assumptions, which are reconsidered annually (or quarterly for the Significant Plans) in accordance with GAAP. The expected rate of return for the U.S. pension and postretirement plans was 7.00% at December 31, 2015, 2014 and 2013. The expected return on assets reflects the expected annual appreciation of the plan assets and reduces the Company’s annual pension expense. The expected return on assets is deducted from the sum of service cost, interest cost and other components of pension expense to arrive at the net pension (benefit) expense. Net pension (benefit) expense for the U.S. pension plans for 2015, 2014 and 2013 reflects deductions of $893 million, $878 million and $863 million of expected returns, respectively.

U.S. Plans

2015(2)

2014(3)

Mortality(1) Pension

RP-2014/MP-2015 RP-2014/MP-2014

Postretirement

RP-2014/MP-2015 RP-2014/MP-2014

(1) (2) (3)

The RP-2014 table is the white-collar RP-2014 table, with a 4% increase in rates to reflect the lower Citigroup-specific mortality experience. The MP-2015 projection scale is projected from 2011, with convergence to 0.5% ultimate rate of annual improvement by 2029. The MP-2014 projection scale includes a phase-out of the assumed rates of improvements from 2015 to 2027.

Adjustments were made to the RP-2014 tables and to the long-term rate of mortality improvement to reflect the Citigroup specific experience. As a result, the U.S. qualified and nonqualified pension and postretirement plans’ PBO at December 31, 2014 increased by $1,209 million and its funded status and AOCI decreased by $1,209 million ($737 million, net of tax). In addition, the 2015 qualified and nonqualified pension and postretirement benefit expense increased by approximately $73 million.

39

Sensitivities of Certain Key Assumptions The following tables summarize the effect on pension expense of a one-percentage-point change in the discount rate:

Health Care Cost Trend Rate Assumed health care cost-trend rates were as follows: Health care cost increase rate for U.S. plans Following year Ultimate rate to which cost increase is assumed to decline Year in which the ultimate rate is reached(1)

One-percentage-point increase In millions of dollars

U.S. plans

2015 $

Non-U.S. plans

26

2014 $

28

2013 $

16

(39)

(32)

(52)

(1)

One-percentage-point decrease In millions of dollars

U.S. plans

2015 $

(44)

Non-U.S. plans

44

2014 $

(45)

(57)

56

79

Since the U.S. qualified pension plan was frozen, the majority of the prospective service cost has been eliminated and the gain/loss amortization period was changed to the life expectancy for inactive participants. As a result, pension expense for the U.S. qualified pension plan is driven more by interest costs than service costs, and an increase in the discount rate would increase pension expense, while a decrease in the discount rate would decrease pension expense. The following tables summarize the effect on pension expense of a one-percentage-point change in the expected rates of return:

U.S. plans Non-U.S. plans

2015

2014

2013

$ (128)

$ (129)

$ (123)

(63)

(67)

(68)

U.S. plans Non-U.S. plans

2015

2014

2013

$ 128

$ 129

$ 123

63

67

68

7.50%

5.00

5.00

2020

2020

2015

2014

6.87%

6.94%

Ultimate rate to which cost increase is assumed to decline

6.86

6.93

2016– 2029

2015– 2027

A one-percentage-point change in assumed health care cost trend rates would have the following effects: Onepercentagepoint increase In millions of dollars

Effect on benefits earned and interest cost for U.S. postretirement plans Effect on accumulated postretirement benefit obligation for U.S. postretirement plans

One-percentage-point decrease In millions of dollars

7.00%

Health care cost increase rate for Non-U.S. plans (weighted average) Following year

Range of years in which the ultimate rate is reached

One-percentage-point increase In millions of dollars

2014

Weighted average for plans with different following year and ultimate rates.

2013 $

2015

2015

$

2014

2 $

2

Effect on benefits earned and interest cost for non-U.S. postretirement plans Effect on accumulated postretirement benefit obligation for non-U.S. postretirement plans

40

2015

$

2014

15 $

156

2015

$

40

45

Onepercentagepoint increase In millions of dollars

Onepercentagepoint decrease

17

197

2014

(2) $

(1)

(34)

(38)

Onepercentagepoint decrease 2015

$

2014

(12) $

(128)

(14)

(161)

Plan Assets Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on asset fair values, are as follows: Target asset allocation Asset category(1)

2016

(2)

U.S. pension assets at December 31, 2014

2015

U.S. postretirement assets at December 31, 2014

2015

Equity securities

0–30%

19%

20%

19%

20%

Debt securities

25–73

46

44

46

44

Real estate

0–7

4

4

4

4

Private equity Other investments Total

0–10 0–22

6 25 100%

8 24 100%

6 25 100%

8 24 100%

(1) (2)

Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real estate are classified in the real estate asset category, not private equity. Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2015 and 2014.

Third-party investment managers and advisers provide their services to Citigroup’s U.S. pension and postretirement plans. Assets are rebalanced as the Company’s Pension Plan Investment Committee deems appropriate. Citigroup’s investment strategy, with respect to its assets, is to maintain a globally diversified investment portfolio across several asset classes that, when combined with Citigroup’s

contributions to the plans, will maintain the plans’ ability to meet all required benefit obligations. Citigroup’s pension and postretirement plans’ weightedaverage asset allocations for the non-U.S. plans and the actual ranges and the weighted-average target allocations by asset category based on asset fair values are as follows: Non-U.S. pension plans

Target asset allocation

Actual range at December 31,

Weighted-average at December 31,

Asset category(1)

2016

2015

2014

Equity securities

0–63 %

0–68%

0–67%

16%

17%

Debt securities

0–100

0–100

0–100

77

77

2014

2015

Real estate

0–19

0–18

0–21

1



Other investments

0–100

0–100

0–100

6

6

100 %

100%

Total (1)

Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.

Non-U.S. postretirement plans Actual range at December 31, 2014 2015

Asset category(1)

Target asset allocation 2016

Equity securities

0–41%

0–41%

0–42%

41%

42%

Debt securities

56–100

56–100

54–100

56

54

0–3

0–3

0–4

Other investments Total (1)

Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.

41

Weighted-average at December 31, 2014 2015

3

4

100 %

100%

Fair Value Disclosure For information on fair value measurements, including descriptions of Levels 1, 2 and 3 of the fair value hierarchy and the valuation methodology utilized by the Company, see Note 1 and Note 25 to the Consolidated Financial Statements. ASU 2015-07 removes the current requirement to categorize investments for which fair value is measured using the NAV per share practical expedient within the fair value hierarchy.

Certain investments may transfer between the fair value hierarchy classifications during the year due to changes in valuation methodology and pricing sources. There were no significant transfers of investments between Level 1 and Level 2 during 2015 and 2014. Plan assets by detailed asset categories and the fair value hierarchy are as follows:

U.S. pension and postretirement benefit plans(1) Fair value measurement at December 31, 2015

In millions of dollars

Asset categories

Level 1

Level 2

Level 3

Total

Equity securities U.S. equity

$

694 $

— $

— $

694

816





816

223





223

1,172





1,172

U.S. agency



105



105

U.S. corporate bonds



1,681



1,681

Non-U.S. government debt



309



309

Non-U.S. corporate bonds



440



440

State and municipal debt



124



124

Asset-backed securities



42



42

Mortgage-backed securities



60



60

Annuity contracts





27

27

6

521



527

147

Non-U.S. equity Mutual funds Debt securities U.S. Treasuries

Derivatives Other investments





Total investments

$

2,911 $

3,282 $

174 $

6,367

Cash and short-term investments

$

138 $

1,064 $

— $

1,202

Other investment liabilities Net investments at fair value

$

Other investment receivables valued at NAV

(10)

(515)

3,039 $

3,831 $

147



(525)

174 $

7,044

$

18

$

12,303

Securities valued at NAV

5,241

Total net assets (1)

The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2015, the allocable interests of the U.S. pension and postretirement plans were 98.6% and 1.4%, respectively.

42

U.S. pension and postretirement benefit plans(1) Fair value measurement at December 31, 2014

In millions of dollars

Asset categories

Level 1

Level 2

Level 3

Total

Equity securities U.S. equity

$

773 $

— $

— $

773

588





588

216





216

1,178





1,178

U.S. agency



113



113

U.S. corporate bonds



1,534



1,534

Non-U.S. government debt



357



357

Non-U.S. corporate bonds



417



417

State and municipal debt



132



132

Asset-backed securities



41



41

Mortgage-backed securities



76



76

Annuity contracts





59

59

Derivatives

12

637



649

161

Non-U.S. equity Mutual funds Debt securities U.S. Treasuries

Other investments





Total investments

$

2,767 $

3,307 $

Cash and short-term investments

$

111 $

Other investment liabilities Net investments at fair value

$

Other investment receivables valued at NAV

1,287

(17)

(618)

2,861 $

3,976 $

161

220 $

6,294

— $

1,398



(635)

220 $

7,057

$

63

$

13,081

Securities valued at NAV

5,961

Total net assets (1)

The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2014, the allocable interests of the U.S. pension and postretirement plans were 99.9% and .01%, respectively.

43

Non-U.S. pension and postretirement benefit plans Fair value measurement at December 31, 2015

In millions of dollars

Asset categories

Level 1

Level 2

Level 3

Total

Equity securities U.S. equity

$

5

$

11

$



$

16

Non-U.S. equity

74

222

47

343

Commingled funds

5





5

U.S. Treasuries



1



1

U.S. corporate bonds



360



360

2,886

171



3,057

87

683

5

775

Real estate



3

1

4

Mortgage-backed securities

22





22

Annuity contracts



1

41

42

Other investments

1



163

164

Debt securities

Non-U.S. government debt Non-U.S. corporate bonds

Total investments

$

3,080

$

1,452

$

257

$

4,789

Cash and short-term investments

$

73

$

2

$



$

75

$

3,153

$

257

$

4,174

$

97

Other investment liabilities



Net investments at fair value Other investment receivables valued at NAV

(690) $

764



(690)

Securities valued at NAV

2,966

Total net assets

$

44

7,237

Non-U.S. pension and postretirement benefit plans Fair value measurement at December 31, 2014

In millions of dollars

Asset categories

Level 1

Level 2

Level 3

Total

Equity securities U.S. equity

$

Non-U.S. equity

5

$

13

$



$

18

83

257

48

388

Mutual funds



24



24

Commingled funds

10





10



350



350

3,213

220

1

3,434

99

765

5

869

Real estate



3



3

Mortgage-backed securities



1



1

Annuity contracts



1

32

33

Derivatives

11





11

1

1

165

167

Debt securities U.S. corporate bonds Non-U.S. government debt Non-U.S. corporate bonds

Other investments Total investments

$

3,422

$

Cash and short-term investments

$

112

$

Other investment liabilities

(3)

Net investments at fair value

$

Other investment receivables valued at NAV

3,531

1,635

$

251

$

2

$



$

(723) $

914

— $

251

5,308 114 (726)

$ $

Securities valued at NAV

4,696 114 3,631

Total net assets

$

45

8,441

Level 3 Rollforward The reconciliations of the beginning and ending balances during the year for Level 3 assets are as follows: U.S. pension and postretirement benefit plans

In millions of dollars

Asset categories

Beginning Level 3 fair value at Dec. 31, 2014(1)

Annuity contracts

$

59

Other investments Total investments (1)

Realized gains (losses) $



161 $

220

Unrealized gains (losses) $

(4)

(1) $

(1)

Purchases, sales, and issuances $

(28)

(9) $

(13)

Transfers in and/or out of Level 3 $



(4) $

(32)

Ending Level 3 fair value at Dec. 31, 2015 $

27

— $

147



$

174

Beginning balance was adjusted to exclude $2,496 million of investments valued at NAV.

U.S. pension and postretirement benefit plans

In millions of dollars

Asset categories

Beginning Level 3 fair value at Dec. 31, 2013(1)

Annuity contracts

$

91

Other investments Total investments

Realized gains (losses) $



150 $

Unrealized gains (losses) $

(1)

(1)

241

$

(1)

Purchases, sales, and issuances $

(31)

(4) $

(5)

Transfers in and/or out of Level 3 $



16 $

(15)

Ending Level 3 fair value at Dec. 31, 2014 $

59

— $

161



$

220

(1) Beginning balance was adjusted to exclude $3,284 million of investments valued at NAV.

Non-U.S. pension and postretirement benefit plans

In millions of dollars

Asset categories

Beginning Level 3 fair value at Dec. 31, 2014(1)

Unrealized gains (losses)

Purchases, sales, and issuances

Transfers in and/or out of Level 3

Ending Level 3 fair value at Dec. 31, 2015

Equity securities Non-U.S. equity

$

48

$

(1)

$



$



$

47

Debt securities Non-U.S. government debt

1



(1)





Non-U.S. corporate bonds

5

(1)

1



5







1

1

Real estate Annuity contracts

32

2

4

3

41

Other investments

165

(2)

2

(2)

163

Total investments (1)

$

251

$

(2)

Beginning balance was adjusted to exclude $5 million of investments valued at NAV.

46

$

6

$

2

$

257

Non-U.S. pension and postretirement benefit plans

In millions of dollars

Asset categories

Beginning Level 3 fair value at Dec. 31, 2013(1)

Unrealized gains (losses)

Purchases, sales, and issuances

$

$

Transfers in and/or out of Level 3

Ending Level 3 fair value at Dec. 31, 2014

Equity securities Non-U.S. equity

$

49

(3)



$

2

$

48

Debt securities Non-U.S. government bonds







1

1

5



1

(1)

5

Annuity contracts

32







32

Other investments

202



(37)



165

Non-U.S. corporate bonds

Total investments (1)

$

288

$

(3)

$

(36)

$

2

$

251

Beginning balance was adjusted to exclude $11 million of investments valued at NAV.

Investment Strategy The Company’s global pension and postretirement funds’ investment strategy is to invest in a prudent manner for the exclusive purpose of providing benefits to participants. The investment strategies are targeted to produce a total return that, when combined with the Company’s contributions to the funds, will maintain the funds’ ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed-income securities and cash and short-term investments. The target asset allocation in most locations outside the U.S. is primarily in equity and debt securities. These allocations may vary by geographic region and country depending on the nature of applicable obligations and various other regional considerations. The wide variation in the actual range of plan asset allocations for the funded non-U.S. plans is a result of differing local statutory requirements and economic conditions. For example, in certain countries local law requires that all pension plan assets must be invested in fixed-income investments, government funds, or local-country securities.

Oversight and Risk Management Practices The framework for the Company’s pension oversight process includes monitoring of retirement plans by plan fiduciaries and/or management at the global, regional or country level, as appropriate. Independent risk management contributes to the risk oversight and monitoring for the Company’s U.S. qualified pension plan and non-U.S. Significant Pension Plans. Although the specific components of the oversight process are tailored to the requirements of each region, country and plan, the following elements are common to the Company’s monitoring and risk management process: • • • • •

Significant Concentrations of Risk in Plan Assets The assets of the Company’s pension plans are diversified to limit the impact of any individual investment. The U.S. qualified pension plan is diversified across multiple asset classes, with publicly traded fixed income, hedge funds, publicly traded equity, and private equity representing the most significant asset allocations. Investments in these four asset classes are further diversified across funds, managers, strategies, vintages, sectors and geographies, depending on the specific characteristics of each asset class. The pension assets for the Company’s non-U.S. Significant Plans are primarily invested in publicly traded fixed income and publicly traded equity securities.

47

periodic asset/liability management studies and strategic asset allocation reviews; periodic monitoring of funding levels and funding ratios; periodic monitoring of compliance with asset allocation guidelines; periodic monitoring of asset class and/or investment manager performance against benchmarks; and periodic risk capital analysis and stress testing.

Estimated Future Benefit Payments The Company expects to pay the following estimated benefit payments in future years: Pension plans U.S. plans

In millions of dollars

2016

$

Postretirement benefit plans

Non-U.S. plans

903

$

377

U.S. plans $

Non-U.S. plans 71

$

63

2017

818

337

70

67

2018

828

359

68

72

2019

848

382

67

77

2020 2021–2025

876

415

65

83

4,523

2,467

303

523

Prescription Drugs In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (Act of 2003) was enacted. The Act of 2003 established a prescription drug benefit under Medicare known as “Medicare Part D,” and a federal subsidy to sponsors of U.S. retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The benefits provided to certain participants are at least actuarially equivalent to Medicare Part D and, accordingly, the Company is entitled to a subsidy. The subsidy reduced the accumulated postretirement benefit obligation (APBO) by approximately $5 million as of December 31, 2015 and 2014 and the postretirement expense by approximately $0.2 million for 2015 and 2014. The following table shows the estimated future benefit payments for the Medicare Part D of the U.S. postretirement plan.

Before Medicare Part D subsidy $

Medicare Part D subsidy

After Medicare Part D subsidy

71 $

— $

71

2017

70



70

2018

68



68

2019

67



67

2020

65



65

303

2

301

2021–2025

Postemployment Plans The Company sponsors U.S. postemployment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long-term disability. As of December 31, 2015 and 2014, the plans’ funded status recognized in the Company’s Consolidated Balance Sheet was $(183) million and $(256) million, respectively. The amounts recognized in Accumulated other comprehensive income (loss) as of December 31, 2015 and 2014 were $45 million and $24 million, respectively. Effective January 1, 2014, the Company made changes to its postemployment plans that limit the period for which future disabled employees are eligible for continued Company subsidized medical benefits. The following table summarizes the components of net expense recognized in the Consolidated Statement of Income for the Company’s U.S. postemployment plans.

Expected U.S. postretirement benefit payments

In millions of dollars

2016

The other provisions of the Act of 2010 are not expected to have a significant impact on Citigroup’s pension and postretirement plans.

In millions of dollars

2015

Net expense 2014

2013

Service related expense Service cost

$

Interest cost Prior service (benefit) Net actuarial loss Total service related expense Non-service related expense (benefit) Total net (benefit) expense

Certain provisions of the Patient Protection and Affordable Care Act of 2010 improved the Medicare Part D option known as the Employer Group Waiver Plan (EGWP) with respect to the Medicare Part D subsidy. The EGWP provides prescription drug benefits that are more cost effective for Medicare-eligible participants and large employers. Effective April 1, 2013, the Company began sponsoring and implementing an EGWP for eligible retirees. The Company subsidy received under the EGWP for 2015 and 2014 was $11.6 million and $11.0 million, respectively.

48



$



$

20

4

5

10

(31)

(31)

(3)

12

14

17

$ (15)

$ (12)

$

44

$

$

37

$

(14)

$

25

$

30

3

$ (12)

Defined Contribution Plans The Company sponsors defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The most significant defined contribution plan sponsored by the Company is the Citi Retirement Savings Plan in the U.S. (formerly known as the Citigroup 401(k) Plan). Under the Citi Retirement Savings Plan, eligible U.S. employees received matching contributions of up to 6% of their eligible compensation for 2015 and 2014, subject to statutory limits. Additionally, for eligible employees whose eligible compensation is $100,000 or less, a fixed contribution of up to 2% of eligible compensation is provided. All Company contributions are invested according to participants’ individual elections. The following table summarizes the Company contributions to the U.S. and nonU.S. plans.

The following table summarizes certain assumptions used in determining the postemployment benefit obligations and net benefit expenses for the Company’s U.S. postemployment plans. 2015

2014

3.70%

3.45%

7.00%

7.50%

Ultimate rate to which cost increase is assumed to decline

5.00

5.00

Year in which the ultimate rate is reached

2020

2020

Discount rate Health care cost increase rate Following year

U.S. plans Company contributions

2014

2015

In millions of dollars

$

380 $

383 $

2013 394

Non U.S. plans 2015

In millions of dollars

Company contributions

49

$

375 $

2014 385 $

2013 402

9. INCOME TAXES

Tax Rate The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income from continuing operations (before non-controlling interests and the cumulative effect of accounting changes) for each of the periods indicated is as follows:

Details of the Company’s income tax provision are presented below: Income Tax Provision 2015

In millions of dollars

2014

2013

2015

Current $

Foreign State Total current income taxes

861 $

181 $ (260)

3,397

3,281

35.0%

35.0%

1.7

3.4

1.7

388

388

Foreign income tax rate differential

(4.6)

(0.3)

(2.3)

Audit settlements(1)

(1.7)

(2.4)

(0.7)

0.4

1.2

(0.3)

0.3

18.3

0.8

State income taxes, net of federal benefit

3,788 (41)

$ 4,646 $ 3,850 $ 3,487

(2)

Effect of tax law changes Nondeductible legal and related expenses

Deferred Federal

$ 3,019 $ 2,510 $ 2,867

Foreign State Total deferred income taxes Provision for income tax on continuing operations before noncontrolling interests(1) Provision (benefit) for income taxes on discontinued operations

(4)

361

(716)

Basis difference in affiliates



(2.5)



(221)

476

548

Tax advantaged investments

(1.8)

(3.6)

(3.0)

$ 2,794 $ 3,347 $ 2,699

Other, net Effective income tax rate

$ 7,440 $ 7,197 $ 6,186 (29)

12

(244)

FX translation

(906)

65

(48)

Investment securities

(498)

1,007

(1,300)

Employee stock plans

(35)

Cash flow hedges Benefit plans

(1)

Income tax expense (benefit) reported in stockholders’ equity related to:

(2)

Retained earnings

(87)

28

176

207

625

(24)

(660)

698



(353)



(2)

(2)

0.7

(0.1)



30.0%

49.0%

31.2%

For 2015, primarily relates to the conclusion of a New York City tax audit for 2009-2011. For 2014, relates to the conclusion of the audit of various issues in the Company’s 2009-2011 U.S. federal tax audit and the conclusion of a New York State tax audit for 2006-2008. For 2013, relates to the settlement of U.S. federal issues for 2003-2005 and IRS appeals. For 2015, includes the results of tax reforms enacted in New York City and several states, which resulted in a DTA charge of approximately $101 million. For 2014, includes the results of tax reforms enacted in New York State and South Dakota, which resulted in a DTA charge of approximately $210 million.

As set forth in the table above, Citi’s effective tax rate for 2015 was 30.0%. The decline in the effective tax rate from 2014 was primarily due to a lower level of non-deductible legal and related expenses in 2015.

Income taxes before non-controlling interests $ 6,124 $ 7,388 $ 5,945 (1)

2013

35.0%

Federal statutory rate

Federal

2014

Includes the effect of securities transactions and other-than-temporaryimpairment losses resulting in a provision (benefit) of $239 million and $(93) million in 2015, $200 million and $(148) million in 2014 and $262 million and $(187) million in 2013, respectively. See “Consolidated Statement of Changes in Stockholders’ Equity” above.

50

Deferred Income Taxes Deferred income taxes at December 31 related to the following: In millions of dollars

2015

Unrecognized Tax Benefits The following is a rollforward of the Company’s unrecognized tax benefits. 2014

Total unrecognized tax benefits at January 1

Deferred tax assets Credit loss deduction

$ 6,058 $ 7,010

Deferred compensation and employee benefits

4,110

4,676

Repositioning and settlement reserves

1,429

1,599

Unremitted foreign earnings

8,403

6,368

Investment and loan basis differences

3,248

4,808

359

529

23,053

23,395

Fixed assets and leases

1,356

2,093

Other deferred tax assets

3,176

2,334

Cash flow hedges Tax credit and net operating loss carry-forwards

Gross deferred tax assets Valuation allowance Deferred tax assets after valuation allowance

$51,192 $52,812 —

2015

In millions of dollars



2013

$ 1,060 $ 1,574 $ 3,109

Net amount of increases for current year’s tax positions

32

135

58

Gross amount of increases for prior years’ tax positions

311

175

251

Gross amount of decreases for prior years’ tax positions

(61)

(772)

(716)

Amounts of decreases relating to settlements

(45)

(28) (1,115)

Reductions due to lapse of statutes of limitation

(22)

(30)

(15)

Foreign exchange, acquisitions and dispositions

(40)

6

2

Total unrecognized tax benefits at December 31

$51,192 $52,812

2014

$ 1,235 $ 1,060 $ 1,574

Deferred tax liabilities Deferred policy acquisition costs and value of insurance in force Intangibles Debt issuances Other deferred tax liabilities

The total amounts of unrecognized tax benefits at December 31, 2015, 2014 and 2013 that, if recognized, would affect Citi’s effective tax rate, are $0.9 billion, $0.8 billion and $0.8 billion, respectively. The remaining uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences, except for $0.4 billion at December 31, 2013, which was recognized in Retained earnings in 2014. Interest and penalties (not included in “unrecognized tax benefits” above) are a component of the Provision for income taxes.

$ (327) $ (415) (1,146) (1,636) (850)

(866)

(1,020)

(559)

Gross deferred tax liabilities

$ (3,343) $ (3,476)

Net deferred tax assets

$47,849 $49,336

In millions of dollars

Pretax

Total interest and penalties in the Consolidated Balance Sheet at January 1

$

2015 Net of tax

269 $

2014 Net of tax

169 $ 277 $

Total interest and penalties in the Consolidated Statement of Income

(29)

(18)

Total interest and penalties in the Consolidated Balance Sheet at December 31(1)

233

146

(1)

Pretax

(1) 269

Pretax

2013 Net of tax

173 $ 492 $ (1) 169

315

(108)

(72)

277

173

Includes $3 million, $2 million, and $2 million for foreign penalties in 2015, 2014 and 2013, respectively. Also includes $3 million for state penalties in 2015 and 2014, and $4 million in 2013.

As of December 31, 2015, Citi is under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months, although Citi does not expect such audits to result in amounts that would cause a significant change to its effective tax rate, other than as discussed below. Citi expects to conclude its IRS audit for the 2012-2013 cycle within the next 12 months. The gross uncertain tax positions at December 31, 2015 for the items that may be resolved are as much as $97 million. Because of the number and nature of the issues remaining to be resolved, the potential tax benefit to continuing operations could be anywhere in a range between $0 and $94 million. In addition, Citi may conclude certain state and local tax audits within the next 12 months. The gross uncertain tax positions at December 31, 2015 are as much as $222 million. In addition there is gross interest of as much as $16 million. The potential tax benefit to

continuing operations could be anywhere between $0 and $155 million, including interest. Furthermore, Citi may conclude certain foreign audits within the next 12 months. The gross uncertain positions at December 31, 2015 are as much as $119 million. In addition there is gross interest of as much as $18 million. The potential tax benefit to continuing operations could be anywhere between $0 and $22 million, including interest. The potential tax benefit to discontinued operations could be anywhere between $0 and $76 million, including interest.

51

Deferred Tax Assets As of December 31, 2015 and 2014, Citi had no valuation allowance on its DTAs. The following table summarizes Citi’s DTAs.

The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination: Jurisdiction United States Mexico New York State and City United Kingdom India Brazil Singapore Hong Kong Ireland

Tax year 2012 2009 2006 2014 2011 2011 2010 2009 2011

In billions of dollars

Jurisdiction/component

DTAs balance DTAs balance December 31, December 31, 2014 2015

U.S. federal(1) Net operating losses (NOLs)(2)

$

Foreign tax credits (FTCs)(3)

2.3 17.6

General business credits (GBCs)

1.3

1.6

Future tax deductions and credits

20.7

21.1

$

41.3 $

42.6

$

2.4 $

1.5

0.3

0.4

Total U.S. federal

Foreign Earnings Foreign pretax earnings approximated $11.3 billion in 2015, $10.1 billion in 2014 and $13.1 billion in 2013. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all foreign pretax earnings earned by a foreign branch. Pretax earnings of a foreign subsidiary or affiliate are subject to U.S. taxation when effectively repatriated. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are indefinitely reinvested outside the United States. At December 31, 2015, $45.2 billion of accumulated undistributed earnings of non-U.S. subsidiaries was indefinitely invested. At the existing U.S. federal income tax rate, additional taxes (net of U.S. foreign tax credits) of $12.7 billion would have to be provided if such earnings were remitted currently. The current year’s effect on the income tax expense from continuing operations is included in the “Foreign income tax rate differential” line in the reconciliation of the federal statutory rate to the Company’s effective income tax rate in the table above. Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent such amounts are distributed in excess of limits prescribed by federal law. At December 31, 2015, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $125 million).

3.4 $ 15.9

State and local New York NOLs Other state NOLs Future tax deductions

1.2

2.0

$

3.9 $

3.9

$

0.2 $

0.2

Non-APB 23 subsidiary NOLs

0.4

0.5

Future tax deductions

2.0

2.1

Total state and local Foreign APB 23 subsidiary NOLs

Total foreign

$

2.6 $

2.8

Total

$

47.8 $

49.3

(1) (2)

(3)

52

Included in the net U.S. federal DTAs of $41.3 billion as of December 31, 2015 were deferred tax liabilities of $2 billion that will reverse in the relevant carry-forward period and may be used to support the DTAs. Includes $0.5 billion and $0.6 billion for 2015 and 2014, respectively, of NOL carry-forwards related to non-consolidated tax return companies that are expected to be utilized separately from Citigroup’s consolidated tax return, and $2.9 billion and $1.7 billion of non-consolidated tax return NOL carry-forwards for 2015 and 2014, respectively, that are eventually expected to be utilized in Citigroup’s consolidated tax return. Includes $1.7 billion and $1.0 billion for 2015 and 2014, respectively, of non-consolidated tax return FTC carry-forwards that are eventually expected to be utilized in Citigroup’s consolidated tax return.

The following table summarizes the amounts of tax carryforwards and their expiration dates:

While Citi’s net total DTAs decreased year-over-year, the time remaining for utilization has shortened, given the passage of time, particularly with respect to the foreign tax credit (FTC) component of the DTAs. Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $47.8 billion at December 31, 2015 is more-likelythan-not based upon expectations as to future taxable income in the jurisdictions in which the DTAs arise and available tax planning strategies (as defined in ASC 740, Income Taxes) that would be implemented, if necessary, to prevent a carryforward from expiring. Citi has concluded that it has the necessary positive evidence to support the full realization of its DTAs. Specifically, Citi forecasts sufficient U.S. taxable income in the carry-forward periods, exclusive of ASC 740 tax planning strategies. Citi’s forecasted taxable income, which will continue to be subject to overall market and global economic conditions, incorporates geographic business forecasts and taxable income adjustments to those forecasts (e.g., U.S. taxexempt income, loan loss reserves deductible for U.S. tax reporting in subsequent years), and actions intended to optimize its U.S. taxable earnings. In general, Citi would need to generate approximately $59 billion of U.S. taxable income during the FTC carry-forward periods to prevent this most time-sensitive component of Citi’s FTCs from expiring. In addition to its forecasted U.S. taxable income, Citi has tax planning strategies available to it under ASC 740 that would be implemented, if necessary, to prevent a carryforward from expiring. These strategies include: (i) repatriating low-taxed foreign source earnings for which an assertion that the earnings have been indefinitely reinvested has not been made; (ii) accelerating U.S. taxable income into, or deferring U.S. tax deductions out of, the latter years of the carry-forward period (e.g., selling appreciated assets, electing straight-line depreciation); (iii) accelerating deductible temporary differences outside the U.S.; and (iv) selling certain assets that produce tax-exempt income, while purchasing assets that produce fully taxable income. In addition, the sale or restructuring of certain businesses can produce significant U.S. taxable income within the relevant carry-forward periods. Based upon the foregoing discussion, Citi believes the U.S. federal and New York state and city NOL carry-forward period of 20 years provides enough time to fully utilize the DTAs pertaining to the existing NOL carry-forwards and any NOL that would be created by the reversal of the future net deductions that have not yet been taken on a tax return. With respect to the FTCs component of the DTAs, the carry-forward period is 10 years. Utilization of FTCs in any year is restricted to 35% of foreign source taxable income in that year. However, overall domestic losses that Citi has incurred of approximately $54 billion as of December 31, 2015 are allowed to be reclassified as foreign source income to the extent of 50% of domestic source income produced in subsequent years. Such resulting foreign source income would cover the FTCs being carried forward. As noted in the table above, Citi’s FTC carry-forwards were $15.9 billion as of December 31, 2015, compared to $17.6 billion as of December 31, 2014. This decrease represented $1.7 billion of the $1.5 billion decrease in Citi’s overall DTAs during 2015,

In billions of dollars

Year of expiration U.S. tax return foreign tax credit carry-forwards 2017 2018 2019 2020 2021 2022 2023(1) 2025(1) Total U.S. tax return foreign tax credit carry-forwards U.S. tax return general business credit carry-forwards 2030 2031 2032 2033 2034 2035 Total U.S. tax return general business credit carry-forwards U.S. subsidiary separate federal NOL carry-forwards 2027 2028 2030 2031 2033 2034 2035 Total U.S. subsidiary separate federal NOL carry-forwards(2) New York State NOL carry-forwards 2034 Total New York State NOL carryforwards(2) New York City NOL carry-forwards 2028 2031 2032 2034 Total New York City NOL carryforwards(2) APB 23 subsidiary NOL carryforwards Various Total APB 23 subsidiary NOL carryforwards (1) (2)

December 31, 2015

December 31, 2014

$

— $ 4.8 1.2 3.1 1.7 3.4 0.4 1.3

1.9 5.2 1.2 3.1 1.8 3.4 1.0 —

$

15.9 $

17.6

$

— $ 0.2 0.4 0.3 0.2 0.2

0.4 0.3 0.4 0.3 0.2 —

$

1.3 $

1.6

$

0.2 $ 0.1 0.3 1.5 1.7 2.3 3.6

0.2 0.1 0.3 1.7 1.9 2.3 —

$

9.7 $

6.5

$

14.6 $

12.3

$

14.6 $

12.3

$

— $ — — 13.3

3.8 0.1 0.5 —

$

13.3 $

4.4

$

0.2 $

0.2

$

0.2 $

0.2

The $1.7 billion in FTC carry-forwards that expire in 2023 and 2025 are in a non-consolidated tax return entity but are eventually expected to be utilized in Citigroup’s consolidated tax return. Pretax.

53

partially offset by an increase in AOCI related DTAs. Citi believes that it will generate sufficient U.S. taxable income within the 10-year carry-forward period to be able to fully utilize the FTCs, in addition to any FTCs produced in the tax return for such period, which must be used prior to any carryforward utilization.

54

10.

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: 2014

2015

In millions, except per-share amounts

Income from continuing operations before attribution of noncontrolling interests

17,386 $

7,504 $

90

192

17,296 $

7,312 $

(54)

(2)

17,242 $

7,310 $

769

511

16,473 $

6,799 $

224

111

$

16,249 $

6,688 $



1

$

16,249 $

6,689 $

$

Less: Noncontrolling interests from continuing operations Net income from continuing operations (for EPS purposes)

$

Income (loss) from discontinued operations, net of taxes Citigroup's net income

$

Less: Preferred dividends(1) Net income available to common shareholders

$

Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to basic EPS Net income allocated to common shareholders for basic EPS Add: Interest expense, net of tax, and dividends on convertible securities and adjustment of undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to diluted EPS Net income allocated to common shareholders for diluted EPS

2013 13,616 227 13,389 270 13,659 194 13,465 263 13,202 1 13,203

3,004.0

3,031.6

3,035.8

Options(2)

3.6

5.1

5.3

Other employee plans

0.1

0.3

0.5

3,007.7

3,037.0

3,041.6

Weighted-average common shares outstanding applicable to basic EPS Effect of dilutive securities(3)

Adjusted weighted-average common shares outstanding applicable to diluted EPS Basic earnings per share(4) Income from continuing operations

$

Discontinued operations

5.43 $

2.21 $

4.26



0.09

5.41 $

2.21 $

4.35

5.42 $

2.20 $

4.25



0.09

2.20 $

4.34

(0.02)

Net income

$

Diluted earnings per share(4) Income from continuing operations

$

Discontinued operations

(0.02)

Net income (1) (2) (3) (4)

$

5.40 $

See Note 21 to the Consolidated Financial Statements for the potential future impact of preferred stock dividends. During 2015, 2014 and 2013, weighted-average options to purchase 0.9 million, 2.8 million and 4.8 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per share because the weighted-average exercise prices of $199.16, $153.91 and $101.11 per share, respectively, were anti-dilutive. Warrants issued to the U.S. Treasury as part of the Troubled Asset Relief Program (TARP) and the loss-sharing agreement (all of which were subsequently sold to the public in January 2011), with exercise prices of $178.50 and $106.10 per share for approximately 21.0 million and 25.5 million shares of Citigroup common stock, respectively. Both warrants were not included in the computation of earnings per share in 2015, 2014 and 2013 because they were anti-dilutive. Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.

55

11. FEDERAL FUNDS, SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS

The resale and repurchase agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other type of default under the relevant master agreement. Events of default generally include (i) failure to deliver cash or securities as required under the transaction, (ii) failure to provide or return cash or securities as used for margining purposes, (iii) breach of representation, (iv) cross-default to another transaction entered into among the parties, or, in some cases, their affiliates, and (v) a repudiation of obligations under the agreement. The counterparty that receives the securities in these transactions is generally unrestricted in its use of the securities, with the exception of transactions executed on a tri-party basis, where the collateral is maintained by a custodian and operational limitations may restrict its use of the securities. A substantial portion of the resale and repurchase agreements is recorded at fair value, as described in Notes 25 and 26 to the Consolidated Financial Statements. The remaining portion is carried at the amount of cash initially advanced or received, plus accrued interest, as specified in the respective agreements. The securities borrowing and lending agreements also represent collateralized financing transactions similar to the resale and repurchase agreements. Collateral typically consists of government and government-agency securities and corporate debt and equity securities. Similar to the resale and repurchase agreements, securities borrowing and lending agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other default by the other party under the relevant master agreement. Events of default and rights to use securities under the securities borrowing and lending agreements are similar to the resale and repurchase agreements referenced above. A substantial portion of securities borrowing and lending agreements is recorded at the amount of cash advanced or received. The remaining portion is recorded at fair value as the Company elected the fair value option for certain securities borrowed and loaned portfolios, as described in Note 26 to the Consolidated Financial Statements. With respect to securities loaned, the Company receives cash collateral in an amount generally in excess of the market value of the securities loaned. The Company monitors the market value of securities borrowed and securities loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection. The enforceability of offsetting rights incorporated in the master netting agreements for resale and repurchase agreements and securities borrowing and lending agreements is evidenced to the extent that a supportive legal opinion has been obtained from counsel of recognized standing that provides the requisite level of certainty regarding the enforceability of these agreements, and that the exercise of

Federal funds sold and securities borrowed or purchased under agreements to resell, at their respective carrying values, consisted of the following:

Federal funds sold

2014

2015

In millions of dollars

25 $

$



Securities purchased under agreements to resell

119,777

123,979

Deposits paid for securities borrowed

99,873

118,591

Total

$

219,675 $

242,570

Federal funds purchased and securities loaned or sold under agreements to repurchase, at their respective carrying values, consisted of the following:

Federal funds purchased

$

Securities sold under agreements to repurchase

189 $ 131,650

Deposits received for securities loaned Total

2014

2015

In millions of dollars

14,657 $

146,496 $

334 147,204 25,900 173,438

The resale and repurchase agreements represent collateralized financing transactions. The Company executes these transactions primarily through its broker-dealer subsidiaries to facilitate customer matched-book activity and to efficiently fund a portion of the Company’s trading inventory. Transactions executed by the Company’s bank subsidiaries primarily facilitate customer financing activity. To maintain reliable funding under a wide range of market conditions, including under periods of stress, Citi manages these activities by taking into consideration the quality of the underlying collateral, and stipulating financing tenor. Citi manages the risks in its collateralized financing transactions by conducting daily stress tests to account for changes in capacity, tenors, haircut, collateral profile and client actions. Additionally, Citi maintains counterparty diversification by establishing concentration triggers and assessing counterparty reliability and stability under stress. It is the Company’s policy to take possession of the underlying collateral, monitor its market value relative to the amounts due under the agreements and, when necessary, require prompt transfer of additional collateral in order to maintain contractual margin protection. For resale and repurchase agreements, when necessary, the Company posts additional collateral in order to maintain contractual margin protection. Collateral typically consists of government and government-agency securities, corporate and municipal bonds, equities, and mortgage-backed and other asset-backed securities. 56

rights by the non-defaulting party to terminate and close-out transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding. A legal opinion may not have been sought or obtained for certain jurisdictions where local law is silent or sufficiently ambiguous to determine the enforceability of offsetting rights or where adverse case law or conflicting regulation may cast doubt on the enforceability of such rights. In some jurisdictions and for some counterparty types, the insolvency law for a particular counterparty type may be nonexistent or unclear as overlapping regimes may exist. For example, this may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.

The following tables present the gross and net resale and repurchase agreements and securities borrowing and lending agreements and the related offsetting amount permitted under ASC 210-20-45. The tables also include amounts related to financial instruments that are not permitted to be offset under ASC 210-20-45 but would be eligible for offsetting to the extent that an event of default occurred and a legal opinion supporting enforceability of the offsetting rights has been obtained. Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtain a legal opinion evidencing enforceability of the offsetting right.

As of December 31, 2015

In millions of dollars

Gross amounts Gross amounts offset on the of recognized Consolidated assets Balance Sheet(1)

Securities purchased under agreements to resell

$

Deposits paid for securities borrowed Total

176,167 $

56,390 $

99,873 $

Net amounts of assets included on the Consolidated Balance Sheet(2)



276,040 $

119,777 $ 99,873

56,390 $

219,650 $

In millions of dollars

Gross amounts Net amounts of Gross amounts offset on the liabilities included on of recognized Consolidated the Consolidated liabilities Balance Sheet(1) Balance Sheet(2)

Securities sold under agreements to repurchase

$

Deposits received for securities loaned Total

188,040 $

56,390 $

14,657 $



202,697 $

Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3)

92,039 $

27,738

16,619

83,254

108,658 $

Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3)

131,650 $

110,992

Net amounts(4)

60,641 $

14,657

56,390 $

Net amounts(4)

71,009

3,226

146,307 $

11,431

63,867 $

82,440

As of December 31, 2014

In millions of dollars

Securities purchased under agreements to resell

Gross amounts of recognized assets $

Deposits paid for securities borrowed Total

In millions of dollars

Securities sold under agreements to repurchase

180,318 $



298,909 $

Gross amounts of recognized liabilities

Net amounts of assets included on the Consolidated Balance Sheet(2)

56,339 $

118,591 $

203,543 $

$

229,443 $

— 56,339 $

57

242,570 $

Net amounts of liabilities included on the Consolidated Balance Sheet(2)

56,339 $

25,900

123,979 $ 118,591

56,339 $

Gross amounts offset on the Consolidated Balance Sheet(1)

$

Deposits received for securities loaned Total

Gross amounts offset on the Consolidated Balance Sheet(1)

147,204 $ 25,900 173,104 $

Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3)

Net amounts(4)

94,353 $

29,626

15,139

103,452

109,492 $ Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3)

133,078

Net amounts(4)

72,928 $ 5,190 78,118 $

74,276 20,710 94,986

(1) (2) (3) (4)

Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45. The total of this column for each period excludes Federal funds sold/purchased. See tables above. Includes financial instruments subject to enforceable master netting agreements that are not permitted to be offset under ASC 210-20-45 but would be eligible for offsetting to the extent that an event of default has occurred and a legal opinion supporting enforceability of the offsetting right has been obtained. Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtain a legal opinion evidencing enforceability of the offsetting right.

The following table presents the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by remaining contractual maturity as of December 31, 2015:

Open and overnight

In millions of dollars

Securities sold under agreements to repurchase

$

89,732 $

$

98,828 $

Deposits received for securities loaned Total

Up to 30 days

9,096

Greater than 90 days

31–90 days

54,336 $

21,541 $

1,823

2,324

56,159 $

23,865 $

22,431 $ 1,414 23,845 $

Total 188,040 14,657 202,697

The following table presents the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by class of underlying collateral as of December 31, 2015:

Repurchase agreements

In millions of dollars

U.S Treasury and federal agency

$

67,005 $

State and municipal

403

Foreign government Corporate bonds

Securities lending agreements

Total — $

67,005



403

66,633

789

67,422

15,355

1,085

16,440

Equity securities

10,297

12,484

22,781

Mortgage-backed securities

19,913



19,913

Asset-backed securities

4,572



4,572

Other

3,862

299

4,161

188,040 $

14,657 $

Total

$

58

202,697

12. BROKERAGE RECEIVABLES AND BROKERAGE PAYABLES

13. TRADING ACCOUNT ASSETS AND LIABILITIES Trading account assets and Trading account liabilities are carried at fair value, other than physical commodities accounted for at the lower of cost or fair value, and consist of the following:

The Company has receivables and payables for financial instruments sold to and purchased from brokers, dealers and customers, which arise in the ordinary course of business. The Company is exposed to risk of loss from the inability of brokers, dealers or customers to pay for purchases or to deliver the financial instruments sold, in which case the Company would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transaction and replaces the broker, dealer or customer in question. The Company seeks to protect itself from the risks associated with customer activities by requiring customers to maintain margin collateral in compliance with regulatory and internal guidelines. Margin levels are monitored daily, and customers deposit additional collateral as required. Where customers cannot meet collateral requirements, the Company may liquidate sufficient underlying financial instruments to bring the customer into compliance with the required margin level. Exposure to credit risk is impacted by market volatility, which may impair the ability of clients to satisfy their obligations to the Company. Credit limits are established and closely monitored for customers and for brokers and dealers engaged in forwards, futures and other transactions deemed to be credit sensitive. Brokerage receivables and Brokerage payables consisted of the following:

Receivables from customers

$

Receivables from brokers, dealers, and clearing organizations

Trading account assets Mortgage-backed securities(1) U.S. government-sponsored agency guaranteed

24,767 $

27,053

Prime

803

1,271

Alt-A

543

709

Subprime

516

1,382

523

1,476

2,855

4,343

Total brokerage receivables

Commercial Total mortgage-backed securities

U.S. Treasury

$

2,696 $

20,474 3,402 64,937

Corporate

14,437

27,797

Derivatives(2)

56,184

67,957

Equity securities

56,495

57,846

3,956

4,546

Asset-backed securities(1) (3)

Other trading assets

28,419

Securities sold, not yet purchased

$

35,653 $

33,984

Derivatives

11,776 249,956 $

296,786

$

57,827 $

70,944

57,592

68,092

2,093



Other trading liabilities(3) Total trading account liabilities

Brokerage receivables and payables are accounted for in accordance with the AICPA Audit and Accounting Guide for Brokers and Dealers in Securities as codified in ASC 940-320.

(2) (3)

13,593

$

(2)

59

17,796 $

1,568

56,609

(1) (1)

18,906

2,005

Foreign government securities

27,683 $

52,180

15,791 $

State and municipal securities

$

53,722 $

$

$

Trading account liabilities

$

36,234

Total U.S. Treasury and federal agency securities

18,039

18,196

30,007 $

Agency obligations

10,380

18,069

$

U.S. Treasury and federal agency securities

17,248

Payables to brokers, dealers, and clearing organizations

$

Non-U.S. residential

Total trading account assets (1)

Total brokerage payables(1)

10,435 $

2014

2015

In millions of dollars

December 31, 2015 2014

In millions of dollars

Payables to customers

December 31,

$

117,512 $

139,036

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, see Note 22 to the Consolidated Financial Statements. Presented net, pursuant to enforceable master netting agreements. See Note 23 to the Consolidated Financial Statements for a discussion regarding the accounting and reporting for derivatives. Includes positions related to investments in unallocated precious metals, as discussed in Note 26 to the Consolidated Financial Statements. Also includes physical commodities accounted for at the lower of cost or fair value.

14. INVESTMENTS Overview The following table presents the Company’s investments by category: December 31, 2014

2015

In millions of dollars

Securities available-for-sale (AFS)

$

Debt securities held-to-maturity (HTM)(1)

299,136 $

300,143

36,215

23,921

Non-marketable equity securities carried at fair value

2,088

2,758

Non-marketable equity securities carried at cost(3)

5,516

6,621

(2)

Total investments (1) (2) (3)

$

342,955 $

333,443

Carried at adjusted amortized cost basis, net of any credit-related impairment. Unrealized gains and losses for non-marketable equity securities carried at fair value are recognized in earnings. Primarily consists of shares issued by the Federal Reserve Bank, Federal Home Loan Banks, foreign central banks and various clearing houses of which Citigroup is a member.

The following table presents interest and dividend income on investments: 2014

2015

In millions of dollars

Taxable interest

2013

6,414 $

6,311 $

Interest exempt from U.S. federal income tax

215

439

732

Dividend income

388

445

437

7,017 $

7,195 $

$

Total interest and dividend income

$

5,750

6,919

The following table presents realized gains and losses on the sale of investments. The gross realized investment losses exclude losses from other-than-temporary impairment (OTTI): 2014

2015

In millions of dollars

Gross realized investment gains

$

1,020 $

(442)

(450)

Gross realized investment losses Net realized gains on sale of investments

682 $

$

The Company has sold certain debt securities that were classified as HTM. These sales were in response to significant deterioration in the creditworthiness of the issuers or securities or because the Company has collected a substantial portion (at least 85%) of the principal outstanding at acquisition of the security. In addition, certain other securities were reclassified to AFS investments in response to

2013

1,124 $

1,606 (858)

570 $

748

significant credit deterioration. Because the Company generally intends to sell these reclassified securities, Citi recorded OTTI on the securities. The following table sets forth, for the periods indicated, the carrying value of HTM securities sold and reclassified to AFS, as well as the related gain (loss) or the OTTI losses recorded on these securities. 2014

2015

In millions of dollars

Carrying value of HTM securities sold

$

Net realized gain (loss) on sale of HTM securities

392 $

2013 8 $

935

10



Carrying value of securities reclassified to AFS

243

889

989

OTTI losses on securities reclassified to AFS

(15)

(25)

(156)

60

(128)

Securities Available-for-Sale The amortized cost and fair value of AFS securities at December 31 were as follows: 2014

2015 Gross Gross Amortized unrealized unrealized cost gains losses

In millions of dollars

Amortized cost

Fair value

Gross unrealized gains

Gross unrealized losses

Fair value

Debt securities AFS Mortgage-backed securities(1) U.S. government-sponsored agency guaranteed

$

Prime

39,584 $ 2

Alt-A Non-U.S. residential Commercial Total mortgage-backed securities

367 $

237 $ 39,714 $





2

50

5



55

5,909

31

11

5,929

4

571

35,647 $ 12

603 $

159 $ 36,091





12

43

1



44

8,247

67

7

8,307

3

554

573

2

551

6

$

46,118 $

405 $

252 $ 46,271 $

44,500 $

677 $

169 $ 45,008

$

113,096 $

254 $

515 $ 112,835 $ 110,492 $

353 $

127 $ 110,718

U.S. Treasury and federal agency securities U.S. Treasury Agency obligations

10,095

22

37

10,080

12,925

60

13

12,972

Total U.S. Treasury and federal agency securities

$

123,191 $

276 $

552 $ 122,915 $ 123,417 $

413 $

140 $ 123,690

State and municipal(2)

$

12,099 $

132 $

772 $ 11,459 $

13,526 $

150 $

977 $ 12,699

Foreign government

92,384

410

593

92,201

90,249

734

286

90,697

Corporate

15,859

121

177

15,803

12,033

215

91

12,157

9,261

5

92

9,174

12,534

30

58

12,506

688





688

661





661

(1)

Asset-backed securities Other debt securities

Total debt securities AFS

$

299,600 $

1,349 $

Marketable equity securities AFS

$

602 $

26 $

Total securities AFS

$

300,202 $

1,375 $

(1) (2)

2,438 $ 298,511 $ 296,920 $ 625 $

2,219 $

2,461 $

308 $

2,441 $ 299,136 $ 299,381 $

2,527 $

3 $

1,721 $ 297,418 44 $

2,725

1,765 $ 300,143

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, see Note 22 to the Consolidated Financial Statements. The gross unrealized losses on state and municipal debt securities are primarily attributable to the effects of fair value hedge accounting. Specifically, Citi hedges the LIBOR-benchmark interest rate component of certain fixed-rate tax-exempt state and municipal debt securities utilizing LIBOR-based interest rate swaps. During the hedge period, losses incurred on the LIBOR-hedging swaps recorded in earnings were substantially offset by gains on the state and municipal debt securities attributable to changes in the LIBOR swap rate being hedged. However, because the LIBOR swap rate decreased significantly during the hedge period while the overall fair value of the municipal debt securities was relatively unchanged, the effect of reclassifying fair value gains on these securities from Accumulated other comprehensive income (loss) (AOCI) to earnings, attributable solely to changes in the LIBOR swap rate, resulted in net unrealized losses remaining in AOCI that relate to the unhedged components of these securities.

consisted of $39,714 million of government-sponsored agency securities, and $6,557 million of privately sponsored securities, substantially all of which were backed by non-U.S. residential mortgages. As discussed in more detail below, the Company conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-thantemporary. Any credit-related impairment related to debt securities is recorded in earnings as OTTI. Non-credit-related impairment is recognized in AOCI if the Company does not plan to sell and is not likely to be required to sell the security. For other debt securities with OTTI, the entire impairment is recognized in the Consolidated Statement of Income.

At December 31, 2015, the amortized cost of approximately 5,212 investments in equity and fixed income securities exceeded their fair value by $2,441 million. Of the $2,441 million, the gross unrealized losses on equity securities were $3 million. Of the remainder, $1,331 million represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for less than a year and, of these, 94% were rated investment grade; and $1,107 million represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for a year or more and, of these, 90% were rated investment grade. Of the $1,107 million mentioned above, $746 million represent state and municipal securities. At December 31, 2015, the AFS mortgage-backed securities portfolio fair value balance of $46,271 million

61

The table below shows the fair value of AFS securities that have been in an unrealized loss position for less than 12 months or for 12 months or longer: Less than 12 months Fair value

In millions of dollars

12 months or longer

Gross unrealized losses

Gross unrealized losses

Fair value

Total Gross unrealized losses

Fair value

December 31, 2015 Securities AFS Mortgage-backed securities U.S. government-sponsored agency guaranteed

$

Prime

141 $

2,618 $

96 $

20,434 $

237





1



1



2,217

7

825

4

3,042

11

291

3

55

1

346

4

$

20,324 $

151 $

3,499 $

101 $

23,823 $

252

$

59,384 $

505 $

1,204 $

10 $

60,588 $

515

Non-U.S. residential Commercial Total mortgage-backed securities

17,816 $

U.S. Treasury and federal agency securities U.S. Treasury Agency obligations

6,716

30

196

7

6,912

37

Total U.S. Treasury and federal agency securities

$

66,100 $

535 $

1,400 $

17 $

67,500 $

552

State and municipal

$

635 $

26 $

4,450 $

746 $

5,085 $

772

Foreign government

35,491

429

4,642

164

40,133

593

Corporate

5,586

132

1,298

45

6,884

177

Asset-backed securities

5,311

58

2,247

34

7,558

92

27







27





133

Other debt securities Marketable equity securities AFS Total securities AFS

132 $ 133,606 $

3

1

1,334 $

17,537 $

30 $

5,547 $

1,107 $ 151,143 $

3 2,441

December 31, 2014 Securities AFS Mortgage-backed securities U.S. government-sponsored agency guaranteed

$

Prime Non-U.S. residential Commercial

4,198 $

129 $

9,745 $

159

5



2



7



1,276

3

199

4

1,475

7

136

2

260

$

5,603 $

34 $

5,884 $

135 $

11,487 $

169

$

36,581 $

119 $

1,013 $

8 $

37,594 $

127

Total U.S. Treasury and federal agency securities

$

42,279 $

State and municipal

$

Total mortgage-backed securities

124

1

3

U.S. Treasury and federal agency securities U.S. Treasury Agency obligations

5,698

754 1,767 $

12 $

4

15 $

6,452

13

44,046 $

140

6,188 $

977

5,802 $

962 $

18,495

147

5,984

139

24,479

286

Corporate

3,511

63

1,350

28

4,861

91

Asset-backed securities

3,701

13

3,816

45

7,517

58

Foreign government

Marketable equity securities AFS Total securities AFS

$

62

386 $

9 128 $

51

4

218

40

269

74,026 $

404 $

24,821 $

1,361 $

98,847 $

44 1,765

The following table presents the amortized cost and fair value of AFS debt securities by contractual maturity dates: December 31, 2014

2015 Amortized cost

In millions of dollars

Fair value

Amortized cost

Fair value

Mortgage-backed securities(1) Due within 1 year

$

114 $

114 $

44 $

44

After 1 but within 5 years

1,408

1,411

931

935

After 5 but within 10 years

1,750

1,751

1,362

1,387

After 10 years(2) Total

42,846

42,995

42,163

42,642

$

46,118 $

46,271 $

44,500 $

45,008

$

3,016 $

3,014 $

13,070 $

13,084

U.S. Treasury and federal agency securities Due within 1 year After 1 but within 5 years

107,034

106,878

104,982

105,131

After 5 but within 10 years

12,786

12,684

2,286

2,325

After 10 years

(2)

Total

355

339

3,079

$

123,191 $

122,915 $

123,417 $

123,690

3,150

$

3,289 $

3,287 $

652 $

651

1,781

1,781

4,387

4,381

502

516

524

537

State and municipal Due within 1 year After 1 but within 5 years After 5 but within 10 years After 10 years

(2)

6,527

5,875

7,963

7,130

$

12,099 $

11,459 $

13,526 $

12,699

$

26,322 $

26,329 $

31,355 $

31,382

After 1 but within 5 years

44,801

44,756

41,913

42,467

After 5 but within 10 years

18,935

18,779

16,008

15,779

Total Foreign government Due within 1 year

After 10 years

(2)

973

1,069

$

92,384 $

92,201 $

90,249 $

90,697

$

1,930 $

1,931 $

1,248 $

1,251

2,326

Total

2,337

All other(3) Due within 1 year After 1 but within 5 years

12,748

12,762

10,442

10,535

After 5 but within 10 years

7,867

7,782

7,282

7,318

After 10 years

(2)

3,263

3,190

6,256

6,220

Total

$

25,808 $

25,665 $

25,228 $

25,324

Total debt securities AFS

$

299,600 $

298,511 $

296,920 $

297,418

(1) (2) (3)

Includes mortgage-backed securities of U.S. government-sponsored agencies. 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. Includes corporate, asset-backed and other debt securities.

63

Debt Securities Held-to-Maturity The carrying value and fair value of debt securities HTM were as follows: Net unrealized gains (losses) recognized in AOCI

Amortized cost basis(1)

In millions of dollars

Gross unrealized gains

Carrying value(2)

Gross unrealized (losses)

Fair value

December 31, 2015 Debt securities held-to-maturity Mortgage-backed securities(3) U.S. government agency guaranteed

$

17,648 $

Prime

121

Alt-A

433

Subprime

138 $

2

Non-U.S. residential

(100) $

17,757

3

(1)

45

(1)

432

259

(162)

529

2

13



15

1,270

37



1,307









(60)



71 $

43



1,330

Commercial

17,786 $

(78)



Total mortgage-backed securities

$

19,534 $

(1) $

19,533 $

383 $

(263) $

19,653

State and municipal(4)

$

8,581 $

(438) $

8,143 $

245 $

(87) $

8,301

Foreign government

4,068



4,068

28

(3)

4,093

Asset-backed securities(3)

4,485

(14)

4,471

34

(41)

4,464

Total debt securities held-to-maturity

$

36,668 $

$

8,795 $

(453) $

36,215 $

690 $

(394) $

36,511

95 $

(6) $

8,990

December 31, 2014 Debt securities held-to-maturity Mortgage-backed securities(3) U.S. government agency guaranteed

8,890 $

106 $

Prime

60

(12)

48

6

(1)

53

Alt-A

1,125

(213)

912

537

(287)

1,162

6

(1)

5

15



20

983

(137)

846

92



938

8

1



9

Subprime Non-U.S. residential Commercial

8



Total mortgage-backed securities

$

10,977 $

(268) $

10,709 $

757 $

(294) $

11,172

State and municipal

$

8,443 $

(494) $

7,949 $

227 $

(57) $

8,119

Foreign government

4,725

Asset-backed securities(3) (5)

Total debt securities held-to-maturity (1)

(2)

(3) (4)

$

4,725

77



556

(18)



538

50

(10)

24,701 $

(780) $

23,921 $

1,111 $

(361) $

4,802 578 24,671

For securities transferred to HTM from Trading account assets, amortized cost basis is defined as the fair value 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, adjusted for the cumulative accretion or amortization of any purchase discount or premium, plus or minus any cumulative fair value hedge adjustments, net of accretion or amortization, and less any other-than-temporary impairment recognized in earnings. HTM securities are carried on the Consolidated Balance Sheet at amortized cost basis, plus or minus any unamortized unrealized gains and losses and fair value hedge adjustments recognized in AOCI prior to reclassifying the securities from AFS to HTM. Changes in the values of these securities are not reported in the financial statements, except for the amortization of any difference between the carrying value at the transfer date and par value of the securities, and the recognition of any non-credit fair value adjustments in AOCI in connection with the recognition of any credit impairment in earnings related to securities the Company continues to intend to hold until maturity. 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, see Note 22 to the Consolidated Financial Statements. The net unrealized losses recognized in AOCI on state and municipal debt securities are primarily attributable to the effects of fair value hedge accounting applied when these debt securities were classified as AFS. Specifically, Citi hedged the LIBOR-benchmark interest rate component of certain fixed-rate taxexempt state and municipal debt securities utilizing LIBOR-based interest rate swaps. During the hedge period, losses incurred on the LIBOR-hedging swaps recorded in earnings were substantially offset by gains on the state and municipal debt securities attributable to changes in the LIBOR swap rate being hedged. However, because the LIBOR swap rate decreased significantly during the hedge period while the overall fair value of the municipal debt securities was relatively unchanged, the effect of reclassifying fair value gains on these securities from AOCI to earnings attributable solely to changes in the LIBOR swap rate resulted in net unrealized losses remaining in AOCI that relate to the unhedged components of these securities. Upon transfer of these debt securities to HTM, all hedges have been de-designated and hedge accounting has ceased.

64

(5)

During the second quarter of 2015, securities with a total fair value of approximately $7.1 billion were transferred from AFS to HTM, consisting of $7.0 billion of U.S. government agency mortgage-backed securities and $0.1 billion of obligations of U.S. states and municipalities. During the second quarter of 2014, securities with a total fair value of approximately $11.8 billion were transferred from AFS to HTM, consisting of $5.4 billion of U.S. government agency mortgage-backed securities and $6.4 billion of obligations of U.S. states and municipalities. The transfer reflects the Company’s intent to hold these securities to maturity or to issuer call in order to reduce the impact of price volatility on AOCI and certain capital measures under Basel III. While these securities were transferred to HTM at fair value as of the transfer date, no subsequent changes in value may be recorded, other than in connection with the recognition of any subsequent other-than-temporary impairment and the amortization of differences between the carrying values at the transfer date and the par values of each security as an adjustment of yield over the remaining contractual life of each security. Any net unrealized holding losses within AOCI related to the respective securities at the date of transfer, inclusive of any cumulative fair value hedge adjustments, will be amortized over the remaining contractual life of each security as an adjustment of yield in a manner consistent with the amortization of any premium or discount.

The Company has the positive intent and ability to hold these securities to maturity or, where applicable, the exercise of any issuer call options, absent any unforeseen significant changes in circumstances, including deterioration in credit or changes in regulatory capital requirements. The net unrealized losses classified in AOCI primarily relate to debt securities previously classified as AFS that have been transferred to HTM, and include any cumulative fair

value hedge adjustments. The net unrealized loss amount also includes any non-credit-related changes in fair value of HTM securities that have suffered credit impairment recorded in earnings. The AOCI balance related to HTM securities is amortized over the remaining contractual life of the related securities as an adjustment of yield in a manner consistent with the accretion of any difference between the carrying value at the transfer date and par value of the same debt securities.

The table below shows the fair value of debt securities HTM that have been in an unrecognized loss position for less than 12 months and for 12 months or longer: Less than 12 months Gross unrecognized losses

Fair value

In millions of dollars

12 months or longer Fair value

Total

Gross unrecognized losses

Fair value

Gross unrecognized losses

December 31, 2015 Debt securities held-to-maturity Mortgage-backed securities

$

935 $

State and municipal

881

Foreign government

180

Asset-backed securities

132

Total debt securities held-to-maturity

$

2,128 $

$

4 $

1 $ 10,301 $ 20

262 $ 11,236 $ 2,707

263

1,826

67

87

3





180

3

13

3,232

28

3,364

41

37 $ 15,359 $

357 $ 17,487 $

394

— $

294 $

294

December 31, 2014 Debt securities held-to-maturity Mortgage-backed securities

1,134 $

1,138 $

State and municipal

2,528

34

314

23

2,842

57

Foreign government













Asset-backed securities Total debt securities held-to-maturity

9 $

2,541 $

Excluded from the gross unrecognized losses presented in the above table are $(453) million and $(780) million of net unrealized losses recorded in AOCI as of December 31, 2015 and December 31, 2014, respectively, primarily related to the difference between the amortized cost and carrying value of HTM securities that were reclassified from AFS. Substantially all of these net unrecognized losses relate to securities that have been in a loss position for 12 months or longer at December 31, 2015 and December 31, 2014.

65

1 35 $

174

9

183

10

1,622 $

326 $

4,163 $

361

The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates: December 31, 2014

2015 Carrying value

In millions of dollars

Fair value

Carrying value

Fair value

Mortgage-backed securities Due within 1 year

$

— $

— $

— $



After 1 but within 5 years

172

172





After 5 but within 10 years

660

663

863

869

9,846

10,303

After 10 years(1)

18,701

18,818

$

19,533 $

19,653 $

10,709 $

11,172

$

309 $

305 $

205 $

205

After 1 but within 5 years

336

335

243

243

After 5 but within 10 years

262

270

140

144

Total State and municipal Due within 1 year

After 10 years

(1)

Total

7,236

7,391

7,361

7,527

$

8,143 $

8,301 $

7,949 $

8,119

$

— $

— $

— $



Foreign government Due within 1 year After 1 but within 5 years After 5 but within 10 years After 10 years

(1)

4,068

4,093

4,725

4,802















$

4,068 $

4,093 $

4,725 $

4,802

$

— $

— $

— $



After 1 but within 5 years









After 5 but within 10 years









Total



All other(2) Due within 1 year

After 10 years

(1)

4,471

4,464

538

578

Total

$

4,471 $

4,464 $

538 $

578

Total debt securities held-to-maturity

$

36,215 $

36,511 $

23,921 $

24,671

(1) (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. Includes corporate and asset-backed securities.

66

Evaluating Investments for Other-Than-Temporary Impairment

Debt The entire difference between amortized cost basis and fair value is recognized in earnings as OTTI for impaired debt securities that the Company has an intent to sell or for which the Company believes it will more-likely-than-not be required to sell prior to recovery of the amortized cost basis. However, for those securities that the Company does not intend to sell and is not likely to be required to sell, only the credit-related impairment is recognized in earnings and any non-creditrelated impairment is recorded in AOCI. For debt securities, credit impairment exists where management does not expect to receive contractual principal and interest cash flows sufficient to recover the entire amortized cost basis of a security.

Overview The Company conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is otherthan-temporary. 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. Losses related to HTM securities generally are not recorded, as these investments are carried at adjusted amortized cost basis. However, for HTM securities with credit-related losses, the credit loss is recognized in earnings as OTTI and any difference between the cost basis adjusted for the OTTI and fair value is recognized in AOCI and amortized as an adjustment of yield over the remaining contractual life of the security. 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, adjusted for the cumulative accretion or amortization of any purchase discount or premium, plus or minus any cumulative fair value hedge adjustments, net of accretion or amortization, and less any impairment recognized in earnings. Regardless of the classification of the securities as AFS or HTM, the Company assesses each position with an unrealized loss for OTTI. Factors considered in determining whether a loss is temporary include: • • • • •

Equity 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 or whether it is more-likely-than-not that the Company will be required to sell the security prior to recovery of its cost basis. 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 to be other-than-temporarily impaired are written down to fair value, with the full difference between fair value and cost recognized in earnings. Management assesses equity method investments that have fair values that are less than their respective carrying values for OTTI. Fair value is measured as price multiplied by quantity if the investee has publicly listed securities. If the investee is not publicly listed, other methods are used (see Note 25 to the Consolidated Financial Statements). For impaired equity method investments that Citi plans to sell prior to recovery of value or would likely be required to sell, with no expectation that the fair value will recover prior to the expected sale date, the full impairment is recognized in earnings as OTTI regardless of severity and duration. The measurement of the OTTI does not include partial projected recoveries subsequent to the balance sheet date. For impaired equity method investments that management does not plan to sell and is not likely to be required to sell prior to recovery of value, the evaluation of whether an impairment is other-than-temporary is based on (i) whether and when an equity method investment will recover in value and (ii) whether the investor has the intent and ability to hold that investment for a period of time sufficient to recover the value. The determination of whether the impairment is considered other-than-temporary considers the following indicators, regardless of the time and extent of impairment:

the length of time and the extent to which fair value has been below cost; the severity of the impairment; the cause of the impairment and the financial condition and near-term prospects of the issuer; activity in the market of the issuer that may indicate adverse credit conditions; and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

The Company’s review for impairment generally entails: • •





identification and evaluation of impaired investments; analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period; consideration of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having other-thantemporary impairment and those that would not support other-than-temporary impairment; and documentation of the results of these analyses, as required under business policies.





67

the cause of the impairment and the financial condition and near-term prospects of the issuer, including any specific events that may influence the operations of the issuer; the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value; and



the length of time and extent to which fair value has been less than the carrying value.

rate. Other assumptions contemplate the actual collateral attributes, including geographic concentrations, rating actions and current market prices. Cash flow projections are developed using different stress test scenarios. Management evaluates 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.

The sections below describe the Company’s process for identifying credit-related impairments for security types that have the most significant unrealized losses as of December 31, 2015. 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 principal and interest cash flows on the underlying mortgages using the security-specific collateral and transaction structure. The model distributes the estimated cash flows to the 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 estimates the remaining cash flows using a number of assumptions, including default rates, prepayment rates, recovery rates (on foreclosed properties) and loss severity rates (on non-agency mortgage-backed securities). Management develops specific assumptions using market data, internal estimates and 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 (i) 10% of current loans, (ii) 25% of 30–59 day delinquent loans, (iii) 70% of 60–90 day delinquent loans and (iv) 100% of 91+ day delinquent loans. These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default

State and Municipal Securities The process for identifying credit impairments in Citigroup’s AFS and HTM state and municipal bonds is primarily based on a credit analysis that incorporates third-party credit ratings. Citigroup monitors the bond issuers and any insurers providing default protection in the form of financial guarantee insurance. The average external credit rating, ignoring any insurance, is Aa3/AA-. In the event of an external rating downgrade or other indicator of credit impairment (i.e., based on instrument-specific estimates of cash flows or probability of issuer default), the subject bond is specifically reviewed for adverse changes in the amount or timing of expected contractual principal and interest payments. For state and municipal bonds with unrealized losses that Citigroup plans to sell (for AFS only), would be more-likelythan-not required to sell (for AFS only) or will be subject to an issuer call deemed probable of exercise prior to the expected recovery of its amortized cost basis (for AFS and HTM), the full impairment is recognized in earnings.

Recognition and Measurement of OTTI The total OTTI recognized in earnings are as follows: Year ended December 31, 2015

OTTI on Investments and Other Assets AFS(1)

In millions of dollars

Other assets

HTM

Total

Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell: Total OTTI losses recognized during the period

$

Less: portion of impairment loss recognized in AOCI (before taxes) Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell Impairment losses recognized in earnings for securities that the Company intends to sell, would be more likely than not required to sell or will be subject to an issuer call deemed probable of exercise Total impairment losses recognized in earnings (1)

— $

$

Includes OTTI on non-marketable equity securities.

68

33 $

33 $

1 $ — 1 $

— $

34





— $

34

182

43

6

231

215 $

44 $

6 $

265

Year ended December 31, 2014

OTTI on Investments and Other Assets AFS(1)

In millions of dollars

Other assets

HTM

Total

Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell: Total OTTI losses recognized during the period Less: portion of impairment loss recognized in AOCI (before taxes) Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell

$

21 $ 8

5 $ —

— $ —

26 8

$

13 $

5 $

— $

18

Impairment losses recognized in earnings for securities that the Company intends to sell, would be more likely than not required to sell or will be subject to an issuer call deemed probable of exercise $

Total impairment losses recognized in earnings (1)

380

26



406

393 $

31 $

— $

424

Includes OTTI on non-marketable equity securities.

Year ended December 31, 2013

OTTI on Investments and Other Assets AFS(1)

In millions of dollars

Other assets(2)

HTM

Total

Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell: Total OTTI losses recognized during the period

$

Less: portion of impairment loss recognized in AOCI (before taxes) Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell

$

Impairment losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery (2) $

Total impairment losses recognized in earnings (1) (2)

9 $ — 9 $

154 $

— $

163

98



98

56 $

— $

65

269



201

470

278 $

56 $

201 $

535

Includes OTTI on non-marketable equity securities. The impairment charge relates to the carrying value of Citi’s then-remaining 35% interest in the MSSB joint venture, offset by the equity pickup from MSSB during the respective periods that was recorded in Other revenue.

69

The following are 12-month rollforwards of the credit-related impairments recognized in earnings for AFS and HTM debt securities held that the Company does not intend to sell nor likely will be required to sell: Cumulative OTTI credit losses recognized in earnings on securities still held

In millions of dollars

Dec. 31, 2014 balance

Credit impairments recognized in earnings on securities not previously impaired

Credit impairments recognized in earnings on Reductions due to securities that credit-impaired have securities sold, been previously transferred or impaired matured

Dec. 31, 2015 balance

AFS debt securities Mortgage-backed securities

$

State and municipal

295 $

— $

(1) $

— $

294



8





Foreign government securities

171





(1)

170

Corporate

118

2

(2)

(6)

112

All other debt securities

149

22

(1)



170

Total OTTI credit losses recognized for AFS debt $ securities

733 $

32 $

(4) $

(7) $

754 668

8

HTM debt securities Mortgage-backed securities(1)

$

Corporate All other debt securities Total OTTI credit losses recognized for HTM debt securities (1)

$

670 $

(1) $

(2) $











133





(1)

132

(1) $

(3) $

800

803 $

1 $

1 $

Primarily consists of Alt-A securities.

Cumulative OTTI credit losses recognized in earnings on securities still held

In millions of dollars

AFS debt securities Mortgage-backed securities State and municipal Foreign government securities Corporate All other debt securities Total OTTI credit losses recognized for AFS debt securities HTM debt securities Mortgage-backed securities(1) Corporate All other debt securities Total OTTI credit losses recognized for HTM debt securities (1)

Dec. 31, 2013 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 credit-impaired securities sold, transferred or matured

Dec. 31, 2014 balance

$

295 $ — 171 113 144

— $ — — 8 5

— $ — — — —

— $ — — (3) —

295 — 171 118 149

$

723 $

13 $

— $

(3) $

733

$

678 $ 56 133

5 $ — —

— $ — —

(13) $ (56) —

670 — 133

$

867 $

5 $

— $

(69) $

803

Primarily consists of Alt-A securities.

70

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, funds 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 nonmarketable 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 the NAV. Unfunded commitments

Fair value In millions of dollars

Hedge funds Private equity funds(1)(2) Real estate funds (2)(3) Total(4) (1) (2)

(3) (4)

December 31, December 31, December 31, December 31, 2014 2014 2015 2015 $ 3 $ — $ 8 $ — 762 173 891 205 130 21 166 24 $ 895 $ 194 $ 1,065 $ 229

Redemption frequency (if currently eligible) monthly, quarterly, annually

Redemption notice period

Generally quarterly — — —

10–95 days — — —

Private equity funds include funds that invest in infrastructure, leveraged buyout transactions, emerging markets and venture capital. With respect to the Company’s investments in private equity funds and real estate funds, distributions from each fund will be received as the underlying assets held by these funds are liquidated. It is estimated that the underlying assets of these funds will be liquidated over a period of several years as market conditions allow. Private equity and real estate funds do not allow redemption of investments by their investors. Investors are permitted to sell or transfer their investments, subject to the approval of the general partner or investment manager of these funds, which generally may not be unreasonably withheld. Includes several real estate funds that invest primarily in commercial real estate in the U.S., Europe and Asia. Included in the total fair value of investments above are $0.9 billion and $0.8 billion of fund assets that are valued using NAVs provided by third-party asset managers as of December 31, 2015 and December 31, 2014, respectively.

71

15. LOANS Delinquency Status Delinquency status is monitored and considered a key indicator of credit quality of consumer loans. Principally, the U.S. residential first mortgage loans use the Mortgage Bankers Association (MBA) method of reporting delinquencies, which considers a loan delinquent if a monthly payment has not been received by the end of the day immediately preceding the loan’s next due date. All other loans use a method of reporting delinquencies that considers a loan delinquent if a monthly payment has not been received by the close of business on the loan’s next due date. As a general policy, residential first mortgages, home equity loans and installment loans are classified as non-accrual when loan payments are 90 days contractually past due. Credit cards and unsecured revolving loans generally accrue interest until payments are 180 days past due. Home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Mortgage loans in regulated bank entities discharged through Chapter 7 bankruptcy, other than Federal Housing Administration (FHA)-insured loans, are classified as nonaccrual. Commercial market loans are placed on a cash (nonaccrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due. 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 openended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for a 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, 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.

Citigroup loans are reported in two categories—consumer and corporate. These categories are classified primarily according to the segment and subsegment that manage the loans. Consumer Loans Consumer loans represent loans and leases managed primarily by the GCB businesses in Citicorp and in Citi Holdings. The following table provides information by loan type for the periods indicated: December 31, 2014

2015

In millions of dollars

In U.S. offices Mortgage and real estate(1)

$

Installment, revolving credit, and other Cards Commercial and industrial

80,281 $

96,533

3,480

14,450

112,800

112,982

6,407

5,895

$

202,968 $

229,860

$

47,062 $

54,462

Installment, revolving credit, and other

29,480

31,128

Cards

27,342

32,032

Commercial and industrial

17,741

18,594

362

546

In offices outside the U.S. Mortgage and real estate(1)

Lease financing $

121,987 $

136,762

Total consumer loans

$

324,955 $

366,622

Net unearned income

$

830

Consumer loans, net of unearned income

$

325,785 $

(1)

(679) 365,943

Loans secured primarily by real estate.

Citigroup has established a risk management process to monitor, evaluate and manage the principal risks associated with its consumer loan portfolio. Credit quality indicators that are actively monitored include delinquency status, consumer credit scores (FICO), and loan to value (LTV) ratios, each as discussed in more detail below. Included in the loan table above are lending products whose terms may give rise to greater credit issues. Credit cards with below-market introductory interest rates and interest-only loans are examples of such products. These products are closely managed using credit techniques that are intended to mitigate their higher inherent risk. During the years ended December 31, 2015 and 2014, the Company sold and/or reclassified to held-for-sale $25.8 billion and $10.3 billion, respectively, of consumer loans. The Company did not have significant purchases of consumer loans during the years ended December 31, 2015 and 2014.

72

The following tables provide details on Citigroup’s consumer loan delinquency and non-accrual loans: Consumer Loan Delinquency and Non-Accrual Details at December 31, 2015 Total 30–89 days 90 days current(1)(2) past due(3) past due(3)

In millions of dollars

Past due government guaranteed(4)

Total loans(2)

Total nonaccrual

90 days past due and accruing

In North America offices Residential first mortgages

$

(5)

Home equity loans

53,146 $

846 $

564 $

2,318 $

56,874 $

1,216 $

1,997

22,335

136

277



22,748

1,017



110,814

1,296

1,243



113,353



1,243

Installment and other

4,576

80

33



4,689

56

2

Commercial market loans

8,241

16

61



8,318

222

17

$

199,112 $

2,374 $

2,178 $

$

Credit cards

Total

2,318 $ 205,982 $

2,511 $

3,259

In offices outside North America Residential first mortgages

39,551 $

240 $

175 $

— $

39,966 $

388 $

Credit cards

25,698

477

442



26,617

261

278



Installment and other

27,664

317

220



28,201

226



Commercial market loans

24,764

46

31



24,841

247



Total

$

117,677 $

1,080 $

868 $

— $ 119,625 $

1,122 $

278

Total GCB and Citi Holdings consumer

$

316,789 $

3,454 $

3,046 $

2,318 $ 325,607 $

3,633 $

3,537

164

7

7

$

316,953 $

3,461 $

3,053 $

Other(6) Total Citigroup (1) (2) (3) (4) (5) (6)



178

2,318 $ 325,785 $

25 3,658 $

— 3,537

Loans less than 30 days past due are presented as current. Includes $34 million of residential first mortgages recorded at fair value. Excludes loans guaranteed by U.S. government-sponsored entities. Consists of residential first mortgages that are guaranteed by U.S. government-sponsored entities that are 30–89 days past due of $0.3 billion and 90 days or more past due of $2.0 billion. Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions. Represents loans classified as consumer loans on the Consolidated Balance Sheet that are not included in the Citi Holdings consumer credit metrics.

73

Consumer Loan Delinquency and Non-Accrual Details at December 31, 2014 Total 30–89 days current(1)(2) past due(3) past due(3)

In millions of dollars

Past due government guaranteed(4)

Total nonaccrual

Total loans(2)

90 days past due and accruing

In North America offices Residential first mortgages

$

(5)

Home equity loans

1,280 $

1,371 $

3,443 $ 67,824 $

2,746 $

2,759

27,262

335

520



28,117

1,271



111,441

1,316

1,271



114,028



1,273

12,680

229

284



13,193

282

3

8,611

31

13



8,655

107

15

$

221,724 $

3,191 $

3,459 $

3,443 $ 231,817 $

4,406 $

$

Credit cards Installment and other Commercial market loans Total

61,730 $

4,050

In offices outside North America Residential first mortgages

44,747 $

312 $

223 $

— $ 45,282 $

454 $

Credit cards

30,132

596

548



31,276

374

322



Installment and other

28,944

366

365



29,675

266



Commercial market loans

27,548

49

37



27,634

375



Total

$

131,371 $

1,323 $

1,173 $

— $ 133,867 $

1,469 $

322

Total GCB and Citi Holdings

$

353,095 $

4,514 $

4,632 $

3,443 $ 365,684 $

5,875 $

4,372

238

10

11

$

353,333 $

4,524 $

4,643 $

Other(6) Total Citigroup (1) (2) (3) (4) (5) (6)



259

30

3,443 $ 365,943 $



5,905 $

4,372

Loans less than 30 days past due are presented as current. Includes $43 million of residential first mortgages recorded at fair value. Excludes loans guaranteed by U.S. government-sponsored entities. Consists of residential first mortgages that are guaranteed by U.S. government-sponsored entities that are 30–89 days past due of $0.6 billion and 90 days or more past due of $2.8 billion. Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions. Represents loans classified as consumer loans on the Consolidated Balance Sheet that are not included in the Citi Holdings consumer credit metrics.

FICO score distribution in U.S. portfolio(1)(2)

Consumer Credit Scores (FICO) In the U.S., independent credit agencies rate an individual’s risk for assuming debt based on the individual’s credit history and assign every consumer a “FICO” (Fair Isaac Corporation) credit score. These scores are continually updated by the agencies based upon an individual’s credit actions (e.g., taking out a loan or missed or late payments). The following tables provide details on the FICO scores attributable to Citi’s U.S. consumer loan portfolio as of December 31, 2015 and 2014 (commercial market loans are not included in the table since they are business based and FICO scores are not a primary driver in their credit evaluation). FICO scores are updated monthly for substantially all of the portfolio or, otherwise, on a quarterly basis for the remaining portfolio.

In millions of dollars

Residential first mortgages

December 31, 2015 Less than 620 $

Equal to or greater than 660

3,483 $

3,036 $

45,047

Home equity loans

2,067

1,782

17,837

Credit cards

7,341

10,072

93,194

337

270

2,662

13,228 $

15,160 $

Installment and other Total (1) (2)

74

620 but less than 660

$

158,740

Excludes loans guaranteed by U.S. government entities, loans subject to long-term standby commitments (LTSCs) with U.S. governmentsponsored entities and loans recorded at fair value. Excludes balances where FICO was not available. Such amounts are not material.

FICO score distribution in U.S. portfolio(1)(2)

In millions of dollars

Residential first mortgages

LTV distribution in U.S. portfolio(1)(2)

December 31, 2014 Less than 620 $

620 but less than 660

8,911 $

Equal to or greater than 660

In millions of dollars

5,463 $

45,783

Residential first mortgages

Home equity loans

3,257

2,456

20,957

Home equity loans

Credit cards

7,647

10,296

92,877

Total

Installment and other Total (1) (2)

4,015 $

2,520

23,830 $

20,735 $

5,150

(1)

164,767

Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value. Excludes balances where FICO was not available. Such amounts are not material.

(2)

In millions of dollars

Residential first mortgages

December 31, 2015 Less than or equal to 80% $

Home equity loans Total (1) (2)

$

> 80% but less than or equal to 100%

Greater than 100%

46,559 $

4,478 $

13,904

5,147

2,527

60,463 $

9,625 $

3,153

Less than or equal to 80% $

> 80% but less than or equal to 100%

48,163 $ 14,638

$

62,801 $

Greater than 100%

9,480 $

2,670

7,267

4,641

16,747 $

7,311

Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value. Excludes balances where LTV was not available. Such amounts are not material.

Impaired Consumer Loans Impaired loans are those loans where Citigroup believes it is probable all amounts due according to the original contractual terms of the loan will not be collected. Impaired consumer loans include non-accrual commercial market loans, as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower’s financial difficulties and where Citigroup has granted a concession to the borrower. These modifications may include interest rate reductions and/or principal forgiveness. Impaired consumer loans exclude smaller-balance homogeneous loans that have not been modified and are carried on a non-accrual basis.

Loan to Value (LTV) Ratios LTV ratios (loan balance divided by appraised value) are calculated at origination and updated by applying market price data. The following tables provide details on the LTV ratios attributable to Citi’s U.S. consumer mortgage portfolios. LTV ratios are updated monthly using the most recent Core Logic Home Price Index data available for substantially all of the portfolio applied at the Metropolitan Statistical Area level, if available, or the state level if not. The remainder of the portfolio is updated in a similar manner using the Federal Housing Finance Agency indices. LTV distribution in U.S. portfolio(1)(2)

December 31, 2014

626

Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value. Excludes balances where LTV was not available. Such amounts are not material.

75

The following tables present information about total impaired consumer loans and for interest income recognized on impaired consumer loans: At and for the year ended December 31, 2015

In millions of dollars

Recorded investment(1)(2)

Unpaid Related principal specific balance allowance(3)

Average carrying value(4)

Interest income recognized(5)

Mortgage and real estate Residential first mortgages

$

Home equity loans Credit cards

6,038 $

6,610 $

739 $

8,932 $

439

1,399

1,972

406

1,778

64

1,950

1,986

604

2,079

179

464

519

197

449

33

339

567

Installment and other Individual installment and other Commercial market loans Total (1) (2) (3) (4) (5)

$

10,190 $ 11,654 $

100

361

13

2,046 $

13,599 $

728

Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans. $1,151 million of residential first mortgages, $459 million of home equity loans and $86 million of commercial market loans do not have a specific allowance. Included in the Allowance for loan losses. Average carrying value represents the average recorded investment ending balance for the last four quarters and does not include the related specific allowance. Includes amounts recognized on both an accrual and cash basis.

At and for the year ended December 31, 2014

In millions of dollars

Recorded investment(1)(2)

Unpaid Related principal specific balance allowance(3)

Average Interest carrying income (4) value recognized(5)(6)

Mortgage and real estate Residential first mortgages

$

Home equity loans Credit cards

13,551 $ 14,387 $

1,920 $ 15,389 $

690

2,029

2,674

602

2,075

74

2,407

2,447

877

2,732

196

948

963

424

975

124

411

579

88

368

Installment and other Individual installment and other Commercial market loans Total (1) (2) (3) (4) (5) (6)

$

19,346 $ 21,050 $

3,911 $ 21,539 $

22 1,106

Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans. $1,896 million of residential first mortgages, $554 million of home equity loans and $158 million of commercial market loans do not have a specific allowance. Included in the Allowance for loan losses. Average carrying value represents the average recorded investment ending balance for the last four quarters and does not include the related specific allowance. Includes amounts recognized on both an accrual and cash basis. Interest income recognized for the year ended December 31, 2013 was $1,280 million.

76

Consumer Troubled Debt Restructurings The following tables present consumer TDRs occurring: At and for the year ended December 31, 2015

In millions of dollars except number of loans modified

Number of loans modified

Postmodification recorded investment(1)(2)

Contingent principal forgiveness(4)

Deferred principal(3)

Average interest rate reduction

Principal forgiveness(5)

North America Residential first mortgages Home equity loans Credit cards Installment and other revolving Commercial markets(6) (8)

Total

9,487 $

1,282 $

9 $

4 $

25

1%

4,317

157

1



3

2

188,502

771







16

4,287

37







13

300

47









206,893 $

2,294 $

10 $

4 $

28

3,918 $



International Residential first mortgages Credit cards Installment and other revolving Commercial markets(6) (8)

Total

104 $

— $

— $

142,851

374





65,895

280



239

87

— — $

212,903 $

845 $

—%

7

13



5

5





1

— $

12

At and for the year ended December 31, 2014

In millions of dollars except number of loans modified

Number of loans modified

Postmodification recorded investment(1)(7)

Contingent principal forgiveness(4)

Deferred principal(3)

Average interest rate reduction

Principal forgiveness(5)

North America Residential first mortgages Home equity loans Credit cards Installment and other revolving (6)

Commercial markets Total(8)

20,114 $

36 $

16

1%

7,444

2,478 $ 279

52 $ 3



14

2

185,962

808







15

46,838

351







7

1



191

35





260,549 $

3,951 $

55 $

36 $

31

3,217 $

114 $

— $

— $

1

139,128

447





9

13

61,563

292





7

9

346

200









204,254 $

1,053 $

— $

— $

17

International Residential first mortgages Credit cards Installment and other revolving (6)

Commercial markets Total(8) (1) (2) (3) (4) (5) (6) (7) (8)

1%

Post-modification balances include past due amounts that are capitalized at the modification date. Post-modification balances in North America include $209 million of residential first mortgages and $55 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2015. These amounts include $126 million of residential first mortgages and $47 million of home equity loans that were newly classified as TDRs during 2015, based on previously received OCC guidance. Represents portion of contractual loan principal that is non-interest bearing but still due from the borrower. Such deferred principal is charged off at the time of permanent modification to the extent that the related loan balance exceeds the underlying collateral value. Represents portion of contractual loan principal that is non-interest bearing and, depending upon borrower performance, eligible for forgiveness. Represents portion of contractual loan principal that was forgiven at the time of permanent modification. Commercial markets loans are generally borrower-specific modifications and incorporate changes in the amount and/or timing of principal and/or interest. Post-modification balances in North America include $322 million of residential first mortgages and $80 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2014. These amounts include $179 million of residential first mortgages and $69 million of home equity loans that were newly classified as TDRs during 2014, based on previously received OCC guidance. The above tables reflect activity for loans outstanding as of the end of the reporting period that were considered TDRs.

77

The following table presents consumer TDRs that defaulted for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due, except for classifiably managed commercial markets loans, where default is defined as 90 days past due. 2014

2015

In millions of dollars

North America Residential first mortgages

$

Home equity loans Credit cards Installment and other revolving Commercial markets

420 $

72

187

194

8

95

9

Total

715

38

9

$

662 $

1,085

$

22 $

24

International Residential first mortgages Credit cards Installment and other revolving Commercial markets Total

$

78

141

217

88

104

28

105

279 $

450

Corporate Loans Corporate loans represent loans and leases managed by ICG. The following table presents information by corporate loan type: December 31, 2015

In millions of dollars

The Company sold and/or reclassified to held-for-sale $2.8 billion and $4.8 billion of corporate loans during the years ended December 31, 2015 and 2014, respectively. The Company did not have significant purchases of corporate loans classified as held-for-investment for the years ended December 31, 2015 or 2014.

December 31, 2014

In U.S. offices Commercial and industrial

41,147 $

35,055

Financial institutions

36,396

36,272

Mortgage and real estate(1)

37,565

32,537

Installment, revolving credit and other

33,374

29,207

1,780

1,758

$

Lease financing $

150,262 $

134,829

$

82,358 $

83,206

28,704

33,269

5,106

6,031

20,853

19,259

303

419

Delinquency Status Citi generally does not manage corporate loans on a delinquency basis. Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forwardlooking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. While corporate loans are generally managed based on their internally assigned risk rating (see further discussion below), the following tables present delinquency information by corporate loan type.

In offices outside the U.S. Commercial and industrial Financial institutions (1)

Mortgage and real estate Installment, revolving credit and other Lease financing Governments and official institutions Total corporate loans

4,911 142,235 $

144,420

$

292,497 $

279,249

Net unearned income Corporate loans, net of unearned income (1)

2,236

$

(665) $

291,832 $

(557) 278,692

Loans secured primarily by real estate.

79

Corporate Loan Delinquency and Non-Accrual Details at December 31, 2015 30–89 days past due past due and and accruing(1) accruing(1)

In millions of dollars

Commercial and industrial

$

Financial institutions

87 $

4 $

16

Mortgage and real estate

Total past due and accruing

Total non-accrual(2)

91 $

1,071 $

Total current(3) 118,465 $

Total loans (4) 119,627



16

173

64,128

64,317

137

7

144

232

42,095

42,471

Leases







76

2,006

2,082

Other

29



29

44

58,286

58,359

Loans at fair value

4,971

Purchased distressed loans

5

Total

$

269 $

11 $

280 $

1,596 $

284,980 $

291,832

Corporate Loan Delinquency and Non-Accrual Details at December 31, 2014

In millions of dollars

Commercial and industrial

30–89 days past due and accruing(1) $

Financial institutions

past due and accruing(1)

50 $

Total past due and accruing

— $

Total non-accrual(2)

50 $

594 $

Total current(3) 113,709 $

Total loans (4) 114,353

2



2

250

67,580

67,832

Mortgage and real estate

86



86

252

38,135

38,473

Leases







51

2,125

2,176

Other

49

1

50

55

49,844

49,949

Loans at fair value

5,858

Purchased distressed loans Total (1) (2) (3) (4)

51 $

187 $

1 $

188 $

1,202 $

271,393 $

278,692

Corporate loans that are 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid. Non-accrual loans generally include those loans that are 90 days past due or those loans for which Citi believes, based on actual experience and a forwardlooking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful. Corporate loans are past due when principal or interest is contractually due but unpaid. Loans less than 30 days past due are presented as current. Total loans include loans at fair value, which are not included in the various delinquency columns.

Citigroup has a risk management process to monitor, evaluate and manage the principal risks associated with its corporate loan portfolio. As part of its risk management process, Citi assigns numeric risk ratings to its corporate loan facilities based on quantitative and qualitative assessments of the obligor and facility. These risk ratings are reviewed at least annually or more often if material events related to the obligor or facility warrant. Factors considered in assigning the risk ratings include financial condition of the obligor, qualitative assessment of management and strategy, amount and sources of repayment, amount and type of collateral and guarantee arrangements, amount and type of any contingencies associated with the obligor, and the obligor’s industry and geography. The obligor risk ratings are defined by ranges of default probabilities. The facility risk ratings are defined by ranges of loss norms, which are the product of the probability of default and the loss given default. The investment grade rating categories are similar to the category BBB-/Baa3 and above as defined by S&P and Moody’s. Loans classified according to the bank regulatory definitions as special mention, substandard and doubtful will have risk ratings within the non-investment grade categories. 80

Corporate Loans Credit Quality Indicators

Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of cost or collateral value, less cost to sell. Cash-basis loans are returned to an accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance, generally six months, in accordance with the contractual terms of the loan.

Recorded investment in loans(1) In millions of dollars

December 31, 2015

December 31, 2014

Investment grade(2) Commercial and industrial

85,828 $

84,757

Financial institutions

53,522

56,154

Mortgage and real estate

18,869

16,068

1,725

1,732

$

Leases Other Total investment grade

51,449

46,284

$

211,393 $

204,995

$

32,726 $

29,003

10,622

11,429

2,800

3,587

282

393

6,867

3,609

Non-investment grade(2) Accrual Commercial and industrial Financial institutions Mortgage and real estate Leases Other Non-accrual Commercial and industrial

1,071

594

Financial institutions

173

250

Mortgage and real estate

232

252

76

51

Leases Other

44

Total non-investment grade $ Private bank loans managed $ on a delinquency basis(2) Loans at fair value Corporate loans, net of unearned income (1) (2)

$

55

54,893 $

49,223

20,575 $

18,616

4,971 291,832 $

5,858 278,692

Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs. Held-for-investment loans are accounted for on an amortized cost basis.

81

The following tables present non-accrual loan information by corporate loan type and interest income recognized on nonaccrual corporate loans: Non-Accrual Corporate Loans At and for the year ended December 31, 2015 Recorded investment(1)

In millions of dollars

Unpaid principal balance

Related specific allowance

Average carrying value(2)

Interest income recognized(3)

Non-accrual corporate loans Commercial and industrial

1,071 $

1,224 $

Financial institutions

$

173

196

10

194

Mortgage and real estate

232

336

21

240

4

76

76

54

62



39



1,394 $

11

Lease financing Other Total non-accrual corporate loans $

44

114

1,596 $

1,946 $

246 $

859 $

32 363 $

7 —

At and for the year ended December 31, 2014 Recorded investment(1)

In millions of dollars

Unpaid principal balance

Related specific allowance

Average carrying value(2)

Interest income recognized(3)

Non-accrual corporate loans Commercial and industrial

594 $

863 $

Financial institutions

$

250

262

7

278

Mortgage and real estate

252

287

24

263

8

51

53

29

85



Lease financing Other Total non-accrual corporate loans

$

55

68

1,202 $

1,533 $

155 $

21 236 $

Recorded investment(1)

32 4

60

3

1,371 $

47

December 31, 2014

December 31, 2015 In millions of dollars

685 $

Recorded investment(1)

Related specific allowance

Related specific allowance

Non-accrual corporate loans with valuation allowances Commercial and industrial

$

571 $

246 $

243 $

155

Financial institutions

18

10

37

7

Mortgage and real estate

60

21

70

24

Lease financing

75

54

47

29

40

32

55

21

Other Total non-accrual corporate loans with specific allowance Non-accrual corporate loans without specific allowance Commercial and industrial

$

764 $

$

500

363 $ $

452 $ 351

Financial institutions

155

213

Mortgage and real estate

172

182

Lease financing

1

4

Other

4



Total non-accrual corporate loans without specific allowance

$

832

N/A $

750

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs. (2) Average carrying value represents the average recorded investment balance and does not include related specific allowance. (3) Interest income recognized for the year ended December 31, 2013 was $43 million. N/A Not Applicable

82

236

N/A

Corporate Troubled Debt Restructurings The following table presents corporate TDR activity at and for the year ended December 31, 2015:

Carrying Value

In millions of dollars

Commercial and industrial

$

120 $

Mortgage and real estate

(2)

$

3

167 $

TDRs involving changes in the amount and/or timing of both principal and interest payments

TDRs involving changes in the amount and/or timing of interest payments(2)

67 $

47

Total (1)

TDRs involving changes in the amount and/or timing of principal payments(1)

70 $

— $

53



44

— $

97

TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal payments. Because forgiveness of principal is rare for commercial loans, modifications typically have little to no impact on the loans’ projected cash flows and thus little to no impact on the allowance established for the loans. Charge-offs for amounts deemed uncollectable may be recorded at the time of the restructuring or may have already been recorded in prior periods such that no charge-off is required at the time of the modification. TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate.

The following table presents corporate TDR activity at and for the year ended December 31, 2014:

Carrying Value

In millions of dollars

Commercial and industrial

$

48 $

Mortgage and real estate $

(2)

30 $

17 $

5

56 $

TDRs involving changes in the amount and/or timing of both principal and interest payments

TDRs involving changes in the amount and/or timing of interest payments(2)

8

Total (1)

TDRs involving changes in the amount and/or timing of principal payments(1)

1

1

35 $

2

18 $

3

TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal payments. Because forgiveness of principal is rare for commercial loans, modifications typically have little to no impact on the loans’ projected cash flows and thus little to no impact on the allowance established for the loans. Charge-offs for amounts deemed uncollectable may be recorded at the time of the restructuring or may have already been recorded in prior periods such that no charge-off is required at the time of the modification. TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate.

The following table presents total corporate loans modified in a TDR as well as those TDRs that defaulted and for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due, except for classifiably managed commercial markets loans, where default is defined as 90 days past due.

In millions of dollars

TDR balances at December 31, 2015

Commercial and industrial

$

Loans to financial institutions Mortgage and real estate Other Total(1) (1)

$

TDR loans in payment default during the year ended December 31, 2015

TDR balances at December 31, 2014

— $

135 $

TDR loans in payment default during the year ended December 31, 2014

117 $



5

1





138



107



308



355



579 $



1 $

586 $

The above tables reflect activity for loans outstanding as of the end of the reporting period that were considered TDRs.

83

Purchased Distressed Loans Included in the corporate and consumer loans outstanding tables above are purchased distressed loans, which are loans that have evidenced significant credit deterioration subsequent to origination but prior to acquisition by Citigroup. In accordance with ASC 310-30, the difference between the total expected cash flows for these loans and the initial recorded investment is recognized in income over the life of the loans using a level yield. Accordingly, these loans have been excluded from the impaired loan table information presented above. In addition, per ASC 310-30, subsequent decreases in the expected cash flows for a purchased distressed loan require a build of an allowance so the loan

retains its level yield. However, increases in the expected cash flows are first recognized as a reduction of any previously established allowance and then recognized as income prospectively over the remaining life of the loan by increasing the loan’s level yield. Where the expected cash flows cannot be reliably estimated, the purchased distressed loan is accounted for under the cost recovery method. The carrying amount of the Company’s purchased distressed loan portfolio was $234 million and $361 million, net of an allowance of $16 million and $60 million, at December 31, 2015 and 2014, respectively.

The changes in the accretable yield, related allowance and carrying amount net of accretable yield were as follows: Carrying amount of loan receivable

Accretable yield

In millions of dollars

Allowance

Balance at December 31, 2013

$

107

$

703

$

113

Purchases(1)

$

1

$

46

$



Disposals/payments received

(6)

(307)

(15)

Accretion

(24)

24



Builds (reductions) to the allowance

(36)



(27)

23





Increase to expected cash flows FX translation/other Balance at December 31, 2014(2) (1)

Purchases

(9) $ $

Disposals/payments received Accretion Builds (reductions) to the allowance Increase to expected cash flows FX translation/other Balance at December 31, 2015(2)

$

$

3

$

(11)

421

$

60

54

$



(5)

(162)

(9)

(13)

13







9

1





(9)

(76)

(44)

33

(1)

(45)

56

$

250

$

16

The balance reported in the column “Carrying amount of loan receivable” consists of $54 million and $46 million in 2015 and 2014, respectively, of purchased loans accounted for under the level-yield method. No purchased loans were accounted for under the cost-recovery method. These balances represent the fair value of these loans at their acquisition date. The related total expected cash flows for the level-yield loans at their acquisition dates were $56 million and $46 million in 2015 and 2014, respectively. (2) The balance reported in the column “Carrying amount of loan receivable” consists of $245 million and $413 million of loans accounted for under the levelyield method and $5 million and $8 million accounted for under the cost-recovery method in 2015 and 2014, respectively.

84

16. ALLOWANCE FOR CREDIT LOSSES 2014

2015

In millions of dollars

Allowance for loan losses at beginning of period

$

Gross credit losses

15,994 $ (9,041)

Gross recoveries(1)

1,739

Net credit losses (NCLs) NCLs

$

(7,302) $

$

7,302 $

Net reserve builds (releases)

139

Net specific reserve releases

2013

19,648 $ (11,108) 2,135

25,455 (12,769) 2,306

(8,973) $

(10,463)

8,973 $

10,463

(1,879)

(1,961)

(333)

(266)

$

7,108 $

6,828 $

(3,174)

(1,509)

(2,948)

Allowance for loan losses at end of period

$

12,626 $

15,994 $

19,648

Allowance for credit losses on unfunded lending commitments at beginning of period

$

1,063 $

1,229 $

1,119

74

(162)

Total provision for loan losses Other, net(2)(3)

Provision (release) for unfunded lending commitments Other, net

(3)

(898) 7,604

80

265

(4)

Allowance for credit losses on unfunded lending commitments at end of period(4)

$

1,402 $

1,063 $

1,229

Total allowance for loans, leases, and unfunded lending commitments

$

14,028 $

17,057 $

20,877

(1) (2)

(3) (4)

30

Recoveries have been reduced by certain collection costs that are incurred only if collection efforts are successful. 2015 includes reductions of approximately $2.4 billion related to the sale or transfer to held-for-sale (HFS) of various loan portfolios, including approximately $1.5 billion related to the transfer of various real estate loan portfolios to HFS. Additionally, 2015 includes a reduction of approximately $474 million related to FX translation. 2014 includes reductions of approximately $1.1 billion related to the sale or transfer to HFS of various loan portfolios, including approximately $411 million related to the transfer of various real estate loan portfolios to HFS, approximately $204 million related to the transfer to HFS of a business in Greece, approximately $177 million related to the transfer to HFS of a business in Spain, approximately $29 million related to the transfer to HFS of a business in Honduras, and approximately $108 million related to the transfer to HFS of various EMEA loan portfolios. Additionally, 2014 includes a reduction of approximately $463 million related to FX translation. 2013 includes reductions of approximately $2.4 billion related to the sale or transfer to HFS of various loan portfolios, including approximately $360 million related to the sale of Credicard and approximately $255 million related to a transfer to HFS of a loan portfolio in Greece, approximately $230 million related to a non-provision transfer of reserves associated with deferred interest to other assets which includes deferred interest and approximately $220 million related to FX translation. 2015 includes a reclassification of $271 million of Allowance for Loan Losses to Allowance for Unfunded Lending Commitments, included in Other, net. This reclassification reflects the re-attribution of $271 million in Allowances for Credit Losses between the funded and unfunded portions of the corporate credit portfolios and does not reflect a change in the underlying credit performance of these portfolios. Represents additional credit loss reserves for unfunded lending commitments and letters of credit recorded in Other liabilities on the Consolidated Balance Sheet.

85

Allowance for Credit Losses and Investment in Loans at December 31, 2015 Corporate

In millions of dollars

Allowance for loan losses at beginning of period

$

Consumer

2,447 $

Total

13,547 $

15,994

Charge-offs

(349)

(8,692)

(9,041)

Recoveries

105

1,634

1,739

Replenishment of net charge-offs

244

7,058

7,302

Net reserve builds (releases)

550

Net specific reserve builds (releases)

86

Other

(292)

Ending balance

(411)

139

(419)

(333)

(2,882)

(3,174)

$

2,791 $

9,835 $

12,626

$

2,408 $

7,776 $

10,184

Allowance for loan losses Determined in accordance with ASC 450 Determined in accordance with ASC 310-10-35

380

Determined in accordance with ASC 310-30 Total allowance for loan losses

2,046

2,426

3

13

$

2,791 $

9,835 $

12,626

16

$

285,053 $

315,316 $

600,369

Loans, net of unearned income Loans collectively evaluated for impairment in accordance with ASC 450 Loans individually evaluated for impairment in accordance with ASC 310-10-35

1,803

10,190

11,993

5

245

250

Loans acquired with deteriorated credit quality in accordance with ASC 310-30 Loans held at fair value

4,971

Total loans, net of unearned income

$

291,832 $

34 325,785 $

5,005 617,617

Allowance for Credit Losses and Investment in Loans at December 31, 2014 Corporate

In millions of dollars

Allowance for loan losses at beginning of period

$

Consumer

2,674 $

Total

16,974 $

19,648

Charge-offs

(458)

(10,650)

(11,108)

Recoveries

160

1,975

2,135

Replenishment of net charge-offs

298

8,675

8,973

(145)

(1,734)

(1,879)

(20)

(246)

(266)

Net reserve releases Net specific reserve releases Other

(62)

Ending balance

(1,447)

(1,509)

$

2,447 $

13,547 $

15,994

$

2,162 $

9,621 $

11,783

Allowance for loan losses Determined in accordance with ASC 450 Determined in accordance with ASC 310-10-35

241

3,911

4,152

44

15

59

$

2,447 $

13,547 $

15,994

$

271,284 $

346,184 $

617,468

Determined in accordance with ASC 310-30 Total allowance for loan losses Loans, net of unearned income Loans collectively evaluated for impairment in accordance with ASC 450 Loans individually evaluated for impairment in accordance with ASC 310-10-35 Loans acquired with deteriorated credit quality in accordance with ASC 310-30 Loans held at fair value $

Total loans, net of unearned income

86

1,499

19,346

51

370

421

5,858

43

5,901

278,692 $

365,943 $

20,845

644,635

Allowance for Credit Losses at December 31, 2013 Corporate

In millions of dollars

Allowance for loan losses at beginning of period

$

Consumer

2,870 $

22,585 $

25,455

Charge-offs

(445)

Recoveries

225

2,081

2,306

Replenishment of net charge-offs

220

10,243

10,463

(202)

(1,759)

(1,961)

(1)

(897)

(898)

Net reserve releases Net specific reserve releases Other

7 $

Ending balance

87

2,674 $

(12,324)

Total (12,769)

(2,955)

(2,948)

16,974 $

19,648

17. GOODWILL AND INTANGIBLE ASSETS Goodwill The changes in Goodwill were as follows: In millions of dollars

Balance at December 31, 2012

$

25,673

Foreign currency translation

(577)

Divestitures, purchase accounting adjustments and other(1)

(25)

Sale of Brazil Credicard

(62)

Balance at December 31, 2013

$

25,009

Foreign currency translation and other

$

(1,214)

Divestitures and purchase accounting adjustments(1)

(203)

Balance at December 31, 2014

$

23,592

Foreign currency translation and other

$

(1,000)

Impairment of goodwill

(31)

Divestitures(2)

(212)

Balance at December 31, 2015

$

22,349

The changes in Goodwill by segment were as follows: Global Consumer Banking

In millions of dollars

Balance at December 31, 2013

$

Foreign currency translation and other (1)

Divestitures and purchase accounting adjustments Intersegment transfers in/(out) (3) Balance at December 31, 2014

$

Foreign currency translation and other Impairment of goodwill Divestitures(2) Intersegment transfers in (out)(4) Balance at December 31, 2015 (1) (2) (3) (4)

$

Institutional Clients Group

Citi Holdings

13,985 $

10,868 $

(505)

(711)

156 $ 2 $ (116)

Total 25,009 (1,214)

(86)

(1)

(177)



177 $



13,217 $

10,156 $

219 $

23,592

(355)

(644)

(1)

(1,000)





(31)

(31)

(24)

(1)

(187)

(212)

(106)

34

72

12,732 $

9,545 $

72 $

(203)

— 22,349

Primarily related to the sales of the Spain consumer operations and the Japan retail banking business. See Note 2 to the Consolidated Financial Statements. Primarily related to the sales of the Latin America Retirement Services and Japan cards businesses completed during the year, and agreements to sell certain businesses in Citi Holdings as of December 31, 2015. See Note 2 to the Consolidated Financial Statements. Goodwill allocation associated with the transfers of certain GCB businesses to Citi Holdings effective January 1, 2015. Goodwill allocation associated with the transfers of GCB businesses to ICG and Citi Holdings effective January 1, 2016. See Note 3 to the Consolidated Financial Statements.

Goodwill impairment testing is performed at the level below each business segment (referred to as a reporting unit). The Company performed its annual goodwill impairment test as of July 1, 2015 resulting in no impairment for any of the reporting units. The reporting unit structure in 2015 was the same as the reporting unit structure in 2014, except for the effect of the January 1, 2015 and January 1, 2016 reorganization noted below and the sales involving the Citi Holdings—Cards, Latin America Retirement Services, and Citi Holdings— Consumer Japan reporting units during the third quarter of 2014 and second and fourth quarter of 2015, respectively. Furthermore, interim goodwill impairment tests were performed during the year, which resulted in $31 million of

total goodwill impairment recorded in Operating expenses, as discussed below. No goodwill was deemed impaired in 2014 and 2013. Effective January 1, 2015, certain consumer banking and institutional businesses were transferred to Citi Holdings and aggregated to form five new reporting units: Citi Holdings—Consumer EMEA, Citi Holdings— Consumer Latin America, Citi Holdings—Consumer Japan, Citi Holdings—Consumer Finance South Korea, and Citi Holdings—ICG. Goodwill balances associated with the transfers were allocated to each of the component businesses based on their relative fair values to the legacy reporting units. An interim goodwill impairment test was performed as of January 1, 2015 under the legacy and new 88

reporting structures, which resulted in full impairment of the new Citi Holdings—Consumer Finance South Korea reporting unit's $16 million of goodwill. Additionally, during the third quarter of 2015, Citi signed definitive agreements to sell most of its businesses reported in Citi Holdings—Consumer Latin America and allocated $55 million of goodwill to these disposals, which are classified as held-for-sale. This resulted in full impairment of the remaining $15 million of goodwill within the Citi Holdings —Consumer Latin America reporting unit. During the first quarter of 2016, Citigroup announced its intention to exit its consumer businesses in Argentina, Brazil and Colombia. These businesses, which previously had been reported as part of Latin America GCB, are reported as part of Citi Holdings—Consumer Latin America beginning the first quarter of 2016. In addition, the other component businesses of Latin America GCB, except the Mexico consumer business, were either transferred to the ICG reporting units (Banking and Markets) or North America GCB reporting unit (International Personal Banking). Furthermore, the remaining businesses in EMEA GCB, except for the commercial business which was transferred to the ICG—Banking reporting unit, are reported under Asia GCB. Goodwill balances associated with the transfers were allocated to each of the component businesses based on their relative fair values to the legacy reporting units. An interim goodwill impairment test was performed as of January 1, 2016 for the impacted reporting units resulting in no impairment under the legacy and current reporting unit structures. There were no other triggering events during the first quarter of 2016. The fair values of the Company’s reporting units substantially exceeded their carrying values and did not indicate a risk of impairment based on current valuations. The following table shows reporting units with goodwill balances under the new reporting unit structures

effective January 1, 2016, as if they were already in existence at December 31, 2015. The fair value as a percentage of book value is based on the most recent impairment test. In millions of dollars

Fair value as a % of allocated book value

Reporting unit(1)(2)

Goodwill

North America Global Consumer Banking

182%

Asia Global Consumer Banking (3)

237

4,775

Latin America Global Consumer Banking (4)

154

1,206

Banking

237

3,083

Markets and Securities Services

145

6,462

Citi Holdings—Consumer Latin America

222

72

Total (1) (2)

(3) (4)

$

$

6,751

22,349

Citi Holdings—Other and Citi Holdings—ICG are excluded from the table as there is no goodwill allocated to them. Citi Holdings—Consumer EMEA, Citi Holdings — Consumer Latin America, and Citi Holdings—Consumer Finance South Korea are excluded from the table as the allocated goodwill was either impaired or classified as held-for-sale as of December 31, 2015. Asia Global Consumer Banking includes the consumer businesses in UK, Russia, Poland, UAE and Bahrain. Latin America Global Consumer Banking contains only the consumer business in Mexico.

Intangible Assets The components of intangible assets were as follows: December 31, 2014

December 31, 2015 Gross carrying amount

In millions of dollars

Purchased credit card relationships

$

Core deposit intangibles Other customer relationships Present value of future profits Indefinite-lived intangible assets Other(1) Intangible assets (excluding MSRs)

(1) (2)

7,606 $

6,520 $

1,086 $

Gross carrying amount

Net Accumulated carrying amortization amount

7,626 $

6,294 $ 1,332

1,050

969

81

1,153

1,021

132

471

252

219

579

331

248

37

31

6

233

154

79

234



234

290



290

2,614

2,095

2,732

2,485

4,709 $

14,107 $

$

15,888 $

Mortgage servicing rights (MSRs)(2) Total intangible assets

Net Accumulated carrying amortization amount

1,781

10,386 $ — 10,386 $

3,721 $ 1,781 5,502 $

5,217 15,098 $ 1,845 16,943 $

10,532 $ 4,566 —

Includes contract-related intangible assets. For additional information on Citi’s MSRs, including the rollforward from 2014 to 2015, see Note 22 to the Consolidated Financial Statements.

89

1,845

10,532 $ 6,411

Intangible assets amortization expense was $625 million, $756 million and $808 million for 2015, 2014 and 2013, respectively. Intangible assets amortization expense is estimated to be $528 million in 2016, $840 million in 2017, $348 million in 2018, $334 million in 2019 and $141 million in 2020. The changes in intangible assets during the twelve months ended December 31, 2015 were as follows: Net carrying amount at

Net carrying amount at

In millions of dollars

Purchased credit card relationships

FX translation December 31, Acquisitions/ December 31, and 2014 divestitures Amortization Impairments 2015 other $ 1,332 $ — $ (261) $ — $ 15 $ 1,086

Core deposit intangibles

132



(41)



(10)

81

Other customer relationships

248



(24)



(5)

219

79

(68)

(4)



(1)

6

290





(17)

(39)

234

2,485

(108)

(295)

4,566 $

(176) $

(625) $

Present value of future profits Indefinite-lived intangible assets Other Intangible assets (excluding MSRs)

$

(1)

Mortgage servicing rights (MSRs) Total intangible assets (1)

(5) (22) $

18

2,095

(22) $

1,845 $

3,721 1,781

6,411

$

For additional information on Citi’s MSRs, including the rollforward from 2014 to 2015, see Note 22 to the Consolidated Financial Statements.

90

5,502

18. DEBT Long-Term Debt

Short-Term Borrowings 2015

In millions of dollars

Balance

Balances at December 31,

2014

Weighted average coupon

Balance

Weighted average coupon

In millions of dollars

Citigroup Inc.

Commercial paper Citibank, N.A.

$ (1)

Non-bank and other Total commercial paper Other borrowings Total (1) (2)

(2)

9,995 —

$

9,995 11,084

$ 21,079

0.22% $ 16,085 —

70

0.22% $ 16,155 1.50

42,180

Weighted average coupon Maturities

2015

2014

(1)

0.22%

Senior debt

3.84 % 2016-2098 $ 113,569 $ 122,323

0.95

Subordinated debt(2)

4.48

2016-2044

26,875

25,464

0.23%

Trust preferred securities

6.90

2036-2067

1,713

1,725

1.58

2016-2038

55,131

65,146

Senior debt

3.25

2016-2042

3,968

8,399

Subordinated debt(2)

1.18

2016-2037

19

23

Total

3.32%

0.53

Bank(3)

$ 58,335

Senior debt Broker-dealer(4)

Includes parent holding company (Citigroup Inc.), Citi’s broker-dealer subsidiaries and other non-bank subsidiaries that are consolidated into Citigroup Inc., as well as Banamex and Citibank (Switzerland) AG. Includes borrowings from the Federal Home Loan Banks and other market participants. At December 31, 2014, collateralized short-term advances from the Federal Home Loan Banks were $11.2 billion. At December 31, 2015, no amounts were outstanding.

Senior debt Subordinated debt(2)

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. Borrowings under these facilities are secured in accordance with Section 23A of the Federal Reserve Act. Citigroup Global Markets Holdings Inc. (CGMHI) has 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.

Trust preferred securities Total (1) (2) (3)

(4)

$ 201,275 $ 223,080 $ 172,668 $ 195,868 26,894

25,487

1,713

1,725

$ 201,275 $ 223,080

Parent holding company, Citigroup Inc. Includes notes that are subordinated within certain countries, regions or subsidiaries. Represents Citibank entities as well as other bank entities. At December 31, 2015 and December 31, 2014, collateralized long-term advances from the Federal Home Loan Banks were $17.8 billion and $19.8 billion, respectively. Represents broker-dealer subsidiaries that are consolidated into Citigroup Inc., the parent holding company.

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 foreign exchange impact of certain debt issuances. At December 31, 2015, the Company’s overall weighted average interest rate for longterm debt was 3.32% on a contractual basis and 2.55% including the effects of derivative contracts.

91

Aggregate annual maturities of long-term debt obligations (based on final maturity dates) including trust preferred securities are as follows: In millions of dollars Bank

$

2016

2017

24,577 $

14,614 $

2018

2019

2020

9,341 $

2,280 $

Thereafter

448 $

Total

3,871 $

55,131

Broker-dealer

951

294

806

640

103

1,193

3,987

Citigroup Inc.

18,009

19,437

21,269

16,233

8,826

58,383

142,157

43,537 $

34,345 $

31,416 $

19,153 $

9,377 $

63,447 $

201,275

Total

$

The following table summarizes the Company’s outstanding trust preferred securities at December 31, 2015: Junior subordinated debentures owned by trust

Trust

Issuance date

Securities Liquidation issued value(1)

Coupon rate(2)

Common shares issued to parent

Maturity

Redeemable by issuer beginning

200

Dec. 1, 2036

Not redeemable

2,246

Oct. 30, 2040

Oct. 30, 2015

148

June 28, 2067

June 28, 2017

Amount

In millions of dollars, except share amounts

Citigroup Capital III

Dec. 1996

Citigroup Capital XIII

Sept. 2010 89,840,000

Citigroup Capital XVIII

June 2007

Total obligated

194,053 $ 99,901 $

194

7.625%

6,003 $

2,246

7.875

1,000

148

6.829

50

2,588

$

2,594

Note: Distributions on the trust preferred securities and interest on the subordinated debentures are payable semiannually for Citigroup Capital III and Citigroup Capital XVIII and quarterly for Citigroup Capital XIII. (1) Represents the notional value received by investors from the trusts at the time of issuance. (2) In each case, the coupon rate on the subordinated debentures is the same as that on the trust preferred securities.

92

19. REGULATORY CAPITAL

with respect to institutions that do not meet minimum capital standards. The following table sets forth Citigroup’s and Citibank’s regulatory capital tiers, total risk-weighted assets, quarterly adjusted average total assets, Total Leverage Exposure, riskbased capital ratios and leverage ratios in accordance with current regulatory standards (reflecting Basel III Transition Arrangements):

Citigroup is subject to risk-based capital and leverage standards issued by the Federal Reserve Board. Citi’s U.S. insured depository institution subsidiaries, including Citibank, are subject to similar standards issued by their respective primary federal bank regulatory agencies. These standards are used to evaluate capital adequacy and include the required minimums shown in the following table. The regulatory agencies are required by law to take specific prompt actions

Citigroup Well capitalized December 31, 2015 minimum

Stated minimum

In millions of dollars, except ratios

Common Equity Tier 1 Capital

$

Citibank Well capitalized December 31, 2015 minimum(1)

173,862

$

126,496

Tier 1 Capital

176,420

126,496

Total Capital (Tier 1 Capital + Tier 2 Capital)

198,746

148,916

1,190,853

998,181

1,732,933

1,297,733

2,326,072

1,838,114

Total risk-weighted assets (2)

Quarterly adjusted average total assets (3)

Total Leverage Exposure

(4)

Common Equity Tier 1 Capital ratio (4)

Tier 1 Capital ratio

(4)

Total Capital ratio

4.5%

N/A

14.60%

6.5%

12.67%

6.0

6.0%

14.81

8.0

12.67

16.69

10.0

14.92

5.0

9.75

N/A

6.88

8.0

Tier 1 Leverage ratio (5)

Supplementary Leverage ratio

10.0

4.0

N/A

10.18

N/A

N/A

7.58

(1)

Beginning January 1, 2015, an insured depository institution, such as Citibank, must maintain minimum Common Equity Tier 1 Capital, Tier 1 Capital, Total Capital, and Tier 1 Leverage ratios of 6.5%, 8%, 10% and 5%, respectively, to be considered “well capitalized.” (2) Tier 1 Leverage ratio denominator. (3) Supplementary Leverage ratio denominator. (4) As of December 31, 2015, Citigroup’s reportable Common Equity Tier 1 Capital, Tier 1 Capital, and Total Capital ratios were the lower derived under the Basel III Advanced Approaches framework. As of December 31, 2015, Citibank’s reportable Common Equity Tier 1 Capital, Tier 1 Capital, and Total Capital ratios were the lower derived under the Basel III Standardized Approach framework. (5) Commencing with 2015, Citi and Citibank are required to publicly disclose their Supplementary Leverage ratios. Beginning on January 1, 2018, Citi and Citibank will be required to maintain a stated minimum Supplementary Leverage ratio of 3%, and Citibank will be required to maintain a Supplementary Leverage ratio of 6% to be considered “well capitalized.” N/A Not Applicable

As indicated in the table above, Citigroup and Citibank were “well capitalized” under the current federal bank regulatory definitions as of December 31, 2015.

organizations should generally pay dividends out of current operating earnings. Citigroup received $13.5 billion and $8.9 billion in dividends from Citibank during 2015 and 2014, respectively.

Banking Subsidiaries—Constraints on Dividends There are various legal limitations on the ability of Citigroup’s subsidiary depository institutions to extend credit, pay dividends or otherwise supply funds to Citigroup and its nonbank subsidiaries. The approval of the Office of the Comptroller of the Currency is required if total dividends declared in any calendar year exceed amounts specified by the applicable agency’s regulations. State-chartered depository institutions are subject to dividend limitations imposed by applicable state law. In determining the 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 93

20. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Changes in each component of Citigroup’s Accumulated other comprehensive income (loss):

Net unrealized gains (losses) on investment securities

In millions of dollars

Balance, December 31, 2012

$

Change, net of taxes(5) Increase (decrease) due to amounts reclassified from AOCI(5) (5)

Cash flow hedges(1)

597 $

Benefit plans(2)

(2,293) $

(5,270) $

(1,962)

512

1,098

(275)

536

183

Foreign currency translation adjustment (CTA), net of hedges(3)(4)

Accumulated other comprehensive income (loss)

(9,930) $ (2,534) 205

(16,896) (2,886) 649

Change, net of taxes

$

(2,237) $

1,048 $

1,281 $

(2,329) $

(2,237)

Balance, December 31, 2013

$

(1,640) $

(1,245) $

(3,989) $

(12,259) $

(19,133)

Other comprehensive income before reclassifications $

1,790 $

85 $

(1,346) $

(4,946) $

(4,417)

176



Increase (decrease) due to amounts reclassified from AOCI

(93)

251

334

Change, net of taxes

$

1,697 $

336 $

(1,170) $

(4,946) $

(4,083)

Balance, December 31, 2014

$

57 $

(909) $

(5,159) $

(17,205) $

(23,216)

Other comprehensive income before reclassifications $ Increase (decrease) due to amounts reclassified from AOCI Change, net of taxes $

(695) $

83 $

(143) $

(5,465) $

(6,220)

(964) $

292 $

43 $

(5,499) $

(6,128)

Balance at December 31, 2015

(907) $

(617) $

(5,116) $

(22,704) $

(29,344)

(1) (2) (3)

(4) (5)

$

(269)

209

186

(34)

92

Primarily driven by Citigroup’s pay fixed/receive floating interest rate swap programs that hedge the floating rates on liabilities. Primarily reflects adjustments based on the quarterly actuarial valuations of the Company’s significant pension and postretirement plans, annual actuarial valuations of all other plans, and amortization of amounts previously recognized in other comprehensive income. Primarily reflects the movements in (by order of impact) the Mexican peso, Brazilian real, Korean won and Euro against the U.S. dollar, and changes in related tax effects and hedges for the year ended December 31, 2015. Primarily reflects the movements in (by order of impact) the Mexican peso, Euro, Japanese yen, and Russian ruble against the U.S. dollar, and changes in related tax effects and hedges for the year ended December 31, 2014. Primarily reflects the movements in (by order of impact) the Japanese yen, Mexican peso, Australian dollar and Indian rupee against the U.S. dollar, and changes in related tax effects and hedges for the year ended December 31, 2013. During 2014, $137 million ($84 million net of tax) was reclassified to reflect the allocation of FX translation between net unrealized gains (losses) on investment securities to foreign currency translation adjustment (CTA). On December 20, 2013, the sale of Credicard was completed (see Note 2 to the Consolidated Financial Statements). The total impact to the gross CTA (net CTA including hedges) was a pretax loss of $314 million ($205 million net of tax).

94

The pretax and after-tax changes in each component of Accumulated other comprehensive income (loss) are as follows: In millions of dollars

Balance, December 31, 2012 Change in net unrealized gains (losses) on investment securities Cash flow hedges Benefit plans Foreign currency translation adjustment Change Balance, December 31, 2013 Change in net unrealized gains (losses) on investment securities Cash flow hedges Benefit plans Foreign currency translation adjustment Change Balance, December 31, 2014 Change in net unrealized gains (losses) on investment securities Cash flow hedges Benefit plans Foreign currency translation adjustment Change Balance, December 31, 2015

$

$ $

$ $

$ $

95

Pretax (25,334) (3,537) 1,673 1,979 (2,377) (2,262) (27,596) 2,704 543 (1,830) (4,881) (3,464) (31,060) (1,462) 468 19 (6,405) (7,380) (38,440)

$

$ $

$ $

$ $

Tax effect 8,438 1,300 (625) (698) 48 25 8,463 (1,007) (207) 660 (65) (619) 7,844 498 (176) 24 906 1,252 9,096

$

$ $

$ $

$ $

After-tax (16,896) (2,237) 1,048 1,281 (2,329) (2,237) (19,133) 1,697 336 (1,170) (4,946) (4,083) (23,216) (964) 292 43 (5,499) (6,128) (29,344)

During 2015, 2014 and 2013 the Company recognized pretax losses of $155 million ($92 million net of tax), $542 million ($334 million gain net of tax) and $1,071 million ($649 million net of tax), respectively, related to amounts reclassified out of Accumulated other comprehensive income (loss) into the Consolidated Statement of Income. See details in the table below: Increase (decrease) in AOCI due to amounts reclassified to Consolidated Statement of Income Year ended December 31, 2014

2015

In millions of dollars

Realized (gains) losses on sales of investments

$

OTTI gross impairment losses

(682) $ 265

Subtotal, pretax

$

Tax effect

(417) $ 148

Net realized (gains) losses on investment securities, after-tax

(1)

Interest rate contracts

424

(748) 334

(146) $

(414)

53

139

(269) $

(93) $

(275)

$

186 $

260 $

700

146

149

176

332 $

409 $

876

$

Tax effect

(123)

Amortization of cash flow hedges, after-tax(2)

(570) $

$

Foreign exchange contracts Subtotal, pretax

2013

(158)

(340)

$

209 $

251 $

536

$

(40) $

(40) $



276

243

271

57

76

44

Amortization of unrecognized Prior service cost (benefit) Net actuarial loss Curtailment/settlement impact(3) (3)

Cumulative effect of change in accounting policy



Subtotal, pretax

$

Tax effect

293 $ (107)

— 279 $ (103)

Amortization of benefit plans, after-tax(3)

$

186 $

176 $

Foreign currency translation adjustment

$

(53) $

— $

Tax effect

19



(20) 295 (112) 183 314 (109)

Foreign currency translation adjustment

$

(34) $

— $

205

Total amounts reclassified out of AOCI, pretax

$

155 $

542 $

1,071

Total tax effect

(63)

Total amounts reclassified out of AOCI, after-tax (1) (2) (3)

$

92 $

(208) 334 $

(422) 649

The pretax amount is reclassified to Realized gains (losses) on sales of investments, net and Gross impairment losses on the Consolidated Statement of Income. See Note 14 to the Consolidated Financial Statements for additional details. See Note 23 to the Consolidated Financial Statements for additional details. See Note 8 to the Consolidated Financial Statements for additional details.

96

21. PREFERRED STOCK The following table summarizes the Company’s preferred stock outstanding:

Issuance date Series AA

(1)

Series E(2) Series A

(3)

Series B(4) Series C

(5)

January 25, 2008 April 28, 2008

Redemption price per depositary share/ Redeemable by issuer Dividend preference beginning rate share February 15, 2018 8.125% $ 25

Carrying value

in millions of dollars

Number of depositary December 31, December 31, 2014 2015 shares 3,870,330 $ 97 97 $

April 30, 2018

8.400

1,000

121,254

121

121

October 29, 2012

January 30, 2023

5.950

1,000

1,500,000

1,500

1,500

December 13, 2012

February 15, 2023

5.900

1,000

750,000

750

750

March 26, 2013

April 22, 2018

5.800

25

23,000,000

575

575

Series D(6)

April 30, 2013

May 15, 2023

5.350

1,000

1,250,000

1,250

1,250

Series J(7)

September 19, 2013

September 30, 2023

7.125

25

38,000,000

950

950

Series K(8)

October 31, 2013

November 15, 2023

6.875

25

59,800,000

1,495

1,495

Series L(9)

February 12, 2014

February 12, 2019

6.875

25

19,200,000

480

480

Series M(10)

April 30, 2014

May 15, 2024

6.300

1,000

1,750,000

1,750

1,750

Series N(11)

October 29, 2014

November 15, 2019

5.800

1,000

1,500,000

1,500

1,500

Series O(12)

March 20, 2015

March 27, 2020

5.875

1,000

1,500,000

1,500



(13)

Series P

Series Q(14) Series R

(15)

April 24, 2015

May 15, 2025

5.950

1,000

2,000,000

2,000



August 12, 2015

August 15, 2020

5.950

1,000

1,250,000

1,250



November 13, 2015

November 15, 2020

6.125

1,000

1,500,000

1,500 $

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

16,718 $

— 10,468

Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on April 30 and October 30 at a fixed rate until April 30, 2018, thereafter payable quarterly on January 30, April 30, July 30 and October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on January 30 and July 30 at a fixed rate until January 30, 2023, thereafter payable quarterly on January 30, April 30, July 30 and October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on February 15 and August 15 at a fixed rate until February 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on January 22, April 22, July 22 and October 22 when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on May 15 and November 15 at a fixed rate until May 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on March 30, June 30, September 30 and December 30 at a fixed rate until September 30, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until November 15, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 12, May 12, August 12 and November 12 at a fixed rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on May 15 and November 15 at a fixed rate until May 15, 2024, thereafter payable quarterly on February 15, May 15, August 15, and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on May 15 and November 15 at a fixed rate until, but excluding, November 15, 2019, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on March 27 and September 27 at a fixed rate until, but excluding, March 27, 2020, and thereafter payable quarterly on March 27, June 27, September 27 and December 27 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2025, and thereafter payable quarterly on February 15, May 15, August 15, and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.

97

(14) Issued as depository shares, each representing 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on February 15 and August 15 at a fixed rated until, but excluding, August 15, 2020, and thereafter payable quarterly on February 15, May 15, August 15, and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. (15) Issued as depository shares, each representing 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semi-annually on May 15 and November 15 at a fixed rated until, but excluding, November 15, 2020, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.

On January 26, 2016, Citi issued $1 billion of Series S Preferred Stock as depositary shares, each representing 1/1000th interest in a share of corresponding series of noncumulative perpetual preferred stock. The dividend rate is 6.3% payable quarterly on February 12, May 12, August 12 and November 12, beginning May 12, 2016, in each case when, as and if declared by the Citi Board of Directors. During 2015, Citi distributed $769 million in dividends on its outstanding preferred stock. Based on its preferred stock outstanding as of December 31, 2015, Citi estimates it will distribute preferred dividends of approximately $1,027 million during 2016, in each case assuming such dividends are declared by the Citi Board of Directors.

98

22. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES

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 and be the primary beneficiary if it has both of the following characteristics:

Uses of Special Purpose Entities A special purpose entity (SPE) is an entity designed to fulfill a specific limited need of the company that organized it. The principal uses of SPEs by Citi are to obtain liquidity and favorable capital treatment by securitizing certain financial assets, to assist clients in securitizing their financial assets and to create investment products for clients. SPEs may be organized in various 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 or other notes of indebtedness. These issuances are recorded on the balance sheet of the SPE, which may or may not be consolidated onto the balance sheet of the company that organized the SPE. Investors usually have recourse only to the assets in the SPE, but may also benefit from other credit enhancements, such as a collateral account, a line of credit or a liquidity facility, such as a liquidity put option or asset purchase agreement. Because of these enhancements, the SPE issuances typically obtain a more favorable credit rating than the transferor could obtain for its own debt issuances. This results 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. Most of Citigroup’s SPEs are variable interest entities (VIEs), as described below.

• •

power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and an obligation to absorb losses of the entity that could potentially be significant to the VIE, or a right to receive benefits from the entity that could potentially be significant to the VIE.

The Company must evaluate each VIE to understand the purpose and design of the entity, the role the Company had in the entity’s design and its involvement in the VIE’s 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 must then 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. In various other transactions, the Company may: (i) 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); (ii) act as underwriter or placement agent; (iii) provide administrative, trustee or other services; or (iv) 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. See Note 1 to the Consolidated Financial Statements for a discussion of impending changes to targeted areas of consolidation guidance.

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 a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity). Investors that finance the VIE through debt or equity interests or other counterparties providing other forms of support, such as guarantees, subordinated fee arrangements or certain types of derivative contracts are variable interest holders in the entity.

99

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 is presented below: As of December 31, 2015 Maximum exposure to loss in significant unconsolidated VIEs(1) Funded exposures(2)

In millions of dollars

Unfunded exposures Total Significant Guarantees involvement Consolidated VIE / SPE unconsolidated Debt Equity Funding and with SPE (3) assets VIE assets investments investments commitments derivatives Total assets $ 54,916 $ 54,916 $ — $ — $ — $ — $ — $ —

Credit card securitizations Mortgage securitizations(4) U.S. agency-sponsored Non-agency-sponsored Citi-administered assetbacked commercial paper conduits (ABCP) Collateralized loan obligations (CLOs) Asset-based financing Municipal securities tender option bond trusts (TOBs) Municipal investments Client intermediation Investment funds(5) Other Total(6) $

217,291 13,036

— 1,586

217,291 11,450

3,571 527

— —

— —

95 1

3,666 528

21,280

21,280













16,719 58,862

— 1,364

16,719 57,498

3,150 21,270

— 269

— 3,616

86 436

3,236 25,591

3,100 2,335 — 102 — 9,153 $

— 3,102 — 7,018 — 49 — 253 52 898 670 $ 44,341

8,572 20,290 434 1,730 4,915 418,045 $

3,830 44 335 842 597 84,794 $

4,742 20,246 99 888 4,318 333,251 $

2 2,196 49 13 292 31,070 $

— 2,487 — 138 554 3,448 $

As of December 31, 2014 Maximum exposure to loss in significant unconsolidated VIEs(1) Funded exposures(2)

In millions of dollars

Unfunded exposures Total Significant Guarantees involvement Consolidated VIE / SPE unconsolidated Debt Equity Funding and with SPE (3) assets VIE assets investments investments commitments derivatives Total assets $ 60,271 $ 60,271 $ — $ — $ — $ — $ — $ —

Credit card securitizations Mortgage securitizations(4) U.S. agency-sponsored Non-agency-sponsored Citi-administered assetbacked commercial paper conduits (ABCP) Collateralized loan obligations (CLOs) Asset-based financing Municipal securities tender option bond trusts (TOBs) Municipal investments Client intermediation Investment funds(5) Other Total(6) $ (1) (2) (3) (4) (5) (6)

247,590 15,110

— 1,304

247,590 13,806

5,205 575

— —

— —

110 1

5,315 576

29,181

29,181













15,440 45,555

— 1,151

15,440 44,404

1,958 17,712

— 63

— 2,014

86 333

2,044 20,122

3,669 2,222 — 124 23 8,052 $

— — 10 — 73 613 $

3,672 6,332 16 325 1,730 40,132

12,278 21,375 187 2,139 8,214 457,340 $

6,671 70 137 1,096 2,909 102,790 $

5,607 21,305 50 1,043 5,305 354,550 $

3 1,930 6 16 183 27,588 $

— 2,180 — 185 1,451 3,879 $

The definition of maximum exposure to loss is included in the text that follows this table. Included on Citigroup’s December 31, 2015 and 2014 Consolidated Balance Sheet. A significant unconsolidated VIE is an entity where the Company has any variable interest or continuing involvement considered to be significant, regardless of the likelihood of loss or the notional amount of exposure. Citigroup mortgage securitizations also include agency and non-agency (private-label) re-securitization activities. These SPEs are not consolidated. See “Resecuritizations” below for further discussion. Substantially all of the unconsolidated investment funds’ assets are related to retirement funds in Mexico managed by Citi. See “Investment Funds” below for further discussion. Citi’s total involvement with Citicorp SPE assets was $383.2 billion and $407.4 billion as of December 31, 2015 and 2014, respectively, with the remainder related to Citi Holdings.

100

The previous tables do 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. For VIEs that obtain asset exposures synthetically through derivative instruments, the tables generally include the full original notional amount of the derivative as an asset balance. 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 adjusted for any accrued interest and cash principal payments received. The carrying amount may also be adjusted for increases or declines in fair value or any impairment in value recognized in earnings. 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. 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, crosscurrency 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.

certain venture capital investments made by some of the Company’s private equity subsidiaries, as the Company accounts for these investments in accordance with the Investment Company Audit Guide (codified in ASC 946); certain limited partnerships that are investment funds that qualify for the deferral from the requirements of ASC 810 where the Company is the general partner and the limited partners have the right to replace the general partner or liquidate the funds; certain investment funds for which the Company provides investment management services and personal estate trusts for which the Company provides administrative, trustee and/or investment management services; VIEs structured by third parties where the Company holds securities in inventory, as these investments are made on arm’s-length terms; certain positions in mortgage-backed and asset-backed securities held by the Company, which are classified as Trading account assets or Investments, where the Company has no other involvement with the related securitization entity deemed to be significant (for more information on these positions, see Notes 13 and 14 to the Consolidated Financial Statements); certain representations and warranties exposures in legacy ICG-sponsored mortgage-backed and asset-backed securitizations, where the Company has no variable interest or continuing involvement as servicer. The outstanding balance of mortgage loans securitized during 2005 to 2008 where the Company has no variable interest or continuing involvement as servicer was approximately $12 billion and $14 billion at December 31, 2015 and 2014, respectively; certain representations and warranties exposures in Citigroup residential mortgage securitizations, where the original mortgage loan balances are no longer outstanding; and VIEs such as trust preferred securities trusts used in connection with the Company’s funding activities. The Company does not have a variable interest in these trusts.

101

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 VIE tables above:

In millions of dollars

Asset-based financing

December 31, 2014 Liquidity Loan / equity facilities commitments

December 31, 2015 Liquidity Loan / equity facilities commitments $

5 $

Municipal securities tender option bond trusts (TOBs)

3,611 $

5 $

2,009

3,100



3,669



Municipal investments



2,335



2,222

Investment funds



102



124

Other







23

3,105 $

6,048 $

3,674 $

Total funding commitments

$

Consolidated VIEs 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 Consolidated Balance Sheet, and any proceeds received are recognized as secured liabilities. 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 respective 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. Thus, the Company’s maximum legal exposure to loss related to consolidated VIEs is significantly less than the carrying value of the consolidated VIE assets due to outstanding third-party financing. Intercompany assets and liabilities are excluded from the table. All VIE 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. The following table presents the carrying amounts and classifications of consolidated assets that are collateral for consolidated VIE obligations:

In billions of dollars

$

Cash Trading account assets Investments Total loans, net of allowance Other Total assets Short-term borrowings Long-term debt Other liabilities Total liabilities(1) (1)

4,378

$ $

$

December 31, 2015 0.2 0.6 5.3 78.6 0.1 84.8 14.0 31.3 2.1 47.4

$

$ $

$

December 31, 2014 0.3 0.7 8.0 93.2 0.6 102.8 22.7 40.1 0.9 63.7

The total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citi were $45.3 billion and $61.2 billion as of December 31, 2015 and 2014, respectively. Liabilities of consolidated VIEs for which creditors or beneficial interest holders have recourse to the general credit of Citi comprise two items included in the above table: (i) credit enhancements provided to consolidated Citi-administered commercial paper conduits in the form of letters of credit of $1.9 billion and $2.3 billion at December 31, 2015 and 2014, respectively; and (ii) credit guarantees provided by Citi to certain consolidated municipal tender option bond trusts of $82 million and $198 million at December 31, 2015 and 2014, respectively.

Significant Interests in Unconsolidated VIEs—Balance Sheet Classification The following table presents the carrying amounts and classification of significant variable interests in unconsolidated VIEs: December 31, December 31, 2014 2015 $ 0.1 $ — 6.2 7.6 3.0 2.6 23.6 19.6 1.7 1.7 $ 34.6 $ 31.5

In billions of dollars

Cash Trading account assets Investments Total loans, net of allowance Other Total assets

102

Credit Card Securitizations The Company securitizes credit card receivables through trusts established to purchase the receivables. Citigroup transfers receivables into the trusts on a non-recourse basis. Credit card securitizations are revolving securitizations; as customers pay their credit card balances, the cash proceeds are used to purchase new receivables and replenish the receivables in the trust. Substantially all of the Company’s credit card securitization activity is through two trusts—Citibank Credit Card Master Trust (Master Trust) and the Citibank Omni Master Trust (Omni Trust), with the substantial majority through the Master Trust. These trusts are consolidated entities because, as servicer, Citigroup has the power to direct

the activities that most significantly impact the economic performance of the trusts, Citigroup holds a seller’s interest and certain securities issued by the trusts, and also provides liquidity facilities to the trusts, which could result in potentially significant losses or benefits from the trusts. Accordingly, the transferred credit card receivables remain on Citi’s Consolidated Balance Sheet with no gain or loss recognized. The debt issued by the trusts to third parties is included on Citi’s Consolidated Balance Sheet. The Company utilizes securitizations as one of the sources of funding for its business in North America. The following table reflects amounts related to the Company’s securitized credit card receivables:

Ownership interests in principal amount of trust credit card receivables Sold to investors via trust-issued securities Retained by Citigroup as trust-issued securities Retained by Citigroup via non-certificated interests Total

The following tables summarize selected cash flow information related to Citigroup’s credit card securitizations: In billions of dollars

Proceeds from new securitizations Pay down of maturing notes

December 31, 2014

December 31, 2015

In billions of dollars

$

$

29.7 $ 9.4 16.5 55.6 $

$

37.0 10.1 14.2 61.3

The Master Trust issues fixed- and floating-rate term notes. Some of the term notes are issued to multi-seller commercial paper conduits. The weighted average maturity of the term notes issued by the Master Trust was 2.4 years as of December 31, 2015 and 2.8 years as of December 31, 2014.

2015 2014 2013 — $ 12.6 $ 11.7 (7.4) (7.8) (2.2)

Master Trust Liabilities (at Par Value)

Managed Loans 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. As Citigroup consolidates the credit card trusts, all managed securitized card receivables are on-balance sheet.

In billions of dollars

Term notes issued to third parties Term notes retained by Citigroup affiliates Total Master Trust liabilities

Dec. 31, Dec. 31, 2015 2014 $ 28.4 $ 35.7

$

7.5 35.9 $

8.2 43.9

The Omni Trust issues fixed- and floating-rate term notes, some of which are purchased by multi-seller commercial paper conduits. The weighted average maturity of the thirdparty term notes issued by the Omni Trust was 0.9 years as of December 31, 2015 and 1.9 years as of December 31, 2014.

Funding, Liquidity Facilities and Subordinated Interests As noted above, Citigroup securitizes credit card receivables through two securitization trusts—Master Trust, which is part of Citicorp, and Omni Trust, substantially all of which is also part of Citicorp. The liabilities of the trusts are included in the Consolidated Balance Sheet, excluding those retained by Citigroup.

Omni Trust Liabilities (at Par Value) In billions of dollars

Term notes issued to third parties Term notes retained by Citigroup affiliates Total Omni Trust liabilities

103

Dec. 31, Dec. 31, 2015 2014 $ 1.3 $ 1.3

$

1.9 3.2 $

1.9 3.2

Mortgage Securitizations The Company provides a wide range of mortgage loan products to a diverse customer base. Once originated, the Company often securitizes these loans through the use of VIEs. These VIEs are funded through the issuance of trust certificates backed solely by the transferred assets. These certificates have the same 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, the Company’s U.S. consumer mortgage 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 and also provides servicing for a limited number of ICG securitizations. The Company securitizes mortgage loans generally through either a government-sponsored agency, such as Ginnie Mae, Fannie Mae 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 VIE that most significantly impact the entity’s economic performance. Therefore, Citi does not consolidate these U.S. agency-sponsored mortgage securitizations. The Company does not consolidate certain non-agencysponsored mortgage securitizations because Citi is either not the servicer with the power to direct the significant activities of the entity or Citi is the servicer but the servicing relationship is deemed to be a fiduciary relationship; therefore, Citi is not deemed to be the primary beneficiary of the entity. In certain instances, the Company has (i) the power to direct the activities and (ii) the obligation to either absorb losses or the right to receive benefits that could be potentially significant to its non-agency-sponsored mortgage securitizations and, therefore, is the primary beneficiary and thus consolidates the VIE.

The following tables summarize selected cash flow information related to Citigroup mortgage securitizations: 2015

2014

2013

In billions of dollars

U.S. agency- Non-agencysponsored sponsored mortgages mortgages

Agency- and non-agencysponsored mortgages

Agency- and non-agencysponsored mortgages

Proceeds from new securitizations(1)

$

25.6 $

12.1 $

39.6 $

72.7

Contractual servicing fees received

0.5



0.5

0.7

Cash flows received on retained interests and other net cash flows

0.1



0.1

0.1

(1) The proceeds from new securitizations in 2015 include $0.7 billion related to personal loan securitizations.

Agency and non-agency securitization gains for the year ended December 31, 2015 were $150 million and $44 million, respectively.

Agency and non-agency securitization gains for the years ended December 31, 2014 and 2013 were $267 million and $223 million, respectively.

Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables were as follows: December 31, 2015 Non-agency-sponsored mortgages(1) U.S. agencysponsored mortgages 0.0% to 11.3% 8.0% 5.7% to 34.9% 11.7% NM NM 3.5 to 10.4 years

Discount rate Weighted average discount rate Constant prepayment rate Weighted average constant prepayment rate Anticipated net credit losses(2) Weighted average anticipated net credit losses Weighted average life

104

Senior interests 2.0% to 3.2% 2.9% — — 40.0% 40.0% 2.5 to 9.8 years

Subordinated interests 2.9% to 12.1% 5.2% 2.8% to 8.0% 3.5% 38.1% to 92.0% 70.6% 8.9 to 12.9 years

December 31, 2014 Non-agency-sponsored mortgages(1) U.S. agencysponsored mortgages 0.0% to 14.7% 11.0% 0.0% to 23.1% 6.2% NM NM 0.0 to 9.7 years

Discount rate Weighted average discount rate Constant prepayment rate Weighted average constant prepayment rate Anticipated net credit losses(2) Weighted average anticipated net credit losses Weighted average life

Senior interests 1.4% to 6.6% 4.2% 0.0% to 7.0% 5.4% 40.0% to 67.1% 56.3% 2.6 to 11.1 years

Subordinated interests 2.6% to 9.1% 7.8% 0.5% to 8.9% 3.2% 8.9% to 58.5% 43.1% 3.0 to 14.5 years

(1)

Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization. (2) Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above. Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests in mortgage securitizations. NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

The interests retained by the Company range from highly rated and/or senior in the capital structure to unrated and/or residual interests. 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 set forth in the tables

below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not 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. December 31, 2015 Non-agency-sponsored mortgages(1) U.S. agencysponsored mortgages 0.0% to 22.1% 5.7% 6.5% to 27.8% 12.5% NM NM 1.3 to 21.0 years

Discount rate Weighted average discount rate Constant prepayment rate Weighted average constant prepayment rate Anticipated net credit losses(2) Weighted average anticipated net credit losses Weighted average life

Senior interests 1.6% to 67.6% 7.6% 4.2% to 100.0% 14.0% 0.2% to 89.1% 48.9% 0.3 to 18.1 years

Subordinated interests 2.0% to 24.9% 8.4% 0.5% to 20.8% 7.5% 3.8% to 92.0% 54.4% 0.9 to 19.0 years

December 31, 2014 Non-agency-sponsored mortgages(1) U.S. agencysponsored mortgages 0.0% to 21.2% 8.4% 6.0% to 41.4% 15.3% NM NM 0.0 to 16.0 years

Discount rate Weighted average discount rate Constant prepayment rate Weighted average constant prepayment rate Anticipated net credit losses(2) Weighted average anticipated net credit losses Weighted average life

Senior interests 1.1% to 47.1% 7.7% 2.0% to 100.0% 10.9% 0.0% to 92.4% 51.7% 0.3 to 14.4 years

Subordinated interests 1.3% to 19.6% 8.2% 0.5% to 16.2% 7.2% 13.7% to 83.8% 52.5% 0.0 to 24.4 years

Note: Citi Holdings held no subordinated interests in mortgage securitizations as of December 31, 2015 and 2014. (1) Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization. (2) Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above. Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests in mortgage securitizations. NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

105

Non-agency-sponsored mortgages(1) U.S. agencysponsored mortgages 2,563 $

In millions of dollars at December 31, 2015

Carrying value of retained interests Discount rates Adverse change of 10% Adverse change of 20% Constant prepayment rate Adverse change of 10% Adverse change of 20% Anticipated net credit losses Adverse change of 10% Adverse change of 20%

$ $

Senior interests 179 $

(65) $ (127)

Subordinated interests 553

(8) $ (15)

(25) (49)

(102) (196)

(3) (6)

(9) (18)

NM NM

(6) (11)

(7) (14)

Non-agency-sponsored mortgages(1) U.S. agencysponsored mortgages $ 2,374 $

In millions of dollars at December 31, 2014

Carrying value of retained interests Discount rates Adverse change of 10% Adverse change of 20% Constant prepayment rate Adverse change of 10% Adverse change of 20% Anticipated net credit losses Adverse change of 10% Adverse change of 20%

$

Senior interests

Subordinated interests 310 $

554

(7) $ (13)

(30) (57)

(93) (179)

(3) (5)

(9) (18)

NM NM

(6) (10)

(9) (16)

(69) $ (134)

Note: Citi Holdings held no subordinated interests in mortgage securitizations as of December 31, 2015 and December 31, 2014. (1) Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization. NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

Mortgage Servicing Rights In connection with the securitization of mortgage loans, the Company’s U.S. consumer mortgage business generally 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. These transactions create an intangible asset referred to as mortgage servicing rights (MSRs), which are recorded at fair value on Citi’s Consolidated Balance Sheet. The fair value of Citi’s capitalized MSRs was $1.8 billion at December 31, 2015 and 2014. Of these amounts, approximately $1.7 billion was specific to Citicorp, with the remainder to Citi Holdings as of December 31, 2015 and 2014. The MSRs correspond to principal loan balances of $198 billion and $224 billion as of December 31, 2015 and 2014, respectively. The following table summarizes the changes in capitalized MSRs:

In millions of dollars

Balance, beginning of year Originations Changes in fair value of MSRs due to changes in inputs and assumptions Other changes(1) Sale of MSRs Balance, as of December 31 (1)

106

$

$

2015 1,845 $ 214 110 (350) (38) 1,781 $

2014 2,718 217 (344) (429) (317) 1,845

Represents changes due to customer payments and passage of time.

The fair value of the MSRs is primarily affected by changes in prepayments of mortgages that result from shifts in mortgage interest rates. Specifically, higher interest rates tend to lead to declining prepayments, which causes the fair value of the MSRs to increase. 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 and sale commitments of mortgage-backed securities and purchased securities all classified as Trading account assets. The Company receives fees during the course of servicing previously securitized mortgages. The amounts of these fees were as follows: 2015

In millions of dollars

Servicing fees Late fees Ancillary fees Total MSR fees

$

$

2014 552 $ 16 31 599 $

As of December 31, 2015, the fair value of Citi-retained interests in agency re-securitization transactions structured by Citi totaled approximately $1.8 billion (including $1.5 billion related to re-securitization transactions executed in 2015) compared to $1.8 billion as of December 31, 2014 (including $1.5 billion related to re-securitization transactions executed in 2014), which is recorded in Trading account assets. The original fair value of agency re-securitization transactions in which Citi holds a retained interest as of December 31, 2015 and 2014 was approximately $65.0 billion and $73.0 billion, respectively. As of December 31, 2015 and 2014, the Company did not consolidate any private-label or agency re-securitization entities.

2013 638 $ 25 56 719 $

800 42 100 942

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. Citi’s 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 conduits is facilitated by the liquidity support and credit enhancements provided by the Company. As administrator to Citi’s 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 the client program and liquidity fees of the conduit after payment of conduit expenses. This administration fee is fairly stable, since most risks and rewards of the underlying assets are passed back to the clients. 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 generally 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

These fees and changes in MSR fair values are classified in the Consolidated Statement of Income as Other revenue. 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 years ended December 31, 2015 and 2014, Citi transferred non-agency (private-label) securities with an original par value of approximately $885 million and $1.2 billion, respectively, to re-securitization entities. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients. As of December 31, 2015, the fair value of Citi-retained interests in private-label re-securitization transactions structured by Citi totaled approximately $428 million (including $132 million related to re-securitization transactions executed in 2015), which has been recorded in Trading account assets. Of this amount, approximately $18 million was related to senior beneficial interests and approximately $410 million was related to subordinated beneficial interests. As of December 31, 2014, the fair value of Citi-retained interests in private-label re-securitization transactions structured by Citi totaled approximately $545 million (including $194 million related to re-securitization transactions executed in 2014). Of this amount, approximately $133 million was related to senior beneficial interests, and approximately $412 million was related to subordinated beneficial interests. The original par value of private-label resecuritization transactions in which Citi holds a retained interest as of December 31, 2015 and 2014 was approximately $3.7 billion and $5.1 billion, respectively. The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (agency) securities. During the years ended December 31, 2015 and 2014, Citi transferred agency securities with a fair value of approximately $17.8 billion and $22.5 billion, respectively, to re-securitization entities.

107

Company’s internal risk ratings. At December 31, 2015 and 2014, the conduits had approximately $21.3 billion and $29.2 billion of purchased assets outstanding, respectively, and had incremental funding commitments with clients of approximately $11.6 billion and $13.5 billion, respectively. Substantially all of the funding of the conduits is in the form of short-term commercial paper. At December 31, 2015 and 2014, the weighted average remaining lives of the commercial paper issued by the conduits were approximately 56 and 57 days, respectively. The primary credit enhancement provided to the conduit investors is in the form of transaction-specific credit enhancements described above. In addition to the transactionspecific credit enhancements, the conduits, other than the government guaranteed loan conduit, have obtained a letter of credit from the Company, which is equal to at least 8% to 10% of the conduit’s assets with a minimum of $200 million. The letters of credit provided by the Company to the conduits total approximately $1.9 billion and $2.3 billion as of December 31, 2015 and 2014, respectively. The net result across multi-seller conduits administered by the Company, other than the government guaranteed loan conduit, is that, in the event defaulted assets exceed the transaction-specific credit enhancements described above, any losses in each conduit are allocated first to the Company and then the commercial paper investors. 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 conduits is supported by a transaction-specific liquidity facility in the form of an asset purchase agreement (APA). Under the APA, the Company has generally agreed to purchase non-defaulted eligible receivables from the conduit at par. 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. Any funding under the APA will likely subject the underlying conduit clients to increased interest costs. 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 Company receives fees for providing both types of liquidity agreements 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. Separately, in the normal course of business, the Company invests in commercial paper, including commercial paper issued by the Company's conduits. At December 31, 2015 and 2014, the Company owned $11.4 billion and $10.6 billion, respectively, of the commercial paper issued by its administered conduits. The Company's investments were not

driven by market illiquidity and the Company is not obligated under any agreement to purchase the commercial paper issued by the conduits. The asset-backed commercial paper conduits are consolidated by the Company. The Company has determined that, through its roles as administrator and liquidity provider, it has the power to direct the activities that most significantly impact the entities’ economic performance. These powers include its ability to structure and approve the assets purchased by the conduits, its ongoing surveillance and credit mitigation activities, its ability to sell or repurchase assets out of the conduits, and its liability management. In addition, as a result of all the Company’s involvement described above, it was concluded that the Company has 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. Collateralized Loan Obligations A collateralized loan obligation (CLO) is a VIE that purchases a portfolio of assets consisting primarily of non-investment grade corporate loans. The CLO issues multiple tranches of debt and equity to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. A third-party asset manager is contracted by the CLO to purchase the underlying assets from the open market and monitor the credit risk associated with those assets. Over the term of the CLO, the asset manager directs purchases and sales of assets in a manner consistent with the CLO’s asset management agreement and indenture. In general, the CLO asset manager will have the power to direct the activities of the entity that most significantly impact the economic performance of the CLO. Investors in the CLO, through their ownership of debt and/or equity in the CLO, can also direct certain activities of the CLO, including removing the CLO asset manager under limited circumstances, optionally redeeming the notes, voting on amendments to the CLO’s operating documents and other activities. The CLO has a finite life, typically 12 years. Citi serves as a structuring and placement agent with respect to the CLO. Typically, the debt and equity of the CLO are sold to third-party investors. On occasion, certain Citi entities may purchase some portion of the CLO’s liabilities for investment purposes. In addition, Citi may purchase, typically in the secondary market, certain securities issued by the CLO to support its market making activities. The Company does not generally have the power to direct the activities of the entity that most significantly impact the economic performance of the CLOs, as this power is generally held by a third-party asset manager of the CLO. As such, those CLOs are not consolidated.

108

Key Assumptions and Retained Interests The key assumptions used to value retained interests in CLOs, and the sensitivity of the fair value to adverse changes of 10% and 20% are set forth in the tables below: Discount rate

Dec. 31, 2015 1.4% to 49.6%

The following table summarizes selected cash flow information related to asset-based financings: Proceeds from new securitizations

Dec. 31, 2014 1.4% to 49.2%

Cash flows received on retained interests and other net cash flows

Dec. 31, Dec. 31, 2014 2015 Carrying value of retained interests $ 918 $ 1,555 Discount rates $ (5) $ Adverse change of 10% (10) (10) Adverse change of 20% (20)

December 31, 2015 Maximum Total exposure to unconsolidated unconsolidated VIE assets VIEs

In millions of dollars

6,528 1,871 55 17,137 25,591

December 31, 2014 Maximum Total exposure to unconsolidated unconsolidated VIE assets VIEs

Type Commercial and other real estate $ Corporate loans Hedge funds and equities Airplanes, ships and other assets Total $ (1)

17,459 $ 1,274 385 38,380 57,498 $

7,987 $ 460 — 35,957 44,404 $

2013

— $

0.5 $

0.5



0.3

1.0

Municipal Securities Tender Option Bond (TOB) Trusts Municipal TOB trusts may hold fixed- or floating-rate, taxable or tax-exempt securities issued by state and local governments and municipalities. TOB trusts are typically structured as single-issuer entities whose assets are purchased from either the Company or from other investors in the municipal securities market. TOB trusts finance the purchase of their municipal assets by issuing two classes of certificates: longdated, floating rate certificates (“Floaters”) that are putable pursuant to a liquidity facility and residual interest certificates (“Residuals”). The Floaters are purchased by third-party investors, typically tax-exempt money market funds. The Residuals are purchased by the original owner of the municipal securities that are being financed. From the Company’s perspective, there are two types of TOB trusts: customer TOB trusts and non-customer TOB trusts. Customer TOB trusts are those trusts utilized by customers of the Company to finance their municipal securities investments. The Residuals issued by these trusts are purchased by the customer being financed. Non-customer TOB trusts are trusts that are used by the Company to finance its own municipal securities investments; the Residuals issued by non-customer TOB trusts are purchased by the Company. With respect to both customer and non-customer TOB trusts, the Company may provide remarketing agent services. If Floaters are optionally tendered and the Company, in its role as remarketing agent, is unable to find a new investor to purchase the optionally tendered Floaters within a specified period of time, the Company may, but is not obligated to, purchase the tendered Floaters into its own inventory. The level of the Company’s inventory of such Floaters fluctuates. At December 31, 2015 and 2014, the Company held $2 million and $3 million, respectively, of Floaters related to customer and non-customer TOB trusts. For certain customer TOB trusts, the Company may also serve as a voluntary advance provider. In this capacity, the Company may, but is not obligated to, make loan advances to customer TOB trusts to purchase optionally tendered Floaters that have not otherwise been successfully remarketed to new investors. Such loans are secured by pledged Floaters. As of December 31, 2015, the Company had no outstanding voluntary advances to customer TOB trusts. For certain non-customer trusts, the Company also provides credit enhancement. At December 31, 2015 and 2014, approximately $82 million and $198 million, respectively, of the municipal bonds owned by non-customer TOB trusts are subject to a credit guarantee provided by the Company.

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 generally does not have the power to direct the activities that most significantly impact these VIEs’ economic performance, and thus it does not consolidate them. The primary types of Citigroup’s asset-based financings, total assets of the unconsolidated VIEs with significant involvement, and the Company’s maximum exposure to loss are shown below. For the Company to realize the maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.

Type Commercial and other real estate $ Corporate loans Hedge funds and equities Airplanes, ships and other assets Total(1) $

$

2014

There were no gains recognized on the securitizations of asset-based financings for the years ended December 31, 2015, 2014 and 2013.

In millions of dollars

In millions of dollars

2015

In billions of dollars

4,003 473 — 15,646 20,122

The increase in the total unconsolidated VIE assets and related maximum exposure to unconsolidated VIEs is due to normal, yet increased, client activity.

109

Municipal Investments Municipal investment transactions include debt and equity 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. The Company may also provide construction loans or permanent loans for the development or operation of real estate properties held by partnerships. 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 are not consolidated by the Company.

The Company also provides liquidity services to many customer and non-customer trusts. If a trust is unwound early due to an event other than a credit event on the underlying municipal bonds, the underlying municipal bonds are sold out of the Trust and bond sale proceeds are used to redeem the outstanding Trust certificates. If this results in a shortfall between the bond sale proceeds and the redemption price of the tendered Floaters, the Company, pursuant to the liquidity agreement, would be obligated to make a payment to the trust to satisfy that shortfall. For certain customer TOB trusts the Company has also executed a reimbursement agreement with the holder of the Residual, pursuant to which the Residual holder is obligated to reimburse the Company for any payment the Company makes under the liquidity arrangement. These reimbursement agreements may be subject to daily margining based on changes in the market value of the underlying municipal bonds. In cases where a third party provides liquidity to a non-customer TOB trust, a similar reimbursement arrangement may be executed, whereby the Company (or a consolidated subsidiary of the Company), as Residual holder, would absorb any losses incurred by the liquidity provider. For certain other non-customer TOB trusts, the Company serves as tender option provider. The tender option provider arrangement allows Floater holders to put their interests directly to the Company at any time, subject to the requisite notice period requirements, at a price of par. At December 31, 2015 and 2014, liquidity agreements provided with respect to customer TOB trusts totaled $3.1 billion and $3.7 billion, respectively, of which $2.2 billion and $2.6 billion, respectively, were offset by reimbursement agreements. For the remaining exposure related to TOB transactions, where the Residual owned by the customer was at least 25% of the bond value at the inception of the transaction, no reimbursement agreement was executed. The Company considers both customer and non-customer TOB trusts to be VIEs. Customer TOB trusts are not consolidated by the Company, as the power to direct the activities that most significantly impact the trust’s economic performance rests with the customer Residual holder, which may unilaterally cause the sale of the trust’s bonds. Non-customer TOB trusts generally are consolidated because the Company holds the Residual interest, and thus has the unilateral power to cause the sale of the trust’s bonds. The Company also provides other liquidity agreements or letters of credit to customer-sponsored municipal investment funds, which are not variable interest entities, and municipality-related issuers that totaled $8.1 billion and $7.4 billion as of December 31, 2015 and 2014, respectively. These liquidity agreements and letters of credit are offset by reimbursement agreements with various term-out provisions.

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 creditlinked notes and equity-linked notes. In these transactions, the VIE 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 VIE issues notes to investors that pay a return based on the specified underlying security, referenced asset or index. The VIE invests the proceeds in a financial asset or a guaranteed insurance contract 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 VIE’s derivative instruments and investing in a portion of the notes issued by the VIE. 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 that 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 VIE and the notional amount of any risk of loss absorbed by the Company through a separate instrument issued by the VIE. The derivative instrument held by the Company may generate a receivable from the VIE (for example, where the Company purchases credit protection from the VIE in connection with the VIE’s issuance of a creditlinked note), which is collateralized by the assets owned by the VIE. These derivative instruments are not considered variable interests, and any associated receivables are not included in the calculation of maximum exposure to the VIE. The proceeds from new securitizations related to the Company’s client intermediation transactions for the years ended December 31, 2015 and 2014 totaled approximately $2.0 billion.

110

Investment Funds The Company is the investment manager for certain investment funds and retirement 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 recourse and nonrecourse bases for a portion of the employees’ investment commitments. The Company has determined that a majority of the investment entities managed by Citigroup are provided a deferral from the requirements of ASC 810, because they meet the criteria in Accounting Standards Update No. 2010-10, Consolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10). These entities continue to be evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R), Consolidation of Variable Interest Entities), which required that a VIE be consolidated by the party with a variable interest that will absorb a majority of the entity’s expected losses or residual returns, or both. See Note 1 to the Consolidated Financial Statements for a discussion of ASU 2015-02 which includes impending changes to targeted areas of consolidation guidance. When ASU 2015-02 becomes effective on January 1, 2016, it will eliminate the above noted deferral for certain investment entities pursuant to ASU 2010-10.

111

23. DERIVATIVES ACTIVITIES 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 of the probability of counterparty default. Liquidity risk is the potential exposure that arises when the size of a derivative position may not be able to be monetized in a reasonable period of time and at a reasonable cost in periods of high volatility and financial stress. Derivative transactions are customarily documented under industry standard master agreements that provide that, following an uncured payment default or other event of default, the non-defaulting party may promptly terminate all transactions between the parties and determine the net amount due to be paid to, or by, the defaulting party. Events of default include: (i) failure to make a payment on a derivatives transaction that remains uncured following applicable notice and grace periods, (ii) breach of agreement that remains uncured after applicable notice and grace periods, (iii) breach of a representation, (iv) cross default, either to third-party debt or to other derivative transactions entered into between the parties, or, in some cases, their affiliates, (v) the occurrence of a merger or consolidation which results in a party’s becoming a materially weaker credit, and (vi) the cessation or repudiation of any applicable guarantee or other credit support document. Obligations under master netting agreements are often secured by collateral posted under an industry standard credit support annex to the master netting agreement. An event of default may also occur under a credit support annex if a party fails to make a collateral delivery that remains uncured following applicable notice and grace periods. The netting and collateral rights incorporated in the master netting agreements are considered to be legally enforceable if a supportive legal opinion has been obtained from counsel of recognized standing that provides the requisite level of certainty regarding enforceability and that the exercise of rights by the non-defaulting party to terminate and close-out transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding. A legal opinion may not be sought for certain jurisdictions where local law is silent or unclear as to the enforceability of such rights or where adverse case law or conflicting regulation may cast doubt on the enforceability of such rights. In some jurisdictions and for some counterparty types, the insolvency law may not provide the requisite level of certainty. For example, this may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.

In the ordinary course of business, Citigroup enters into various types of derivative transactions. These derivative transactions include: •





Futures and forward contracts, which are commitments to buy or sell at a future date a financial instrument, commodity or currency at a contracted price and may be settled in cash or through delivery. Swap contracts, which are commitments to settle in cash at a future date or dates that may range from a few days to a number of years, based on differentials between specified indices or financial instruments, as applied to a notional principal amount. Option contracts, which give the purchaser, for a premium, the right, but not the obligation, to buy or sell within a specified time a financial instrument, commodity or currency at a contracted price that may also be settled in cash, based on differentials between specified indices or prices.

Swaps and forwards and some option contracts are overthe-counter (OTC) derivatives that are bilaterally negotiated with counterparties and settled with those counterparties, except for swap contracts that are novated and "cleared" through central counterparties (CCPs). Futures contracts and other option contracts are standardized contracts that are traded on an exchange with a CCP as the counterparty from the inception of the transaction. Citigroup enters into these derivative contracts relating to interest rate, foreign currency, commodity and other market/credit risks for the following reasons: •



Trading Purposes: Citigroup trades derivatives as an active market maker. Citigroup offers its customers derivatives in connection with their risk management actions to transfer, modify or reduce their interest rate, foreign exchange and other market/credit risks or for their own trading purposes. Citigroup also manages its derivative risk positions through offsetting trade activities, controls focused on price verification, and daily reporting of positions to senior managers. Hedging: Citigroup uses derivatives in connection with its risk management activities to hedge certain risks or reposition the risk profile of the Company. For example, Citigroup issues fixed-rate long-term debt and then enters into a receive-fixed, pay-variable-rate interest rate swap with the same tenor and notional amount to convert the interest payments to a net variable-rate basis. This strategy is the most common form of an interest rate hedge, as it minimizes net interest cost in certain yield curve environments. Derivatives are also used to manage risks inherent in specific groups of on-balance sheet assets and liabilities, including AFS securities and borrowings, as well as other interest-sensitive assets and liabilities. In addition, foreign-exchange contracts are used to hedge non-U.S.-dollar-denominated debt, foreign-currencydenominated AFS securities and net investment exposures. 112

Exposure to credit risk on derivatives is affected by market volatility, which may impair the ability of counterparties to satisfy their obligations to the Company. Credit limits are established and closely monitored for customers engaged in derivatives transactions. Citi considers the level of legal certainty regarding enforceability of its offsetting rights under master netting agreements and credit support annexes to be an important factor in its risk management process. Specifically, Citi generally transacts much lower volumes of derivatives under master netting agreements where Citi does not have the requisite level of legal certainty regarding enforceability, because such derivatives consume greater amounts of single counterparty credit limits than those executed under enforceable master netting agreements. Cash collateral and security collateral in the form of G10 government debt securities is often posted by a party to a master netting agreement to secure the net open exposure of the other party; the receiving party is free to commingle/ rehypothecate such collateral in the ordinary course of its business. Nonstandard collateral such as corporate bonds, municipal bonds, U.S. agency securities and/or MBS may also be pledged as collateral for derivative transactions. Security collateral posted to open and maintain a master netting agreement with a counterparty, in the form of cash and/or securities, may from time to time be segregated in an account at a third-party custodian pursuant to a tri-party account control agreement.

113

Information pertaining to Citigroup’s derivative activity, based on notional amounts is presented in the table below. Derivative notional amounts are reference amounts from which contractual payments are derived and do not represent a complete and accurate measure of Citi’s exposure to derivative transactions. Rather, as discussed above, Citi’s derivative exposure arises primarily from market fluctuations (i.e., market risk), counterparty failure (i.e., credit risk) and/or periods of high volatility or financial stress (i.e., liquidity risk), as well as any market valuation adjustments that may be

required on the transactions. Moreover, notional amounts do not reflect the netting of offsetting trades (also as discussed above). For example, if Citi enters into an interest rate swap with $100 million notional, and offsets this risk with an identical but opposite position with a different counterparty, $200 million in derivative notionals is reported, although these offsetting positions may result in de minimis overall market risk. Aggregate derivative notional amounts can fluctuate from period to period in the normal course of business based on Citi’s market share, levels of client activity and other factors.

Derivative Notionals Hedging instruments under ASC 815(1)(2)

Other derivative instruments Trading derivatives

In millions of dollars

Management hedges(3)

December 31, December 31, December 31, December 31, December 31, December 31, 2014 2014 2014 2015 2015 2015

Interest rate contracts Swaps

28,969 $

31,945

Futures and forwards





6,868,340

7,044,990

38,421

42,305

Written options





3,033,617

3,311,904

2,606

3,913

Purchased options





2,887,605

3,171,184

4,575

4,910

$

166,576 $

163,348 $

22,208,794 $ 31,906,549 $

$

166,576 $

163,348 $

$

23,007 $

25,157 $

4,765,687 $

4,567,977 $

72,124

73,219

2,563,649

3,003,295

3,034

7,069

Written options

448



1,125,664

1,343,520



432

Purchased options

819



1,131,816

1,363,382



432

$

96,398 $

98,376 $

$

Total interest rate contract notionals

34,998,356 $ 45,434,627 $

74,571 $

83,073

23,960 $

23,990

Foreign exchange contracts Swaps Futures, forwards and spot(4)

Total foreign exchange contract notionals

9,586,816 $ 10,278,174 $

26,994 $

31,923

Equity contracts Swaps

— $

— $

— $



Futures and forwards





33,735

30,510





Written options





298,876

305,627





Purchased options





265,062

275,216





— $

— $

778,636 $

742,697 $

— $



90,817 $

Total equity contract notionals

$

180,963 $

131,344 $

Commodity and other contracts Swaps

— $



789

1,089

106,474

106,021





Written options





72,648

104,581





Purchased options





66,051

95,567





— $



$

Futures and forwards

Total commodity and other contract notionals $

— $

— $

70,561 $

789 $

1,089 $

315,734 $

396,986 $

— $

— $

950,922 $

1,063,858 $





981,586

1,100,369

Credit derivatives(5) Protection sold

$

Protection purchased Total credit derivatives

$

— $

— $

Total derivative notionals

$

263,763 $

262,813 $

(1) (2) (3)

1,932,508 $

— $ 23,628

— 16,018

2,164,227 $

23,628 $

16,018

47,612,050 $ 59,016,711 $

125,193 $

131,014

The notional amounts presented in this table do not include hedge accounting relationships under ASC 815 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 was $2,102 million and $3,752 million at December 31, 2015 and December 31, 2014, respectively. Derivatives in hedge accounting relationships accounted for under ASC 815 are recorded in either Other assets/Other liabilities or Trading account assets/Trading account liabilities on the Consolidated Balance Sheet. Management hedges represent derivative instruments used to mitigate certain economic risks, but for which hedge accounting is not applied. These derivatives are recorded in either Other assets/Other liabilities or Trading account assets/Trading account liabilities on the Consolidated Balance Sheet.

114

(4) (5)

Foreign exchange notional contracts include spot contract notionals of $335 billion and $849 billion at December 31, 2015 and December 31, 2014, respectively. Previous presentations of foreign exchange derivative notional contracts did not include spot contracts. There was no impact to the Consolidated Financial Statements related to this updated presentation. 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 enters into credit derivative positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification of overall risk.

The following tables present the gross and net fair values of the Company’s derivative transactions, and the related offsetting amounts permitted under ASC 210-20-45 and ASC 815-10-45, as of December 31, 2015 and December 31, 2014. Under ASC 210-20-45, gross positive fair values are offset against gross negative fair values by counterparty pursuant to enforceable master netting agreements. Under ASC 815-10-45, payables and receivables in respect of cash collateral received from or paid to a given counterparty pursuant to a credit support annex are included in the offsetting amount if a legal opinion supporting enforceability of netting and collateral rights has been obtained. GAAP does not permit similar offsetting for security collateral. The tables also include amounts that are not permitted to be offset under ASC 210-20-45 and ASC 815-10-45, such as security collateral posted or cash collateral posted at third-party custodians, but which would be eligible for offsetting to the extent an event of default occurred and a legal opinion supporting enforceability of the netting and collateral rights has been obtained.

115

Derivative Mark-to-Market (MTM) Receivables/Payables Derivatives classified in Trading account assets / liabilities(1)(2)(3)

In millions of dollars at December 31, 2015

Derivatives instruments designated as ASC 815 hedges

Assets

Over-the-counter

$

Cleared

Derivatives classified in Other assets / liabilities(2)(3)

Liabilities

262 $

Assets

105 $

4,607

1,471

Liabilities

2,328 $

106

5



Interest rate contracts

$

4,869 $

1,576 $

2,333 $

106

Over-the-counter

$

2,688 $

364 $

95 $

677

Foreign exchange contracts

$

2,688 $

364 $

95 $

677

Total derivative instruments designated as ASC 815 hedges

$

7,557 $

1,940 $

2,428 $

783

$

289,124 $

267,761 $

182 $

12

120,848

126,532

244

216

53

35





Derivatives instruments not designated as ASC 815 hedges Over-the-counter Cleared Exchange traded Interest rate contracts

$

410,025 $

394,328 $

426 $

228

Over-the-counter

$

126,474 $

133,361 $

— $

66

134

152





21

36





Cleared Exchange traded Foreign exchange contracts

$

126,629 $

133,549 $

— $

66

Over-the-counter

$

14,560 $

20,107 $

— $



Cleared Exchange traded

28

3





7,297

6,406





Equity contracts

$

21,885 $

26,516 $

— $



Over-the-counter

$

16,794 $

18,641 $

— $







Commodity and other contracts

$

18,010 $

20,553 $

— $



Over-the-counter

$

31,072 $

30,608 $

711 $

245

131

318

Exchange traded

1,216

Cleared

3,803 (4)

1,912

3,560

Credit derivatives

$

34,875 $

34,168 $

842 $

563

Total derivatives instruments not designated as ASC 815 hedges

$

611,424 $

609,114 $

1,268 $

857

Total derivatives

$

618,981 $

611,054 $

3,696 $

1,640

Cash collateral paid/received(5)(6)

$

4,911 $

13,628 $

8 $

37

(7)

Less: Netting agreements

Less: Netting cash collateral received/paid(8) Net receivables/payables included on the consolidated balance sheet(9) Additional amounts subject to an enforceable master netting agreement but not offset on the Consolidated Balance Sheet Less: Cash collateral received/paid

$

$

Less: Non-cash collateral received/paid (9)

Total net receivables/payables (1) (2) (3)

(4) (5)

$

(524,481)

(524,481)

(43,227)

(42,609)

56,184 $

(779) $

57,592 $

(2) $

(9,855)

(5,131)

45,550 $

52,459 $

— (1,949)

— (53)

1,755 $

1,624

— $



(270) 1,485 $

— 1,624

The trading derivatives fair values are presented in Note 13 to the Consolidated Financial Statements. Derivative mark-to-market receivables/payables related to management hedges are recorded in either Other assets/Other liabilities or Trading account assets/ Trading account liabilities. Over-the-counter (OTC) derivatives are derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price transparency. The credit derivatives trading assets comprise $17,957 million related to protection purchased and $16,918 million related to protection sold as of December 31, 2015. The credit derivatives trading liabilities comprise $16,968 million related to protection purchased and $17,200 million related to protection sold as of December 31, 2015. For the trading account assets/liabilities, reflects the net amount of the $47,520 million and $56,855 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $42,609 million was used to offset trading derivative liabilities and, of the gross cash collateral received, $43,227 million was used to offset trading derivative assets.

116

(6) (7) (8) (9)

For cash collateral paid with respect to non-trading derivative assets, reflects the net amount of $61 million of gross cash collateral paid, of which $53 million is netted against non-trading derivative positions within Other liabilities. For cash collateral received with respect to non-trading derivative liabilities, reflects the net amount of $1,986 million of gross cash collateral received, of which $1,949 million is netted against OTC non-trading derivative positions within Other assets. Represents the netting of derivative receivable and payable balances with the same counterparty under enforceable netting agreements. Approximately $391 billion, $126 billion and $7 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively. Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements. Substantially all cash collateral received and paid is netted against OTC derivative assets and liabilities, respectively. The net receivables/payables include approximately $10 billion of derivative asset and $10 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively.

Derivatives classified in Trading Derivatives classified in account assets / liabilities(1)(2)(3) Other assets / liabilities(2)(3)

In millions of dollars at December 31, 2014

Derivatives instruments designated as ASC 815 hedges

Assets

Over-the-counter

$

Cleared

Liabilities

1,508 $ 4,300

Assets

204 $

Liabilities

3,117 $

414

868



25

Interest rate contracts

$

5,808 $

1,072 $

3,117 $

439

Over-the-counter

$

3,885 $

743 $

678 $

588

Foreign exchange contracts

$

3,885 $

743 $

678 $

588

Total derivative instruments designated as ASC 815 hedges

$

9,693 $

1,815 $

3,795 $

1,027

$

376,778 $

359,689 $

106 $



255,847

261,499

6

21

22

Derivatives instruments not designated as ASC 815 hedges Over-the-counter Cleared Exchange traded

141

164

Interest rate contracts

$

632,645 $

20

621,210 $

253 $

185

Over-the-counter

$

151,736 $

157,650 $

— $

17

366

387





46

Cleared Exchange traded





Foreign exchange contracts

$

152,109 $

7

158,083 $

— $

17

Over-the-counter

$

20,425 $

28,333 $

— $



16

35





4,101

Cleared Exchange traded





Equity contracts

$

24,752 $

4,311

32,469 $

— $



Over-the-counter

$

19,943 $

23,103 $

— $







Exchange traded

3,577

3,083

Commodity and other contracts

$

23,520 $

26,186 $

— $



Over-the-counter

$

39,412 $

39,439 $

265 $

384

Credit derivatives(4)

$

43,518 $

43,430 $

Total derivatives instruments not designated as ASC 815 hedges

$

876,544 $

881,378 $

531 $

757

Total derivatives

$

886,237 $

883,193 $

4,326 $

1,784

Cash collateral paid/received(5)(6)

$

9,846 $

123 $

Cleared

4,106

Less: Netting agreements(7) Less: Netting cash collateral received/paid(8) $ Net receivables/payables included on the Consolidated Balance Sheet(9) Additional amounts subject to an enforceable master netting agreement but not offset on the Consolidated Balance Sheet $ Less: Cash collateral received/paid (9)

$

Total net receivables/payables

(3)

(777,178)

(777,178)

(47,625)

(47,769)

67,957 $

(867) $ (10,043)

Less: Non-cash collateral received/paid

(1) (2)

6,523 $

3,991

57,047 $

68,092 $

(11) $ (6,264) 61,817 $

13 278 $

— (1,791)

171 555

7 — (15)

2,658 $

1,776

— $



(1,293) 1,365 $

— 1,776

The trading derivatives fair values are presented in Note 13 to the Consolidated Financial Statements. Derivative mark-to-market receivables/payables related to management hedges are recorded in either Other assets/Other liabilities or Trading account assets/ Trading account liabilities. Over-the-counter (OTC) derivatives include derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market but then novated to a central clearing house,

117

(4) (5) (6) (7) (8) (9)

whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price transparency. The credit derivatives trading assets comprise $18,430 million related to protection purchased and $25,088 million related to protection sold as of December 31, 2014. The credit derivatives trading liabilities comprise $25,972 million related to protection purchased and $17,458 million related to protection sold as of December 31, 2014. For the trading account assets/liabilities, reflects the net amount of the $54,292 million and $57,471 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $47,769 million was used to offset derivative liabilities and, of the gross cash collateral received, $47,625 million was used to offset derivative assets. For cash collateral paid with respect to non-trading derivative assets, reflects the net amount of $138 million of the gross cash collateral paid, of which $15 million is netted against non-trading derivative positions within Other liabilities. For cash collateral received with respect to non-trading derivative liabilities, reflects the net amount of $1,798 million of gross cash collateral received of which $1,791 million is netted against non-trading derivative positions within Other assets. Represents the netting of derivative receivable and payable balances with the same counterparty under enforceable netting agreements. Approximately $510 billion, $264 billion and $3 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively. Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements. Substantially all cash collateral received is netted against OTC derivative assets. Cash collateral paid of approximately $46 billion and $2 billion is netted against OTC and cleared derivative liabilities, respectively. The net receivables/payables include approximately $11 billion of derivative asset and $10 billion of liability fair values not subject to enforceable master netting agreements.

For the years ended December 31, 2015, 2014 and 2013, the amounts recognized in Principal transactions in the Consolidated Statement of Income related to derivatives not designated in a qualifying hedging relationship, as well as the underlying non-derivative instruments, are presented in Note 6 to the Consolidated Financial Statements. Citigroup presents 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 represents the way these portfolios are risk managed. The amounts recognized in Other revenue in the Consolidated Statement of Income related to derivatives not designated in a qualifying hedging relationship are shown below. The table below does not include any offsetting gains/ losses on the economically hedged items to the extent such amounts are also recorded in Other revenue. Gains (losses) included in Other revenue 2014

2015

In millions of dollars

2013

Interest rate contracts $

117 $

(227) $

208

Foreign exchange

(39)

14

(41)

476

(150)

(594)

554 $

(363) $

(427)

Credit derivatives Total Citigroup

$

118

Accounting for Derivative Hedging Citigroup accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging. 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 changes in fair value are referred to as fair value hedges, while contracts hedging the variability of expected future cash flows are 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-functionalcurrency foreign subsidiaries (net investment in a foreign operation) are net investment hedges. If certain hedging criteria specified in ASC 815 are met, including testing for hedge effectiveness, 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, changes in the value of the hedging derivative, as well as changes in the 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, changes in the value of the hedging derivative are reflected in Accumulated other comprehensive income (loss) in Citigroup’s stockholders’ equity to the extent the hedge is highly effective. Hedge ineffectiveness, in either case, is reflected in current earnings. For asset/liability management hedging, fixed-rate longterm debt is recorded at amortized cost under GAAP. However, by designating an interest rate swap contract as a hedging instrument and electing to apply ASC 815 fair value hedge accounting, the carrying value of the debt is adjusted for changes in the benchmark interest rate, with such changes in value recorded in current earnings. The related interest-rate swap also is recorded on the balance sheet at fair value, with any changes in fair value also reflected in earnings. Thus, any ineffectiveness resulting from the hedging relationship is captured in current earnings. Alternatively, for management hedges that do not meet the ASC 815 hedging criteria, the derivative is recorded at fair value on the balance sheet, with the associated changes in fair value recorded in earnings, while the debt continues to be carried at amortized cost. Therefore, current earnings are affected only by the interest rate shifts and other factors that cause a change in the swap’s value. This type of hedge is undertaken when hedging requirements cannot be achieved or management decides not to apply ASC 815 hedge accounting. Another alternative is 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 is reported in earnings. The related interest rate swap, with changes in fair value, is also reflected in earnings, which provides a natural offset to the debt’s fair value change. To the extent the two offsets are not exactly equal because the full change in the fair value of the debt

includes risks not offset by the interest rate swap, the difference is captured in current earnings. The key requirements to achieve ASC 815 hedge accounting are documentation of a hedging strategy and specific hedge relationships at 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 may exclude 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. These hedges are designated as fair value hedges of the benchmark interest rate risk associated with the currency of the hedged liability. The fixed cash flows of the hedged items are converted to benchmark variable-rate cash flows by entering into receivefixed, pay-variable interest rate swaps. These fair value hedge relationships use either regression or dollar-offset ratio analysis to assess whether the hedging relationships are highly effective at inception and on an ongoing basis. Citigroup also hedges exposure to changes in the fair value of fixed-rate assets due to changes in benchmark interest rates, including available-for-sale debt securities and loans. The hedging instruments used are receive-variable, pay-fixed interest rate swaps. These fair value hedging relationships use either regression or dollar-offset ratio analysis to assess whether the hedging relationships are highly effective at inception and on an ongoing basis.

119

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 generally a forward foreign-exchange contract. In this hedge, the change in fair value of the hedged availablefor-sale security attributable to the portion of foreign exchange risk hedged is reported in earnings, and not Accumulated other comprehensive income (loss)—which serves to offset the change in fair value of the forward contract that is also reflected in earnings. Citigroup considers the premium associated with forward contracts (i.e., the 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. The 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: Gains (losses) on fair value hedges(1) Year ended December 31, 2014

2015

In millions of dollars

2013

Gain (loss) on the derivatives in designated and qualifying fair value hedges Interest rate contracts

$

Foreign exchange contracts

(847) $ 1,315

Commodity contracts

41

Total gain (loss) on the derivatives in designated and qualifying fair value hedges

$

1,546 $ 1,367 (221)

(3,288) 265 —

509 $

2,692 $

(3,023)

792 $

(1,496) $

3,204

Gain (loss) on the hedged item in designated and qualifying fair value hedges Interest rate hedges

$

Foreign exchange hedges

(1,258)

Commodity hedges Total gain (loss) on the hedged item in designated and qualifying fair value hedges

(1,422)

(35)

250

$

(501) $

(2,668) $

$

(47) $

53 $

(185) — 3,019

Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges Interest rate hedges Foreign exchange hedges

(23)

Total hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges

(16)

(84) (4)

$

(70) $

37 $

(88)

$

(8) $

(3) $



Net gain (loss) excluded from assessment of the effectiveness of fair value hedges Interest rate contracts (2)

Foreign exchange contracts Commodity hedges(2)

Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges (1) (2)

$

80

(39)

84

6

29



78 $

(13) $

84

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. Amounts relate to the premium associated with forward contracts (differential between spot and contractual forward rates). These amounts are excluded from the assessment of hedge effectiveness and are reflected directly in earnings.

120

Cash Flow Hedges

Hedging of Foreign Exchange Risk Citigroup locks in the functional currency equivalent cash flows of long-term debt and short-term borrowings that are denominated in currencies 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 cross-currency swaps and forward contracts. These cash flow hedge relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis.

Hedging of Benchmark Interest Rate Risk Citigroup hedges variable cash flows associated with floatingrate liabilities and the rollover (re-issuance) of liabilities. Variable cash flows from those liabilities are converted to fixed-rate cash flows by entering into receive-variable, payfixed interest rate swaps and receive-variable, pay-fixed forward-starting interest rate swaps. Citi also hedges variable cash flows from recognized and forecasted floating-rate assets. Variable cash flows from those assets are converted to fixedrate cash flows by entering into receive-fixed, pay-variable 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. When certain variable interest rates, associated with hedged items, do not qualify as benchmark interest rates, Citigroup designates the risk being hedged as the risk of overall changes in the hedged cash flows. 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 Total Return Citigroup generally manages the risk associated with leveraged loans it has originated or in which it participates by transferring a majority of its exposure to the market through SPEs prior to or shortly after funding. Retained exposures to leveraged loans receivable are generally hedged using total return swaps. The amount of hedge ineffectiveness on the cash flow hedges recognized in earnings for the years ended December 31, 2015, 2014 and 2013 is not significant. The pretax change in Accumulated other comprehensive income (loss) from cash flow hedges is presented below: Year ended December 31, 2014

2015

In millions of dollars

2013

Effective portion of cash flow hedges included in AOCI Interest rate contracts

$

Foreign exchange contracts

357 $ (220)

Credit derivatives

749 34

2

14

$

137 $

134 $

797

$

(186) $

(260) $

(700)

(146)

(149)

(176)

(332) $

(409) $

(876)



Total effective portion of cash flow hedges included in AOCI

299 $ (167)

Effective portion of cash flow hedges reclassified from AOCI to earnings Interest rate contracts Foreign exchange contracts Total effective portion of cash flow hedges reclassified from AOCI to earnings(1) (1)

$

Included primarily in Other revenue and Net interest revenue on the Consolidated Income Statement.

For cash flow hedges, the changes in the fair value of the hedging derivative remaining in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheet will be included in the 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 (loss) within 12 months of December 31, 2015 is approximately $0.3 billion. The maximum length of time over which forecasted cash flows are hedged is 10 years. The after-tax impact of cash flow hedges on AOCI is shown in Note 20 to the Consolidated Financial Statements.

Net Investment Hedges Consistent with ASC 830-20, Foreign Currency Matters— Foreign Currency Transactions, ASC 815 allows hedging of the foreign currency risk of a net investment in a foreign operation. Citigroup uses foreign currency forwards, options 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 Foreign currency translation adjustment account within Accumulated other comprehensive income (loss). Simultaneously, the effective portion of the hedge of this exposure is also recorded in the Foreign currency translation adjustment account and the ineffective portion, if any, is immediately recorded in earnings. 121

For derivatives designated as net investment hedges, Citigroup follows the forward-rate method outlined in ASC 815-35-35-16 through 35-26. 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 translation adjustment account within Accumulated other comprehensive income (loss). 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 gain (loss) recorded in the Foreign currency translation adjustment account within Accumulated other comprehensive income (loss), related to the effective portion of the net investment hedges, is $2,475 million, $2,890 million and $2,370 million for the years ended December 31, 2015 2014 and 2013, respectively.

derivative transactions that reference emerging market entities will also typically include additional credit events 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 reference entities or asset-backed securities. If there is no credit event, 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. Under certain contracts, the seller of protection may not be required to make a 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. A total return swap typically 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 any time the floating interest rate payment plus any depreciation of the reference asset exceeds the cash flows associated with the underlying asset. A total return swap may terminate upon a default of the reference asset or a credit event with respect to the reference entity 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 a reference entity. For example, in a credit spread option, the option writer assumes the obligation to purchase or sell credit protection on the reference entity at a specified “strike” spread level. The option purchaser buys the right to sell credit default protection on the reference entity 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 or other reference. The options usually terminate if a credit event occurs with respect to the underlying reference entity. 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 effectively provides credit protection to the issuer by agreeing to receive a return that could be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the note may be cash settled or physically settled by delivery of a debt security of the reference entity. Thus, the maximum amount of the note purchaser’s exposure is the amount paid for the credit-linked note.

Credit Derivatives Citi is a market maker and trades a range of credit derivatives. Through these contracts, Citi either purchases or writes protection on either a single name or a portfolio of reference credits. Citi also uses credit derivatives to help mitigate credit risk in its corporate and consumer loan portfolios and other cash positions, and to facilitate client transactions. Citi monitors its counterparty credit risk in credit derivative contracts. As of December 31, 2015 and December 31, 2014, approximately 98% of the gross receivables are from counterparties with which Citi maintains collateral agreements. A majority of Citi’s top 15 counterparties (by receivable balance owed to Citi) 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 Citi may call for additional collateral. The range of credit derivatives entered into includes credit default swaps, total return swaps, credit options and creditlinked notes. 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 predefined credit event on a reference entity. These credit events are defined by the terms of the derivative contract 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 122

The following tables summarize the key characteristics of Citi’s credit derivatives portfolio by counterparty and derivative form: Fair values Receivable(1)

In millions of dollars at December 31, 2015

Notionals Protection purchased

Payable(2)

Protection sold

By industry/counterparty Banks

$

18,377 $

Broker-dealers

513,335 $

508,459

5,895

6,697

155,195

152,604

128

123

3,969

2,087

Non-financial Insurance and other financial institutions Total by industry/counterparty

16,988 $

11,317

10,923

332,715

287,772

$

35,717 $

34,731 $

1,005,214 $

950,922

$

34,849 $

34,158 $

981,999 $

940,650

868

573

23,215

10,272

$

35,717 $

34,731 $

1,005,214 $

950,922

$

12,694 $

13,142 $

764,040 $

720,521

By instrument Credit default swaps and options Total return swaps and other Total by instrument By rating Investment grade Non-investment grade Total by rating

23,023

21,589

241,174

230,401

$

35,717 $

34,731 $

1,005,214 $

950,922

$

3,871 $

3,559 $

265,632 $

254,225

By maturity Within 1 year From 1 to 5 years After 5 years Total by maturity (1) (2)

$

27,991

27,488

669,834

639,460

3,855

3,684

69,748

57,237

1,005,214 $

950,922

35,717 $

34,731 $

The fair value amount receivable is composed of $18,799 million under protection purchased and $16,918 million under protection sold. The fair value amount payable is composed of $17,531 million under protection purchased and $17,200 million under protection sold.

Fair values Receivable(1)

In millions of dollars at December 31, 2014

Notionals Protection purchased

Payable(2)

Protection sold

By industry/counterparty Banks

$

Broker-dealers

23,189 $

574,764 $

604,700

8,093

9,309

204,542

199,693

91

113

3,697

1,595

10,784

11,374

333,384

257,870

$

43,796 $

43,985 $

1,116,387 $

1,063,858

$

42,930 $

42,201 $

1,094,199 $

1,054,671

Non-financial Insurance and other financial institutions Total by industry/counterparty

24,828 $

By instrument Credit default swaps and options Total return swaps and other Total by instrument

866

1,784

22,188

9,187

$

43,796 $

43,985 $

1,116,387 $

1,063,858

$

17,432 $

17,182 $

824,831 $

786,848

26,364

26,803

291,556

277,010

43,796 $

43,985 $

1,116,387 $

1,063,858

4,278 $

250,489 $

229,502

790,251

772,001

By rating Investment grade Non-investment grade Total by rating

$

By maturity Within 1 year

$

From 1 to 5 years After 5 years Total by maturity

4,356 $ 34,692

35,160

4,748 $

4,547

43,796 $

43,985 $

123

75,647 1,116,387 $

62,355 1,063,858

(1) (2)

The fair value amount receivable is composed of $18,708 million under protection purchased and $25,088 million under protection sold. The fair value amount payable is composed of $26,527 million under protection purchased and $17,458 million under protection sold.

Fair values included in the above tables are prior to application of any netting agreements and cash collateral. For notional amounts, Citi 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. The ratings of the credit derivatives portfolio presented in the tables and used to evaluate payment/performance risk are based on the assigned internal or external ratings of the referenced asset or entity. Where external ratings are used, investment-grade ratings are considered to be ‘Baa/BBB’ and above, while anything below is considered non-investment grade. Citi’s internal ratings are in line with the related external rating system. Citigroup evaluates the payment/performance risk of the credit derivatives for which it stands as a protection seller based on the credit rating assigned to the underlying referenced credit. 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 also 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 notional amount for credit protection sold is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the value of the reference assets and the related cash flows. In accordance with most credit derivative contracts, should a credit event occur, the Company usually is liable for the difference between the protection sold and the value of the reference assets. Furthermore, the notional amount 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 alone 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.

124

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 event related to the credit risk of the Company. 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 (excluding CVA) of all derivative instruments with credit-riskrelated contingent features that were in a net liability position at both December 31, 2015 and December 31, 2014 was $22 billion and $30 billion, respectively. The Company had posted $19 billion and $27 billion as collateral for this exposure in the normal course of business as of December 31, 2015 and December 31, 2014, respectively. A downgrade could trigger additional collateral or cash settlement requirements for the Company and certain affiliates. In the event that Citigroup and Citibank were downgraded a single notch by all three major rating agencies as of December 31, 2015, the Company could be required to post an additional $1.8 billion as either collateral or settlement of the derivative transactions. Additionally, the Company could be required to segregate with third-party custodians collateral previously received from existing derivative counterparties in the amount of $0.1 billion upon the single notch downgrade, resulting in aggregate cash obligations and collateral requirements of approximately $1.9 billion.

transaction. These transactions generally do not result in a gain or loss on the sale of the security, because the transferred security was held at fair value in the Company’s trading portfolio. For transfers of financial assets accounted for by the Company as a sale, where the Company has retained substantially all of the economic exposure to the transferred asset through a total return swap executed in contemplation of the initial sale with the same counterparty and still outstanding as of December 31, 2015, both the asset carrying amounts derecognized and gross cash proceeds received as of the date of derecognition were $1.0 billion. At December 31, 2015, the fair value of these previously derecognized assets was $1.0 billion and the fair value of the total return swaps was $7 million recorded as gross derivative assets and $35 million recorded as gross derivative liabilities. The balances for the total return swaps are on a gross basis, before the application of counterparty and cash collateral netting, and are included primarily as equity derivatives in the tabular disclosures in this Note.

Derivatives Accompanied by Financial Asset Transfers The Company executes total return swaps which provide it with synthetic exposure to substantially all of the economic return of the securities or other financial assets referenced in the contract. In certain cases, the derivative transaction is accompanied by the Company’s transfer of the referenced financial asset to the derivative counterparty, most typically in response to the derivative counterparty’s desire to hedge, in whole or in part, its synthetic exposure under the derivative contract by holding the referenced asset in funded form. In certain jurisdictions these transactions qualify as sales, resulting in derecognition of the securities transferred (see Note 1 to the Consolidated Financial Statements for further discussion of the related sale conditions for transfers of financial assets). For a significant portion of the transactions, the Company has also executed another total return swap where the Company passes on substantially all of the economic return of the referenced securities to a different third party seeking the exposure. In those cases, the Company is not exposed, on a net basis, to changes in the economic return of the referenced securities. These transactions generally involve the transfer of the Company’s liquid government bonds, convertible bonds, or publicly traded corporate equity securities from the trading portfolio and are executed with third-party financial institutions. The accompanying derivatives are typically total return swaps. The derivatives are cash settled and subject to ongoing margin requirements. When the conditions for sale accounting are met, the Company reports the transfer of the referenced financial asset as a sale and separately reports the accompanying derivative 125

24. CONCENTRATIONS OF CREDIT RISK Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to Citigroup’s total credit exposure. Although Citigroup’s portfolio of financial instruments is broadly diversified along industry, product, and geographic lines, material transactions are completed with other financial institutions, particularly in the securities trading, derivatives and foreign exchange businesses. In connection with the Company’s efforts to maintain a diversified portfolio, the Company limits its exposure to any one geographic region, country or individual creditor and monitors this exposure on a continuous basis. At December 31, 2015, Citigroup’s most significant concentration of credit risk was with the U.S. government and its agencies. The Company’s exposure, which primarily results from trading assets and investments issued by the U.S. government and its agencies, amounted to $223.0 billion and $216.3 billion at December 31, 2015 and 2014, respectively. The Mexican and United Kingdom governments and their agencies, which are rated investment grade by both Moody’s and S&P, were the next largest exposures. The Company’s exposure to Mexico amounted to $22.5 billion and $29.7 billion at December 31, 2015 and 2014, respectively, and was composed of investment securities, loans and trading assets. The Company’s exposure to the United Kingdom amounted to $20.4 billion and $18.0 billion at December 31, 2015 and 2014, respectively, and was composed of investment securities, loans and trading assets. The Company’s exposure to states and municipalities amounted to $29.3 billion and $31.0 billion at December 31, 2015 and 2014, respectively, and was composed of trading assets, investment securities, derivatives and lending activities.

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25. FAIR VALUE MEASUREMENT

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. The Company may also apply a price-based methodology, which utilizes, where available, quoted prices or other market information obtained from recent trading activity in positions with the same or similar characteristics to the position being valued. The market activity and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the observability of prices from those markets. If relevant and observable prices are available, those valuations may be classified as Level 2. When less liquidity exists for a security or loan, a quoted price is stale, a significant adjustment to the price of a similar security is necessary to reflect differences in the terms of the actual security or loan being valued, or prices from independent sources are insufficient to corroborate the valuation, the “price” inputs are considered unobservable and the fair value measurements are classified as Level 3. If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based parameters, such as interest rates, currency rates and option volatilities. 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 as Level 3 even though there may be some significant inputs that are readily observable. 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 and any significant assumptions.

ASC 820-10 Fair Value Measurement, defines fair value, establishes a consistent framework for measuring fair value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 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. Under ASC 820-10, the probability of default of a counterparty is factored into the valuation of derivative and other positions as well as the impact of Citigroup’s own credit risk on derivatives and other liabilities measured at fair value. Fair Value Hierarchy ASC 820-10 specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable inputs are developed using market data and reflect market participant assumptions, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy: • •



Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and modelderived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

As required under the fair value hierarchy, the Company considers relevant and observable market inputs 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.

Market Valuation Adjustments Generally, the unit of account for a financial instrument is the individual financial instrument. The Company applies market valuation adjustments that are consistent with the unit of account, which does not include adjustment due to the size of the Company’s position, except as follows. ASC 820-10 permits an exception, through an accounting policy election, to measure the fair value of a portfolio of financial assets and financial liabilities on the basis of the net open risk position when certain criteria are met. Citi has elected to measure certain portfolios of financial instruments, such as derivatives, that meet those criteria on the basis of the net open risk position. The Company applies market valuation adjustments, including adjustments to account for the size of the net open risk position, consistent with market participant assumptions and in accordance with the unit of account.

Determination of Fair Value For assets and liabilities carried at fair value, the Company measures fair value using the procedures set out below, irrespective of whether the assets and liabilities are measured at fair value as a result of an election or whether they are required to be measured at fair value. When available, the Company 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 127

Liquidity adjustments are applied to items in Level 2 or Level 3 of the fair-value hierarchy in an effort to ensure that the fair value reflects the price at which the net open risk position could be liquidated. The liquidity adjustment is based on the bid/offer spread for an instrument. When Citi has elected to measure certain portfolios of financial investments, such as derivatives, on the basis of the net open risk position, the liquidity adjustment may be adjusted to take into account the size of the position. Credit valuation adjustments (CVA) and, effective in the third quarter of 2014, funding valuation adjustments (FVA), are applied to over-the-counter (OTC) derivative instruments in which the base valuation generally discounts expected cash flows using the relevant base interest rate curve for the currency of the derivative (e.g., LIBOR for uncollateralized U.S.-dollar derivatives). As not all counterparties have the same credit risk as that implied by the relevant base curve, a CVA is necessary to incorporate the market view of both counterparty credit risk and Citi’s own credit risk in the valuation. FVA reflects a market funding risk premium inherent in the uncollateralized portion of derivative portfolios, and in collateralized derivatives where the terms of the agreement do not permit the reuse of the collateral received. Citi’s CVA and FVA methodology is composed of two steps. •



The CVA and FVA are designed to incorporate a market view of the credit and funding risk, respectively, inherent in the derivative portfolio. However, most unsecured derivative instruments are negotiated bilateral contracts and are not commonly transferred to third parties. Derivative instruments are normally settled contractually or, if terminated early, are terminated at a value negotiated bilaterally between the counterparties. Thus, the CVA and FVA may not be realized upon a settlement or termination in the normal course of business. In addition, all or a portion of these adjustments may be reversed or otherwise adjusted in future periods in the event of changes in the credit or funding risk associated with the derivative instruments. The table below summarizes the CVA and FVA applied to the fair value of derivative instruments at December 31, 2015 and 2014:

In millions of dollars

Credit and funding valuation adjustments contra-liability (contra-asset) December 31, December 31, 2014 2015

Counterparty CVA

$

(1,470) $

Asset FVA

(584)

(518)

Citigroup (own-credit) CVA

471

580

Liability FVA

106

19

Total CVA—derivative instruments(1)

First, the exposure profile for each counterparty is determined using the terms of all individual derivative positions and a Monte Carlo simulation or other quantitative analysis to generate a series of expected cash flows at future points in time. The calculation of this exposure profile considers the effect of credit risk mitigants and sources of funding, including pledged cash or other collateral and any legal right of offset that exists with a counterparty through arrangements such as netting agreements. Individual derivative contracts that are subject to an enforceable master netting agreement with a counterparty are aggregated as a netting set for this purpose, since it is those aggregate net cash flows that are subject to nonperformance risk. This process identifies specific, point-in-time future cash flows that are subject to nonperformance risk and unsecured funding, rather than using the current recognized net asset or liability as a basis to measure the CVA and FVA. Second, for CVA, market-based views of default probabilities derived from observed credit spreads in the credit default swap (CDS) market are applied to the expected future cash flows determined in step one. Citi’s own-credit CVA is determined using Citi-specific CDS spreads for the relevant tenor. Generally, counterparty CVA is determined using CDS spread indices for each credit rating and tenor. For certain identified netting sets where individual analysis is practicable (e.g., exposures to counterparties with liquid CDSs), counterpartyspecific CDS spreads are used. For FVA, a term structure of future liquidity spreads is applied to the expected future funding requirement.

(1,853)

(1)

(1,477) $

$

(1,772)

FVA is included with CVA for presentation purposes.

The table below summarizes pretax gains (losses) related to changes in CVA on derivative instruments, net of hedges, FVA on derivatives and debt valuation adjustments (DVA) on Citi’s own fair value option (FVO) liabilities for the years indicated: Credit/funding/debt valuation adjustments gain (loss) 2014

2015

In millions of dollars

Counterparty CVA

$

(115) $

2013

(43) $

291

Asset FVA

(66)

(518)



Own-credit CVA

(28)

(65)

(223)

98

19



Liability FVA Total CVA—derivative instruments

$

(111) $

(607) $

68

DVA related to own FVO liabilities

$

366 $

217 $

(410)

$

255 $

(390) $

(342)

Total CVA and DVA (1)

(1)

FVA is included with CVA for presentation purposes.

Valuation Process for Fair Value Measurements Price verification procedures and related internal control procedures are governed by the Citigroup Pricing and Price Verification Policy and Standards, which is jointly owned by Finance and Risk Management.

128

For fair value measurements of substantially all assets and liabilities held by the Company, individual business units are responsible for valuing the trading account assets and liabilities, and Product Control within Finance performs independent price verification procedures to evaluate those fair value measurements. Product Control is independent of the individual business units and reports to the Global Head of Product Control. It has authority over the valuation of financial assets and liabilities. Fair value measurements of assets and liabilities are determined using various techniques, including, but not limited to, discounted cash flows and internal models, such as option and correlation models. Based on the observability of inputs used, Product Control classifies the inventory as Level 1, Level 2 or Level 3 of the fair value hierarchy. When a position involves one or more significant inputs that are not directly observable, price verification procedures are performed that may include reviewing relevant historical data, analyzing profit and loss, valuing each component of a structured trade individually, and benchmarking, among others. Reports of inventory that is classified within Level 3 of the fair value hierarchy are distributed to senior management in Finance, Risk and the business. This inventory is also discussed in Risk Committees and in monthly meetings with senior trading management. As deemed necessary, reports may go to the Audit Committee of the Board of Directors or to the full Board of Directors. Whenever an adjustment is needed to bring the price of an asset or liability to its exit price, Product Control reports it to management along with other price verification results. In addition, the pricing models used in measuring fair value are governed by an independent control framework. Although the models are developed and tested by the individual business units, they are independently validated by the Model Validation Group within Risk Management and reviewed by Finance with respect to their impact on the price verification procedures. The purpose of this independent control framework is to assess model risk arising from models’ theoretical soundness, calibration techniques where needed, and the appropriateness of the model for a specific product in a defined market. To ensure their continued applicability, models are independently reviewed annually. In addition, Risk Management approves and maintains a list of products permitted to be valued under each approved model for a given business.

long-dated positions are classified within Level 3 of the fair value hierarchy. Trading Account Assets and Liabilities—Trading Securities and Trading Loans When available, the Company uses quoted market prices in active markets to determine the fair value of trading securities; such items are classified as Level 1 of the fair value hierarchy. Examples include government securities and exchange-traded equity securities. For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing valuation techniques, including discounted cash flows, price-based and internal models, such as BlackScholes and Monte Carlo simulation. Fair value estimates from these internal valuation techniques are verified, where possible, to prices obtained from independent sources, including third-party vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. A price-based methodology utilizes, where available, quoted prices or other market information obtained from recent trading activity of assets with similar characteristics to the bond or loan being valued. The yields used in discounted cash flow models are derived from the same price information. 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, a significant adjustment to the price of a similar security or loan is necessary to reflect differences in the terms of the actual security or loan being valued, or prices from independent sources are insufficient to corroborate valuation, a loan or security is generally classified as Level 3. The price input used in a price-based methodology may be zero for a security, such as a subprime CDO, that is not receiving any principal or interest and is currently written down to zero. When 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 commercial real estate loans, price verification of the hypothetical securitizations has been possible, since these markets have remained active. Accordingly, this loan portfolio is classified as Level 2 of the fair value hierarchy. For most of the lending and structured 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

Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase No quoted prices exist for these instruments, 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. These cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of the underlying collateral. Generally, when such instruments are recorded at fair value, they are classified within Level 2 of the fair value hierarchy, as the inputs used in the valuation are readily observable. However, certain 129

valuation techniques. The valuation of certain asset-backed security (ABS) CDO positions utilizes prices based on the underlying assets of the ABS CDO.

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. In addition, the Company holds investments in certain alternative investment funds that calculate NAV per share, including hedge funds, private equity funds and real estate funds. Investments in funds are generally classified as nonmarketable 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 investment will be realized at a price other than the NAV. Consistent with the provisions of ASU No. 2015-07 these investments have not been categorized within the fair value hierarchy and are not included in the tables below. See Note 13 to the Consolidated Financial Statements for additional information.

Trading Account Assets and Liabilities—Derivatives Exchange-traded derivatives, measured at fair value using quoted (i.e., exchange) prices in active markets, where available, are classified as Level 1 of the fair value hierarchy. Derivatives without a quoted price in an active market and derivatives executed over the counter are valued using internal valuation techniques. These derivative instruments are classified as either Level 2 or Level 3 depending upon the observability of the significant inputs to the model. 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 and internal models, including BlackScholes and Monte Carlo simulation. 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, volatilities and correlation. The Company uses overnight indexed swap (OIS) curves as fair value measurement inputs for the valuation of certain collateralized derivatives. Citi uses the relevant benchmark curve for the currency of the derivative (e.g., the London Interbank Offered Rate for U.S. dollar derivatives) as the discount rate for uncollateralized derivatives. As referenced above, during the third quarter of 2014, Citi incorporated FVA into the fair value measurements due to what it believes to be an industry migration toward incorporating the market’s view of funding risk premium in OTC derivatives. The charge incurred in connection with the implementation of FVA was reflected in Principal transactions as a change in accounting estimate. Citi’s FVA methodology leverages the existing CVA methodology to estimate a funding exposure profile. The calculation of this exposure profile considers collateral agreements where the terms do not permit the firm to reuse the collateral received, including where counterparties post collateral to third-party custodians.

Short-Term Borrowings and Long-Term Debt Where fair value accounting has been elected, the fair value of non-structured liabilities is determined by utilizing internal models using the appropriate discount rate for the applicable maturity. Such instruments are generally classified as Level 2 of the fair value hierarchy when all significant inputs are readily observable. The Company determines the fair value of hybrid financial instruments, including structured liabilities, using the appropriate derivative valuation methodology (described above in “Trading account assets and liabilities— derivatives”) 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. Alt-A Mortgage Securities The Company classifies its Alt-A mortgage securities as held-to-maturity, available-for-sale or 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, Citi defines Alt-A mortgage securities as non-agency residential mortgage-backed securities (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. Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair values 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. Consensus data providers 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 the security being valued.

Investments The investments category includes available-for-sale debt and marketable equity securities whose fair values are generally determined by utilizing similar procedures described for trading securities above or, in some cases, using vendor pricing as the primary source. Also included in investments are nonpublic investments in private equity and real estate entities. Determining the fair value of nonpublic securities involves a significant degree of management judgment, as no quoted prices exist and such securities are generally thinly traded. In addition, there may be transfer restrictions on private equity securities. The Company’s process for determining the fair value of such securities utilizes commonly accepted valuation techniques, including comparables analysis. In determining the fair value of nonpublic securities, the Company also considers events 130

The valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures, are price-based and yield analysis. The primary market-derived input is yield. Cash flows are based on current collateral performance with prepayment rates and loss projections reflective of current economic conditions of housing price change, unemployment rates, interest rates, borrower attributes and 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 subordinated tranches in the capital structure 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.

131

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 at December 31, 2015 and December 31, 2014. The Company’s hedging of positions that have been classified in the Level 3 category is not limited to other financial instruments (hedging

instruments) that have been classified as Level 3, but also instruments classified as Level 1 or Level 2 of the fair value hierarchy. The effects of these hedges are presented gross in the following tables:

Fair Value Levels Level 1(1)

In millions of dollars at December 31, 2015

Level 2(1)

Gross inventory

Level 3

Netting(2)

Net balance

Assets Federal funds sold and securities borrowed or purchased under agreements to resell Trading non-derivative assets Trading mortgage-backed securities U.S. government-sponsored agency guaranteed Residential Commercial Total trading mortgage-backed securities U.S. Treasury and federal agency securities State and municipal Foreign government Corporate Equity securities Asset-backed securities Other trading assets Total trading non-derivative assets Trading derivatives Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading derivatives Cash collateral paid(3) Netting agreements Netting of cash collateral received Total trading derivatives Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed Residential Commercial Total investment mortgage-backed securities U.S. Treasury and federal agency securities State and municipal Foreign government Corporate Equity securities Asset-backed securities Other debt securities Non-marketable equity securities(4) Total investments

$

$ $

$

— $

— — — — $ 14,208 $ — 35,715 302 50,429 — — 100,654 $

$

9 $ 5 2,422 204 — 2,640 $

$

$

$

$ $

$

2,640 $

— — — — 111,536 — 42,073 3,605 430 — — — 157,644

132

$

$ $

$

177,538 $

1,337 $

24,023 744 1,059 1,326 2,338 517 27,420 $ 2,587 $ 3,587 $ 1 $ 2,345 351 20,697 197 13,759 376 2,382 3,684 1,217 2,739 9,293 2,483 80,700 $ 12,418 $ 412,802 $ 128,189 17,866 16,706 31,082 606,645 $

178,875 $ (40,911) $ 137,964

24,767 2,385 2,855 30,007 $ 17,796 $ 2,696 56,609 14,437 56,495 3,956 11,776 193,772 $

— 24,767 — 2,385 — 2,855 — $ 30,007 — $ 17,796 — 2,696 — 56,609 — 14,437 — 56,495 — 3,956 — 11,776 — $ 193,772

2,083 $ 1,123 1,597 1,100 3,793 9,696 $ $

414,894 129,317 21,885 18,010 34,875 618,981 4,911

606,645 $

9,696 $

$ (524,481) (43,227) 623,892 $ (567,708) $ 56,184

39,575 5,982 569 46,126 11,375 9,267 49,868 11,595 71 8,578 688 58 137,626

139 4 2 145 4 2,192 260 603 124 596 — 1,135 5,059

39,714 5,986 571 46,271 122,915 11,459 92,201 15,803 625 9,174 688 1,193 300,329

$

$ $

$

$

$ $

$

$

$ $

$

— — — — — — — — — — — — —

$ 39,714 5,986 571 $ 46,271 $ 122,915 11,459 92,201 15,803 625 9,174 688 1,193 $ 300,329

Level 1(1)

In millions of dollars at December 31, 2015

Loans(5)

$



Mortgage servicing rights Non-trading derivatives and other financial assets measured on a recurring basis, gross

$

— $



$

Level 2(1)

Level 3

2,839

$ 2,166



1,781

7,882

$

180

Gross inventory $

5,005

Netting(2) $

1,781 $

(6)

Cash collateral paid

Net balance

— $

5,005



1,781

8,062 8

Netting of cash collateral received Non-trading derivatives and other financial assets measured on a recurring basis

$

Total assets

$ 260,938

Total as a percentage of gross assets(7)



$

7,882

$ 1,013,230

20.0%

$

180

$ 32,637

77.5%

$

8,070

$

(1,949)

$

(1,949) $

6,121

$1,311,724

$ (610,568) $ 701,156

$

$

2.5%

Liabilities Interest-bearing deposits

$



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

$



1,156

$

76,507

434 1,247

1,590 77,754

— $ (40,911)

1,590 36,843

Trading account liabilities Securities sold, not yet purchased

$ 48,452

Other trading liabilities Total trading liabilities

$



9,176

$

2,093 11,269

199

$

— $

199

57,827

$

2,093

$ 48,452

$

$

59,920

$

5

$ 393,321

$ 2,578

$ 395,904

6

133,404

503

133,913

2,244

21,875

2,397

26,516

263

17,329

2,961

20,553

— $ 57,827 —

$

2,093

— $ 59,920

Trading derivatives Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading derivatives

$



30,682

3,486

34,168

2,518

$ 596,611

$ 11,925

$ 611,054

Cash collateral received(8)

$

13,628

Netting agreements

$ (524,481)

Netting of cash collateral paid Total trading derivatives Short-term borrowings

(42,609) $

2,518

$



Long-term debt



Non-trading derivatives and other financial liabilities measured on a recurring basis, gross $



$ 596,611

$ 11,925

$ 624,682

$ (567,090) $ 57,592

$

$

$

$

1,198 18,342

$

1,626

9 6,951

$

14

1,207 25,293

$

Cash collateral received(9)

$

Total liabilities

$ 50,970



Total as a percentage of gross liabilities(7)

(3) (4) (5) (6) (7) (8) (9)

1,207 25,293

37

Total non-trading derivatives and other financial liabilities measured on a recurring basis

(2)



1,640

Netting of cash collateral paid

(1)

— $

6.5%

$

1,626

$ 706,709 90.8%

$

14

$ 20,779

$

1,677

$ 792,123

$

(53)

$

(53) $

1,624

$ (608,054) $ 184,069

2.7%

In 2015, the Company transferred assets of approximately $3.3 billion from Level 1 to Level 2, respectively, primarily related to foreign government securities and equity securities not traded in active markets. In 2015, the Company transferred assets of approximately $4.4 billion from Level 2 to Level 1, respectively, primarily related to foreign government bonds and equity securities traded with sufficient frequency to constitute a liquid market. In 2015, the Company transferred liabilities of approximately $0.6 billion from Level 2 to Level 1. In 2015, the Company transferred liabilities of approximately $0.4 billion from Level 1 to Level 2. 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 and cash collateral offsetting. Reflects the net amount of $47,520 million of gross cash collateral paid, of which $42,609 million was used to offset trading derivative liabilities. Amounts exclude $0.9 billion investments measured at Net Asset Value (NAV) in accordance with ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). See Note 1 to the Consolidated Financial Statements. There is no allowance for loan losses recorded for loans reported at fair value. Reflects the net amount of $61 million of gross cash collateral paid, of which $53 million was used to offset non-trading derivative liabilities. Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives. Reflects the net amount of $56,855 million of gross cash collateral received, of which $43,227 million was used to offset trading derivative assets. Reflects the net amount of $1,986 million of gross cash collateral received, of which $1,949 million was used to offset non-trading derivative assets.

133

Fair Value Levels In millions of dollars at December 31, 2014

Level 1(1)

Level 2(1)

Level 3

Gross inventory

Netting(2)

Net balance

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

$

— $

187,922 $

3,398 $

191,320 $

(47,129) $144,191

Trading non-derivative assets Trading mortgage-backed securities U.S. government-sponsored agency guaranteed



25,968

1,085

27,053



27,053

Residential



2,158

2,680

4,838



4,838

Commercial



3,903

440

4,343



4,343

Total trading mortgage-backed securities

$

— $

32,029 $

4,205 $

36,234 $

— $ 36,234

U.S. Treasury and federal agency securities

$

15,991 $

4,483 $

— $

20,474 $

— $ 20,474

State and municipal



3,161

241

3,402



3,402

Foreign government

37,995

26,736

206

64,937



64,937

1,337

25,640

820

27,797



27,797

51,346

4,281

2,219

57,846



57,846

Asset-backed securities



1,252

3,294

4,546



4,546

Other trading assets



9,221

4,372

13,593



13,593

Corporate Equity securities

Total trading non-derivative assets

$

106,669 $

106,803 $ 15,357 $

228,829 $

$

74 $

634,318 $

4,061 $

638,453



154,744

1,250

155,994

2,748

19,969

2,035

24,752

647

21,850

1,023

23,520

40,618

2,900

— $228,829

Trading derivatives Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives

— $

Total trading derivatives

3,469 $

43,518

871,499 $ 11,269 $

886,237

$

6,523

Cash collateral paid(3)

$ (777,178)

Netting agreements (4)(8)

(47,625)

Netting of cash collateral received Total trading derivatives

$

3,469 $

$

— $

871,499 $ 11,269 $

892,760 $ (824,803) $ 67,957

Investments Mortgage-backed securities U.S. government-sponsored agency guaranteed Residential



Commercial



36,053 $ 8,355 553

Total investment mortgage-backed securities

$

— $

44,961 $

U.S. Treasury and federal agency securities

$

110,710 $

12,974 $

38 $ 8 1

36,091 $

— $ 36,091

8,363



8,363

554



554

47 $

45,008 $

— $ 45,008

6 $

123,690 $

— $123,690

State and municipal



10,519

2,180

12,699



12,699

Foreign government

37,280

52,739

678

90,697



90,697

Corporate

1,739

9,746

672

12,157



12,157

Equity securities

1,770

274

681

2,725



2,725

Asset-backed securities



11,957

549

12,506



12,506

Other debt securities



661



661



661

Non-marketable equity securities(5)



233

1,460

1,693



1,693

Total investments

$

134

151,499 $

144,064 $

6,273 $

301,836 $

— $301,836

In millions of dollars at December 31, 2014

Loans(6)

Level 1(1) $



$



Mortgage servicing rights Non-trading derivatives and other financial assets measured on a recurring basis, gross

$



$

Level 2(1)

Level 3

2,793

$ 3,108



1,845

9,352

$

78

Gross inventory $

5,901

Netting(2) $

1,845 $

(7)

Net balance

— $ 5,901 —

1,845

9,430 123

Cash collateral paid

Netting of cash collateral received(8) Non-trading derivatives and other financial assets measured on a recurring basis

$

Total assets

$ 261,637

Total as a percentage of gross assets(7)



$

9,352

$1,322,433

16.1%

$

78

$ 41,328

81.4%

$

9,553

$

(1,791)

$

(1,791) $ 7,762

$1,632,044

$ (873,723) $758,321

$

$

2.5%

Liabilities $

Interest-bearing deposits Federal funds purchased and securities loaned or sold under agreements to repurchase



$

1,198

$

486

1,684

— $ 1,684



82,811

1,043

83,854

(47,129)

36,725

59,463

11,057

424

70,944



70,944













Trading account liabilities Securities sold, not yet purchased Other trading liabilities Total trading liabilities Trading account derivatives Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading derivatives Cash collateral received(8) Netting agreements Netting of cash collateral paid(3) Total trading derivatives Short-term borrowings Long-term debt Non-trading derivatives and other financial liabilities measured on a recurring basis, gross

$

59,463

$

77 — 2,955 669 — 3,701

$

$ $

3,701 — —

$



$

11,057

$ 617,933 158,354 26,616 22,872 39,787 $ 865,562

$

424

$ 4,272 472 2,898 2,645 3,643 $ 13,930

$

70,944

$ 13,930 $ 344 7,290

$ 893,039 $ 1,496 26,180

$

$

$

7

Cash collateral received(9)

7

Netting of cash collateral paid

Non-trading derivatives and other financial liabilities measured on a recurring basis

$



Total liabilities

$

63,164

Total as a percentage of gross liabilities(4)

(2) (3) (4) (5) (6) (7) (8) (9)

$ (777,178) (47,769) $ (824,947) $ 68,092 $ — $ 1,496 — 26,180

1,784

(7)

(1)

— $ 70,944

$ 622,282 158,826 32,469 26,186 43,430 $ 883,193 $ 9,846

$ 865,562 $ 1,152 18,890 1,777

$

5.9%

$

1,777

$ 982,447 91.9%

$

7

$ 23,524

$

1,791

$1,078,988

$

(15)

$

(15) $ 1,776

$ (872,091) $206,897

2.2%

In 2014, the Company transferred assets of approximately $4.1 billion from Level 1 to Level 2, primarily related to foreign government securities not traded with sufficient frequency to constitute an active market and Citi refining its methodology for certain equity contracts to reflect the prevalence of off-exchange trading. In 2014, the Company transferred assets of approximately $4.2 billion from Level 2 to Level 1, primarily related to foreign government bonds traded with sufficient frequency to constitute a liquid market. In 2014, the Company transferred liabilities of approximately $1.4 billion from Level 1 to Level 2, as Citi refined its methodology for certain equity contracts to reflect the prevalence of off-exchange trading. In 2014, there were no material liability transfers from Level 2 to Level 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 and cash collateral offsetting. Reflects the net amount of $54,292 million of gross cash collateral paid, of which $47,769 million was used to offset trading derivative liabilities. Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives. Amounts exclude $1.1 billion investments measured at Net Asset Value (NAV) in accordance with ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). See Note 1 to the Consolidated Financial Statements. There is no allowance for loan losses recorded for loans reported at fair value. Reflects the net amount of $138 million of gross cash collateral paid, of which $15 million was used to offset non-trading derivative liabilities. Reflects the net amount of $57,471 million of gross cash collateral received, of which $47,625 million was used to offset trading derivative assets. Reflects the net amount of $1,798 million of gross cash collateral received, of which $1,791 million was used to offset non-trading derivative assets.

135

Changes in Level 3 Fair Value Category The following tables present the changes in the Level 3 fair value category for the years ended December 31, 2015 and 2014. As discussed above, the Company classifies financial instruments as 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. 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:

Level 3 Fair Value Rollforward Net realized/unrealized gains (losses) incl. in Dec. 31, 2014

In millions of dollars

Principal transactions

Other(1)(2)

Transfers into Level 3

out of Level 3 Purchases Issuances

Sales

Settlements

Dec. 31, 2015

Unrealized gains (losses) still held(3)

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

$

3,398 $

(147) $

— $

279 $ (2,856) $

784 $

— $

— $

(121) $

1,337 $

(5)

Trading non-derivative assets Trading mortgagebacked securities U.S. governmentsponsored agency guaranteed

1,085

24



872

(1,277)

796



(756)



744

(4)

Residential

2,680

254



370

(480)

1,574



(3,072)



1,326

(101)

440

18



252

(157)

697



(733)



517

(7)

Commercial Total trading mortgagebacked securities

$

U.S. Treasury and federal agency securities $

4,205 $

296 $

— $

— $ 1,494 $ (1,914) $ (1) $

— $

— $

— $

— $





67

(35)

183



(105)



351

Foreign government

206

(10)



53

(100)

271



(169)

(54)

197

6

Corporate

820

111



186

(288)

802



(1,244)

(11)

376

(29)

Equity securities

2,219

547



344

(371)

1,377



(432)



3,684

464

Asset-backed securities

3,294

141



663

(282)

4,426



(5,503)



2,739

(174)

Other trading assets

4,372

180



968

(3,290)

2,504

51

(2,110)

(192)

2,483

(45)

$ 15,357 $

1,265 $

51 $ (14,125) $

1 $

(112)

— $

12,631 $

(1) $

2,587 $

241

— $ 3,777 $ (6,281) $

1 $

— $ (4,561) $

State and municipal

Total trading nonderivative assets

2 $

3,067 $

(257) $ 12,418 $

— (7)

103

(4)

Trading derivatives, net Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives

Total trading derivatives, net(4)

$

(211) $

(492) $

— $

778

(245)



(11)

27

393



(381)

59

620

(863)

148



(126)

66

496



(334)

(187)

(800)

(1,622) (743) $ (2,661) $

(124) $

(753)



214

555



9

(787) $

— $

(38) $

15 $

— $

141 $

152 $

(28)







328

61

1



(3)

427

141 $

136

24 $

914 $

— $

(577) $

(495) $

(1,861) 307

779 $ (2,229) $

553 (12) 41 (257) 442 767

Net realized/unrealized gains (losses) incl. in In millions of dollars

Dec. 31, 2014

Principal transactions

Other(1)(2)

Transfers into Level 3

out of Level 3

Purchases

Issuances

Sales

Settlements

Dec. 31, 2015

Unrealized gains (losses) still held(3)

Investments Mortgage-backed securities U.S. governmentsponsored agency guaranteed

— $

29 $

171 $

(118) $

62 $

— $

(43) $

— $

139 $

(2)

Residential

8



(1)

4



11



(18)



4



Commercial

1





4

(3)









2



47 $

— $

28 $

179 $

(121) $

73 $

— $

145 $

(2)

6 $

— $

6 $

— $

$

Total investment mortgage-backed securities

$

U.S. Treasury and federal agency securities

$

38 $

— $

State and municipal

2,180



(23)

Foreign government

678



45

Corporate

672



Equity securities

681



Asset-backed securities

549







Other debt securities Non-marketable equity securities

— $

— $

834

— $

4 $



842



(671)

(249)

2,192

(5)

(270)

601



(519)

(270)

260

(7)

15

(52)

144



(134)

(35)

603

(4)

(22)

12

(14)

7



(540)



124

(120)

(17)

45

(58)

202



(125)



596

14







10



(10)







76

6

5



(58)

1,460



(50)

$

6,273 $

— $

(46) $ 1,156 $ (1,230) $

Loans

$

3,108 $

— $

1,845



110



78



100

201

Other financial assets measured on a recurring basis

(8) $

— $

(721)

Total investments Mortgage servicing rights

(61) $

(303) $

689 $

(304)

1,135

1,890 $

— $(2,126) $

(858) $

5,059 $

(805) $

1,190 $

461 $ (807) $

(1,367) $

2,166 $





214

(38)

(350)

1,781

(66)

6

208

(85)

(262)

180

9 (1)

26 (78) 24 (390)

582

Liabilities Interest-bearing deposits Federal funds purchased and securities loaned or sold under agreements to repurchase

$

486 $

1,043

— $

10 $

1 $

(1) $

— $

36 $

— $

(78) $

434 $

(23)











302

(121)

1,247

(154)

134

Trading account liabilities Securities sold, not yet purchased

424

88



311

(231)





385

(602)

199

Short-term borrowings

344

11



23

(30)



1



(318)

9

(4)

7,290

539



2,311

(3,958)



3,407



(1,560)

6,951

(347)

7



(11)

10

(4)

5

2

(12)

14

(4)

Long-term debt Other financial liabilities measured on a recurring basis (1) (2) (3) (4)

(5)

(25)

Changes in fair value for available-for-sale investments are recorded in Accumulated other comprehensive income (loss), unless related to other-than-temporary impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income. Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income. Represents the amount of total gains or losses for the period, included in earnings (and Accumulated other comprehensive income (loss) for changes in fair value of available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2015. Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

137

Net realized/unrealized gains (losses) incl. in In millions of dollars

Dec. 31, 2013

Principal transactions

Other(1)(2)

Transfers into Level 3

out of Level 3

Purchases Issuances

Sales

Settlements

Dec. 31, 2014

Unrealized gains (losses) still held(3)

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

$

3,566 $

(61) $

— $

84 $

(8) $

75 $

— $

— $

U.S. governmentsponsored agency guaranteed

1,094

117



854

(966)

714

26

(695)

Residential

2,854

457



442

(514)

2,582



256

17



187

(376)

758



(258) $

3,398 $

133

Trading non-derivative assets Trading mortgagebacked securities

Commercial Total trading mortgagebacked securities

$

4,204 $

591 $

U.S. Treasury and federal agency securities $

— $

3 $

— $ 1,483 $ (1,856) $ — $

— $

— $

4,054 $ 7 $

(59)

1,085

8

(3,141)



2,680

132

(402)



440

26 $ (4,238) $ — $

(4)

(59) $

4,205 $

136

(10) $

— $

— $



State and municipal

222

10



150

(105)

34



(70)



241

Foreign government

416

(56)



130

(253)

676



(707)



206

Corporate

1,835

(127)



465

(502)

1,988



(2,839)



820

Equity securities

1,057

87



142

(209)

1,437



(295)



2,219

Asset-backed securities

4,342

876



158

(332)

3,893



(5,643)



3,294

3

Other trading assets

3,184

269



2,637

(2,278)

5,427



(4,490)

(377)

4,372

31

$ 15,260 $

1,653 $

Total trading nonderivative assets

— $ 5,165 $ (5,535) $

17,516 $

26 $(18,292) $

(436) $ 15,357 $

— $

(109) $

1 5 (139) 337

374

Trading derivatives, net(4) Interest rate contracts

$

Foreign exchange contracts Equity contracts Commodity contracts Credit derivatives Total trading derivatives, net(4)

839 $

(818) $

— $

24 $

(98) $

113 $

(162) $

(211) $

(414)

695

92



47

(39)

59



(59)

(17)

778

56

(858)

482



(916)

766

435



(279)

(493)

(863)

(274)

(1,393)

(338)



92

(12)







29

(1,622)

(174)

(274)

(567)



4

(156)

103



(3)

150

(743)

(369)

$

(991) $

(1,149) $

— $

(749) $

461 $

710 $

— $

$

(203) $

(503) $

(440) $ (2,661) $

(1,175)

Investments Mortgage-backed securities U.S. governmentsponsored agency guaranteed

— $

52 $

60 $

17 $

— $

102



33

31

(2)

17



(173)



8



Commercial





(6)

4

(7)

10







1



289 $

— $

79 $

44 $

— $

8 $

— $

— $

— $

Total investment mortgage-backed securities

$

U.S. Treasury and federal agency securities $

— $

95 $

(212) $

— $

— $

(73) $

(2) $

(246) $

(2) $

(2) $

— $

38 $

(8)

187 $

Residential

47 $

(8)

6 $



State and municipal

1,643



(64)

811

(584)

923



(549)



Foreign government

344



(27)

286

(105)

851



(490)

(181)

678

(17)

Corporate

285



(6)

26

(143)

728



(218)



672

(4)



Equity securities Asset-backed securities Other debt securities Non-marketable equity securities Total investments

$

2,180

49

815



111

19

(19)

10



(255)

681

(78)

1,960



41



(47)

95



(195)

(1,305)

549

(18)

50



(1)





116



(115)

(50)





2,508



211

67



416



(768)

(974)

1,460

81

7,902 $

— $

344 $ 1,304 $ (1,110) $

138

3,183 $

— $ (2,838) $

(2,512) $

6,273 $

5

Net realized/unrealized gains (losses) incl. in In millions of dollars

Dec. 31, 2013

Loans

$

Mortgage servicing rights Other financial assets measured on a recurring basis

Principal transactions

Other(1)(2)

Transfers into Level 3

out of Level 3

Purchases

6 $

Issuances

951 $

Sales

Settlements

197 $ (895) $

Dec. 31, 2014

4,143 $

— $

(233) $

92 $

(1,153) $

2,718



(390)







217

(317)

(383)

1,845

181



100

(83)



3

178

(18)

(283)

78

890 $

— $

357 $

902

(6)



590

(81)

29

(31)

7,621 10

Unrealized gains (losses) still held(3)

3,108 $

37 (390)

14

Liabilities Interest-bearing deposits Federal funds purchased and securities loaned or sold under agreements to repurchase Trading account liabilities Securities sold, not yet purchased Short-term borrowings Long-term debt Other financial liabilities measured on a recurring basis (1) (2) (3) (4)

$

5 $

(12) $

— $

127 $

— $

(167) $

(69)

486 $

54



78



220

(217)

1,043

(34)



79

(111)





534

(749)

424

(58)



323

(12)



49



(76)

344

(8)

109

49

2,701

(4,206)



3,893



(2,561)

7,290

(446)



(5)

7

(3)

(8)

7

(4)

(2)

1

(3)

Changes in fair value of available-for-sale investments are recorded in Accumulated other comprehensive income (loss), unless related to other-than-temporary impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income. Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income. Represents the amount of total gains or losses for the period, included in earnings (and Accumulated other comprehensive income (loss) for changes in fair value of available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2014. Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

Level 3 Fair Value Rollforward The following were the significant Level 3 transfers for the period December 31, 2014 to December 31, 2015: • Transfers of Federal Funds sold and securities borrowed or purchased under agreements to resell of $2.9 billion from Level 3 to Level 2 related to shortening of the remaining tenor of certain reverse repos. There is more transparency and observability for repo curves used in the valuation of structured reverse repos with tenors up to five years; thus, these positions are generally classified as Level 2. • Transfers of U.S. government-sponsored agency guaranteed MBS in Trading account assets of $0.9 billion from Level 2 to Level 3, and of $1.3 billion from Level 3 to Level 2 primarily related to changes in observability due to market trading activity. • Transfers of other trading assets of $1.0 billion from Level 2 to Level 3, and of $3.3 billion from Level 3 to Level 2 primarily related to trading loans for which there were changes in volume of and transparency into market quotations. • Transfers of Long-term debt of $2.3 billion from Level 2 to Level 3, and of $4.0 billion from Level 3 to Level 2, mainly related to structured debt, reflecting certain unobservable inputs becoming less significant and certain underlying market inputs being more observable.

The following were the significant Level 3 transfers for the period December 31, 2013 to December 31, 2014: •



139

Transfers of Long-term debt of $2.7 billion from Level 2 to Level 3, and of $4.2 billion from Level 3 to Level 2, mainly related to structured debt, reflecting changes in the significance of unobservable inputs as well as certain underlying market inputs becoming less or more observable. Transfers of other trading assets of $2.6 billion from Level 2 to Level 3, and of $2.3 billion from Level 3 to Level 2, related to trading loans, reflecting changes in the volume of market quotations.

Valuation Techniques and Inputs for Level 3 Fair Value Measurements The Company’s Level 3 inventory consists of both cash securities and derivatives of varying complexity. The valuation methodologies used to measure the fair value of these positions include discounted cash flow analysis, internal models and comparative analysis. A position is classified within Level 3 of the fair value hierarchy when at least one input is unobservable and is considered significant to its valuation. The specific reason an input is deemed unobservable varies. For example, at least one significant input to the pricing model is not observable in the market, at least one significant input has been adjusted to make it more representative of the position being valued, or the price quote available does not reflect sufficient trading activities.

The following tables present the valuation techniques covering the majority of Level 3 inventory and the most significant unobservable inputs used in Level 3 fair value measurements. Differences between this table and amounts presented in the Level 3 Fair Value Rollforward table represent individually immaterial items that have been measured using a variety of valuation techniques other than those listed.

Valuation Techniques and Inputs for Level 3 Fair Value Measurements Fair value(1) (in millions)

As of December 31, 2015

Methodology

Low(2)(3)

Input

High(2)(3)

Weighted average(4)

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

$

1,337 Model-based

Mortgage-backed securities

$

1,287 Price-based

IR log-normal volatility Interest rate Price

1,377 Yield analysis

Yield Price Credit spread WAL Redemption rate Price

State and municipal, foreign government, corporate and other debt securities

$

Equity securities(5)

$

3,761 Price-based 1,719 Cash flow 3,499 Model-based

Asset-backed securities

$

3,075 Price-based

Non-marketable equity

$

$

29.02 % 137.02% —% 2.03% 3.45 $ 109.21 $ 0.50 %

14.07%

$

— $ 217.00 $ 20 bps 600 bps 1.5 years 1.5 years 41.21 % 41.21% $ 5.55 $ 100.21 $

633 Comparables analysis EBITDA multiples

6.80x

473 Price-based

—% 90.00% 0.19x 1.09x — $ 132.78 $

Discount to price Price-to-book ratio Price

$

10.80x

37.90 % 0.27 % 78.25 4.83 % 79.41 251 bps 1.5 years 41.21 % 71.57 9.05x 10.89 % 0.60x 46.66

Derivatives—gross(6) Interest rate contracts (gross)

Foreign exchange contracts (gross)

$

$

4,553 Model-based

IR log-normal volatility

17.41 %

137.02%

37.60 %

(5.52)%

20.00%

0.71 %

1,326 Model-based 275 Cash flow

Mean reversion Foreign exchange (FX) volatility Interest rate Forward price

0.38 % 7.50 % 1.48 %

25.73% 7.50% 138.09%

11.63 % 7.50 % 56.80 %

3 bps

515 bps

235 bps

Credit spread

(7)

Equity contracts (gross)

$

3,976 Model-based

Commodity contracts (gross)

$

4,061 Model-based

IR-IR correlation

(51.00)%

77.94%

32.91 %

IR-FX correlation Equity volatility Equity-FX correlation Equity forward

(20.30)% 11.87 % (88.17)% 82.72 %

60.00% 49.57% 65.00% 100.53%

48.85 % 27.33 % (21.09)% 95.20 %

Equity-equity correlation Forward price

(80.54)% 35.09 %

100.00% 299.32%

49.54 % 112.98 %

5.00 %

83.00%

24.00 %

(57.00)% 1.00 %

91.00% 75.00%

30.00 % 32.49 %

Commodity volatility Credit derivatives (gross)

$

Commodity correlation Recovery rate

5,849 Model-based

140

Fair value(1)

Methodology 1,424 Price-based

Nontrading derivatives and other financial assets and liabilities measured on a recurring basis (gross)(6)

Input Credit correlation Price Credit spread Upfront points

(in millions)

As of December 31, 2015

$

194 Model-based

Weighted Low(2)(3) High(2)(3) average(4) 5.00 % 90.00% 43.48 % $ 0.33 $ 101.00 $ 61.52 1 bps 967 bps 133 bps 7.00 % 99.92% 66.75 %

Recovery rate Redemption rate

Loans

$

Mortgage servicing rights

$

Liabilities Interest-bearing deposits

$

Interest rate Yield Price

750 Price-based 892 Model-based 524 Cash flow 1,690 Cash flow

$

Credit spread Yield WAL

434 Model-based

$

1,245 Model-based

Securities sold, not yet purchased

$

152 Price-based

Short-term borrowings and longterm debt

$

7,004 Model-based

40.00%

10.72 %

99.50%

74.80 %

5.26 % 5.28% 1.50 % 4.50% — $ 106.98 $ 29 bps 500 bps —% 23.32% 3.38 years 7.48 years

5.27 % 2.52 % 40.69 105 bps 6.83 % 5.5 years

Equity-IR correlation

23.00 %

39.00%

34.51 %

Forward price

35.09 %

299.32%

112.72 %

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

7.00 % 27.00 %

(57.00)%

91.00%

30.00 %

Commodity volatility

5.00 %

83.00%

24.00 %

Interest rate

1.27 %

2.02%

1.92 %

Trading account liabilities Price



$ 217.00

$

87.78

Mean reversion

(5.52)%

20.00%

7.80 %

Equity volatility Equity forward

9.55 % 82.72 %

42.56% 100.80%

22.26 % 94.48 %

(80.54)%

100.00%

49.16 %

35.09 %

299.32%

106.32 %

(88.20)%

56.85%

(31.76)%

Equity-equity correlation Forward price Equity-FX correlation

141

$

Fair value(1) (in millions)

As of December 31, 2014

Methodology

Low(2)(3)

Input

Weighted average(4)

High(2)(3)

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

$

3,156 Model-based

Interest rate

Mortgage-backed securities

$

2,874 Price-based

Price

1,117 Yield analysis

Yield

5,937 Price-based

Price

1,860 Cash flow

Credit spread

2,163 Price-based

Price (5)

State and municipal, foreign government, corporate and other debt securities Equity securities(5)

$ $

679 Cash flow

1.27 % $

$

3,607 Price-based

Price

Non-marketable equity

$

1,224 Price-based

Discount to price



$



$ $

124.00 141.00

$

—%

105.50

90.62 233 bps

$

91.00 4.50 %

3.14 years $

81.43 5.89 %

5.00%

0.01 years —

1.80 % $

600 bps

4.00 % $

127.87 19.91%

25 bps

WAL $

1.97% $

0.01 %

Yield

Asset-backed securities



1.07 years $

67.01

90.00%

4.04 %

2.90x

13.10x

9.77x

PE ratio

8.10x

13.10x

8.43x

Price-to-book ratio

0.99x

1.56x

1.15x

18.05 %

90.65%

30.21 %

Mean reversion

1.00 %

20.00%

10.50 %

Foreign exchange (FX) volatility

0.37 %

58.40%

8.57 %

Interest rate

3.72 %

8.27%

5.02 %

40.00 %

60.00%

50.00 %

9.56 %

82.44%

24.61 %

84.10 %

100.80%

94.10 %

(88.20)%

48.70%

(25.17)%

1,055 Comparables analysis EBITDA multiples

(6)

Derivatives—gross

Interest rate contracts (gross)

Foreign exchange contracts (gross)

$

$

Interest rate (IR) lognormal volatility

8,309 Model-based

1,428 Model-based 294 Cash flow

IR-FX correlation Equity contracts (gross)(7)

$

4,431 Model-based

Equity volatility

502 Price-based

Equity forward Equity-FX correlation Equity-equity correlation Price

Commodity contracts (gross)

$

3,606 Model-based

(66.30)% $

Commodity volatility Commodity correlation

Credit derivatives (gross)

$

$

Loans

$

94.80% $

144.50

36.87 % $

93.05

5.00 %

83.00%

24.00 %

(57.00)%

91.00%

30.00 %

Forward price

35.34 %

268.77%

101.74 %

4,944 Model-based

Recovery rate

13.97 %

75.00%

37.62 %

1,584 Price-based

Credit correlation Price

Non-trading derivatives and other financial assets and liabilities measured on a recurring basis (gross)(6)

0.01

74 Model-based

—% $

58.76 % $

53.86

1 bps

3,380 bps

180 bps

0.39

100.00

52.26

13.00 %

99.50%

68.73 %

107.00 %

107.10%

107.05 %

1.60 %

4.50%

2.23 %

Yield

832 Model-based

Price

740 Price-based

Credit spread

142

144.50

Upfront points

Forward Price

441 Yield analysis

95.00% $

Credit spread

Redemption rate

1,095 Cash flow

1.00

$

4.72 35 bps

$

106.55 500 bps

$

98.56 199 bps

Fair value(1) (in millions)

As of December 31, 2014

Mortgage servicing rights

$

Methodology

Low(2)(3)

Input

1,750 Cash flow

Yield

5.19 %

WAL

Weighted average(4)

High(2)(3) 21.40%

3.31 years

10.25 %

7.89 years

5.17 years

Liabilities Interest-bearing deposits

$

486 Model-based

Equity-IR correlation Commodity correlation Commodity volatility Forward price

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

$

1,043 Model-based

Interest rate

$

251 Model-based

Credit-IR correlation

$

142 Price-based

Price

$

7,204 Model-based

34.00 %

37.00%

35.43 %

(57.00)%

91.00%

30.00 %

5.00 %

83.00%

24.00 %

35.34 %

268.77%

101.74 %

0.74 %

2.26%

1.90 %

Trading account liabilities Securities sold, not yet purchased Short-term borrowings and longterm debt

IR log-normal volatility

8.81% $

117.00

47.17 % $

70.33

18.05 %

90.65%

30.21 %

1.00 %

20.00%

10.50 %

Equity volatility

10.18 %

69.65%

23.72 %

Credit correlation

87.50 %

87.50%

87.50 %

Equity forward

89.50 %

100.80%

95.80 %

Forward price

35.34 %

268.77%

101.80 %

(57.00)%

91.00%

30.00 %

5.00 %

83.00%

24.00 %

Commodity volatility

(4) (5) (6) (7)



Mean reversion

Commodity correlation

(1) (2) (3)

(70.49)% $

The fair value amounts presented in these tables represent the primary valuation technique or techniques for each class of assets or liabilities. Some inputs are shown as zero due to rounding. When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the input applies to only one large position. Weighted averages are calculated based on the fair values of the instruments. For equity securities, the price and fund NAV inputs are expressed on an absolute basis, not as a percentage of the notional amount. Both trading and nontrading account derivatives—assets and liabilities—are presented on a gross absolute value basis. Includes hybrid products.

143

Sensitivity to Unobservable Inputs and Interrelationships between Unobservable Inputs The impact of key unobservable inputs on the Level 3 fair value measurements may not be independent of one another. In addition, the amount and direction of the impact on a fair value measurement for a given change in an unobservable input depends on the nature of the instrument as well as whether the Company holds the instrument as an asset or a liability. For certain instruments, the pricing, hedging and risk management are sensitive to the correlation between various inputs rather than on the analysis and aggregation of the individual inputs. The following section describes the sensitivities and interrelationships of the most significant unobservable inputs used by the Company in Level 3 fair value measurements.

at-the-money option would experience a larger percentage change in its fair value than a deep-in-the-money option. In addition, the fair value of an option with more than one underlying security (for example, an option on a basket of bonds) depends on the volatility of the individual underlying securities as well as their correlations. Yield Adjusted yield is generally used to discount the projected future principal and interest cash flows on instruments, such as asset-backed securities. Adjusted yield is impacted by changes in the interest rate environment and relevant credit spreads. In some circumstances, the yield of an instrument is not observable in the market and must be estimated from historical data or from yields of similar securities. This estimated yield may need to be adjusted to capture the characteristics of the security being valued. In other situations, the estimated yield may not represent sufficient market liquidity and must be adjusted as well. Whenever the amount of the adjustment is significant to the value of the security, the fair value measurement is classified as Level 3.

Correlation Correlation is a measure of the extent to which two or more variables change in relation to each other. A variety of correlation-related assumptions are required for a wide range of instruments, including equity and credit baskets, foreignexchange options, CDOs backed by loans or bonds, mortgages, subprime mortgages and many other instruments. For almost all of these instruments, correlations are not observable in the market and must be calculated using historical information. Estimating correlation can be especially difficult where it may vary over time. Calculating correlation information from market data requires significant assumptions regarding the informational efficiency of the market (for example, swaption markets). Changes in correlation levels can have a major impact, favorable or unfavorable, on the value of an instrument, depending on its nature. A change in the default correlation of the fair value of the underlying bonds comprising a CDO structure would affect the fair value of the senior tranche. For example, an increase in the default correlation of the underlying bonds would reduce the fair value of the senior tranche, because highly correlated instruments produce larger losses in the event of default and a part of these losses would become attributable to the senior tranche. That same change in default correlation would have a different impact on junior tranches of the same structure.

Prepayment Voluntary unscheduled payments (prepayments) change the future cash flows for the investor and thereby change the fair value of the security. The effect of prepayments is more pronounced for residential mortgage-backed securities. An increase in prepayments—in speed or magnitude—generally creates losses for the holder of these securities. Prepayment is generally negatively correlated with delinquency and interest rate. A combination of low prepayment and high delinquencies amplify each input’s negative impact on mortgage securities’ valuation. As prepayment speeds change, the weighted average life of the security changes, which impacts the valuation either positively or negatively, depending upon the nature of the security and the direction of the change in the weighted average life. Recovery Recovery is the proportion of the total outstanding balance of a bond or loan that is expected to be collected in a liquidation scenario. For many credit securities (such as asset-backed securities), there is no directly observable market input for recovery, but indications of recovery levels are available from pricing services. The assumed recovery of a security may differ from its actual recovery that will be observable in the future. The recovery rate impacts the valuation of credit securities. Generally, an increase in the recovery rate assumption increases the fair value of the security. An increase in loss severity, the inverse of the recovery rate, reduces the amount of principal available for distribution and, as a result, decreases the fair value of the security.

Volatility Volatility represents the speed and severity of market price changes and is a key factor in pricing options. Typically, instruments can become more expensive if volatility increases. For example, as an index becomes more volatile, the cost to Citi of maintaining a given level of exposure increases because more frequent rebalancing of the portfolio is required. Volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in the contract. Volatilities for certain combinations of tenor and strike are not observable. The general relationship between changes in the value of a portfolio to changes in volatility also depends on changes in interest rates and the level of the underlying index. Generally, long option positions (assets) benefit from increases in volatility, whereas short option positions (liabilities) will suffer losses. Some instruments are more sensitive to changes in volatility than others. For example, an

Credit Spread Credit spread is a component of the security representing its credit quality. Credit spread reflects the market perception of changes in prepayment, delinquency and recovery rates, therefore capturing the impact of other variables on the fair value. Changes in credit spread affect the fair value of 144

securities differently depending on the characteristics and maturity profile of the security. For example, credit spread is a more significant driver of the fair value measurement of a high yield bond as compared to an investment grade bond. Generally, the credit spread for an investment grade bond is also more observable and less volatile than its high yield counterpart.

underlying obligor. Stronger companies have tighter credit spreads, and weaker companies have wider credit spreads. Price The price input is a significant unobservable input for certain fixed income instruments. For these instruments, the price input is expressed as a percentage of the notional amount, with a price of $100 meaning that the instrument is valued at par. For most of these instruments, the price varies between zero to $100, or slightly above $100. Relatively illiquid assets that have experienced significant losses since issuance, such as certain asset-backed securities, are at the lower end of the range, whereas most investment grade corporate bonds will fall in the middle to the higher end of the range. For certain structured debt instruments with embedded derivatives, the price input may be above $100 to reflect the embedded features of the instrument (for example, a step-up coupon or a conversion option). The price input is also a significant unobservable input for certain equity securities; however, the range of price inputs varies depending on the nature of the position, the number of shares outstanding and other factors.

Qualitative Discussion of the Ranges of Significant Unobservable Inputs The following section describes the ranges of the most significant unobservable inputs used by the Company in Level 3 fair value measurements. The level of aggregation and the diversity of instruments held by the Company lead to a wide range of unobservable inputs that may not be evenly distributed across the Level 3 inventory. Correlation There are many different types of correlation inputs, including credit correlation, cross-asset correlation (such as equityinterest rate correlation), and same-asset correlation (such as interest rate-interest rate correlation). Correlation inputs are generally used to value hybrid and exotic instruments. Generally, same-asset correlation inputs have a narrower range than cross-asset correlation inputs. However, due to the complex and unique nature of these instruments, the ranges for correlation inputs can vary widely across portfolios.

Mean Reversion A number of financial instruments require an estimate of the rate at which the interest rate reverts to its long term average. Changes in this estimate can significantly affect the fair value of these instruments. However, sometimes there is insufficient external market data to calibrate this parameter, especially when pricing more complex instruments. The level of mean reversion affects the correlation between short and long term interest rates. The fair values of more complex instruments, such as Bermudan swaptions (options with multiple exercise dates) and constant maturity spread options or structured debts with these embedded features, are more sensitive to the changes in this correlation as compared to less complex instruments, such as caps and floors.

Volatility Similar to correlation, asset-specific volatility inputs vary widely by asset type. For example, ranges for foreign exchange volatility are generally lower and narrower than equity volatility. Equity volatilities are wider due to the nature of the equities market and the terms of certain exotic instruments. For most instruments, the interest rate volatility input is on the lower end of the range; however, for certain structured or exotic instruments (such as market-linked deposits or exotic interest rate derivatives), the range is much wider. Yield Ranges for the yield inputs vary significantly depending upon the type of security. For example, securities that typically have lower yields, such as municipal bonds, will fall on the lower end of the range, while more illiquid securities or securities with lower credit quality, such as certain residual tranche asset-backed securities, will have much higher yield inputs. Credit Spread Credit spread is relevant primarily for fixed income and credit instruments; however, the ranges for the credit spread input can vary across instruments. For example, certain fixed income instruments, such as certificates of deposit, typically have lower credit spreads, whereas certain derivative instruments with high-risk counterparties are typically subject to higher credit spreads when they are uncollateralized or have a longer tenor. Other instruments, such as credit default swaps, also have credit spreads that vary with the attributes of the 145

Items Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring 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 the periods as a result of an impairment. In addition, these assets include loans held-forsale and other real estate owned that are measured at the lower of cost or market. The following table presents the carrying amounts of all assets that were still held for which a nonrecurring fair value measurement was recorded: In millions of dollars

Fair value

Level 2

The fair value of loans-held-for-sale is determined where possible using quoted secondary-market prices. 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. Fair value for the other real estate owned is based on appraisals. For loans whose carrying amount is based on the fair value of the underlying collateral, the fair values depend on the type of collateral. Fair value of the collateral is typically estimated based on quoted market prices if available, appraisals or other internal valuation techniques. Where the fair value of the related collateral is based on an unadjusted appraised value, the loan is generally classified as Level 2. Where significant adjustments are made to the appraised value, the loan is classified as Level 3. Additionally, for corporate loans, appraisals of the collateral are often based on sales of similar assets; however, because the prices of similar assets require significant adjustments to reflect the unique features of the underlying collateral, these fair value measurements are generally classified as Level 3.

Level 3

December 31, 2015 Loans held-for-sale

$

10,326 $

Other real estate owned Loans(1) Total assets at fair value on a nonrecurring basis $

In millions of dollars

6,752 $

3,574

107

15

92

1,173

836

337

11,606 $

Fair value

7,603 $

Level 2

4,003

Level 3

December 31, 2014 Loans held-for-sale

$

4,152 $

Other real estate owned Loans(1) Total assets at fair value on a nonrecurring basis (1)

$

1,084 $

3,068

102

21

81

3,367

2,881

486

7,621 $

3,986 $

3,635

Represents impaired loans held for investment whose carrying amount is based on the fair value of the underlying collateral, primarily real estate secured loans.

Valuation Techniques and Inputs for Level 3 Nonrecurring Fair Value Measurements The following tables present the valuation techniques covering the majority of Level 3 nonrecurring fair value measurements and the most significant unobservable inputs used in those measurements: As of December 31, 2015

Loans held-for-sale

Fair value(1) (in millions) $

Methodology

3,486 Price-based 90 Price-based

Other real estate owned

2 Loans(3)

$

157 Recovery analysis 87 Price-based

(1) (2) (3) (4) (5)

Low(5)

Input Price

$

Discount to price(4) Appraised value (4)

Discount to price



$

0.34% $

Recovery rate



100.00

$

13.00% $

8,518,230

81.05 2.86%

$

3,813,045

11.79%

60.00%

23.49%

13.00%

34.00%

7.99%

The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities. Weighted averages are calculated based on the fair values of the instruments. Represents loans held for investment whose carrying amounts are based on the fair value of the underlying collateral. Includes estimated costs to sell. Some inputs are shown as zero due to rounding.

146

Weighted average(2)

High

Fair value(1) (in millions)

As of December 31, 2014

Loans held-for-sale

$

Methodology

2,740 Price-based

Input

Low

Price

$

Credit spread Other real estate owned Loans (1) (2) (3) (4)

(3)

$ $

76 Price-based 437 Price-based

Appraised value

100.00

Loans held-for-sale

$

$11,000

$11,124,137

$4,730,129 28.80%

(4)

13.00%

34.00%

28.92%

Discount to price

(79) (17)

(1)

Loans

Total nonrecurring fair value gains (losses)

(142) $

(238)

Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, primarily real estate loans.

Year ended December 31, 2014

In millions of dollars

Loans held-for-sale

$

Other real estate owned Total nonrecurring fair value gains (losses)

34 (16)

Loans(1)

(533) $

99.54 175 bps

64.00%

2015

Other real estate owned

$

358 bps

13.00%

Year ended December 31,

(1)

$

5 bps

Discount to price(4)

Nonrecurring Fair Value Changes The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that were still held:

(1)

92.00

The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities. Weighted averages are based on the fair values of the instruments. Represents loans held for investment whose carrying amounts are based on the fair value of the underlying collateral. Includes estimated costs to sell.

In millions of dollars

Weighted average(2)

High

(515)

Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, primarily real estate loans.

147

Estimated Fair Value of Financial Instruments Not Carried at Fair Value The table below presents the carrying value and fair value of Citigroup’s financial instruments that are not carried at fair value. The table below therefore excludes items measured at fair value on a recurring basis presented in the tables above. The disclosure also 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, 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 liabilities, such as long-term debt not carried at fair value. For loans not accounted for at fair value, 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. Expected credit losses are either embedded in the estimated future cash flows or incorporated as an adjustment to the discount rate used. 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.

December 31, 2015 Carrying value

In billions of dollars

Estimated fair value

Estimated fair value Level 1

Level 2

Level 3

Assets Investments

$

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

41.7 $

42.7 $

3.5 $

36.4 $

2.8

81.7

81.7



77.4

4.3

Loans(1)(2)

597.5

599.4



6.0

593.4

Other financial assets(2)(3)

186.5

186.5

6.9

126.2

53.4

Liabilities Deposits

906.3 $

896.7 $

— $

749.4 $

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

$

109.7

109.7



109.4

0.3

Long-term debt(4)

176.0

180.8



153.8

27.0

97.6

97.6



18.0

79.6

Other financial liabilities(5)

December 31, 2014 Carrying value

In billions of dollars

Estimated fair value

147.3

Estimated fair value Level 1

Level 2

Level 3

Assets Investments

$

30.5 $

32.2 $

4.5 $

25.2 $

2.5

98.4

98.4



89.7

8.7

Loans

620.0

617.6



5.6

612.0

Other financial assets(2)(3)

213.8

213.8

8.3

151.9

53.6

897.6 $

894.4 $

— $

766.7 $

136.7

136.7



136.5

0.2

Long-term debt

196.9

202.5



172.7

29.8

Other financial liabilities(5)

136.2

136.2



41.4

94.8

Federal funds sold and securities borrowed or purchased under agreements to resell (1)(2)

Liabilities Deposits

$

Federal funds purchased and securities loaned or sold under agreements to repurchase (4)

148

127.7

(1) (2) (3) (4) (5)

The carrying value of loans is net of the Allowance for loan losses of $12.6 billion for December 31, 2015 and $16.0 billion for December 31, 2014. In addition, the carrying values exclude $2.4 billion and $2.7 billion of lease finance receivables at December 31, 2015 and December 31, 2014, respectively. Includes items measured at fair value on a nonrecurring basis. Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable 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. The carrying value includes long-term debt balances under qualifying fair value hedges. Includes brokerage payables, separate and variable accounts, short-term borrowings (carried at cost) 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 estimated fair values of the Company’s corporate unfunded lending commitments at December 31, 2015 and December 31, 2014 were liabilities of $7.0 billion and $5.5 billion, respectively, substantially all of which are classified as Level 3. The Company does not estimate the fair values of consumer unfunded lending commitments, which are generally cancellable by providing notice to the borrower.

149

26. FAIR VALUE ELECTIONS

current earnings. Additional discussion regarding the applicable areas in which fair value elections were made is presented in Note 25 to the Consolidated Financial Statements. All servicing rights are recognized initially at fair value. The Company has elected fair value accounting for its mortgage servicing rights. See Note 22 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.

The Company may elect to report most financial instruments and certain other items at fair value on an instrument-byinstrument basis with changes in fair value reported in earnings. The election is made upon the initial recognition 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

The following table presents the changes in fair value gains and losses associated with those items for which the fair value option was elected: Changes in fair value gains (losses) for the years ended December 31, 2014

2015

In millions of dollars

Assets Federal funds sold and securities borrowed or purchased under agreements to resell selected portfolios of securities purchased under agreements to resell and securities borrowed

$

Trading account assets Investments

(153) $

(154)

(305)

190

57

30

(192)

(135)

Loans Certain corporate loans(1) Certain consumer loans(1) Total loans

3

(41)

$

(189) $

(176)

$

104 $

(344)

Other assets MSRs Certain mortgage loans held for sale(2)

331

474

Total other assets

$

435 $

130

Total assets

$

(155) $

20

$

(94) $

(77)

3

(5)

Trading account liabilities

(60)

29

Short-term borrowings

(59)

8

Liabilities Interest-bearing deposits Federal funds purchased and securities loaned or sold under agreements to repurchase selected portfolios of securities sold under agreements to repurchase and securities loaned

Long-term debt Total liabilities (1) (2)

$

343

(307)

133 $

(352)

Includes mortgage loans held by mortgage loan securitization VIEs consolidated upon the adoption of ASC 810, Consolidation (SFAS 167), on January 1, 2010. Includes gains (losses) associated with interest rate lock-commitments for those loans that have been originated and elected under the fair value option.

150

Own Debt Valuation Adjustments Own debt valuation adjustments are recognized on Citi’s liabilities for which the fair value option has been elected using Citi’s credit spreads observed in the bond market. The fair value of 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 liabilities due to such changes in the Company’s own credit risk (or instrument-specific credit risk) was a gain of $367 million and $218 million for the years ended December 31, 2015 and 2014, respectively. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating the Company’s current credit spreads observable in the bond market into the relevant valuation technique used to value each liability as described above.

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. 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 lending and trading businesses. None of these credit products are highly leveraged financing commitments. 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.

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, securities borrowed, securities loaned, and certain non-collateralized short-term borrowings held primarily by 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.

The following table provides information about certain credit products carried at fair value: December 31, 2014

December 31, 2015 In millions of dollars

Trading assets

Carrying amount reported on the Consolidated Balance Sheet

$

Aggregate unpaid principal balance in excess of (less than) fair value Balance of non-accrual loans or loans more than 90 days past due Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due

In addition to the amounts reported above, $2,113 million and $2,335 million of unfunded commitments related to certain credit products selected for fair value accounting were outstanding as of December 31, 2015 and 2014, respectively.

Trading assets

Loans

Loans

9,314 $

5,005 $

10,290 $

5,901

980

280

234

125

5

2

13

3

13

1

28

1

Changes in the 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 years ended December 31, 2015 and 2014 due to instrument-specific credit risk totaled to a loss of $221 million and $155 million, respectively.

151

Certain Investments in Unallocated Precious Metals Citigroup invests in unallocated precious metals accounts (gold, silver, platinum and palladium) as part of its commodity and foreign currency trading activities or to economically hedge certain exposures from issuing structured liabilities. Under ASC 815, the investment is bifurcated into a debt host contract and a commodity forward derivative instrument. Citigroup elects the fair value option for the debt host contract, and reports the debt host contract within Trading account assets on the Company’s Consolidated Balance Sheet. The total carrying amount of debt host contracts across unallocated precious metals accounts was approximately $0.6 billion and $1.2 billion at December 31, 2015 and 2014, respectively. The amounts are expected to fluctuate based on trading activity in future periods. As part of its commodity and foreign currency trading activities, Citi sells (buys) unallocated precious metals investments and executes forward purchase (sale) derivative contracts with trading counterparties. When Citi sells an unallocated precious metals investment, Citi’s receivable from its depository bank is repaid and Citi derecognizes its investment in the unallocated precious metal. The forward purchase (sale) contract with the trading counterparty indexed to unallocated precious metals is accounted for as a derivative, at fair value through earnings. As of December 31, 2015, there were approximately $10.6 billion and $9.2 billion notional amounts of such forward purchase and forward sale derivative contracts outstanding, respectively.

Certain Investments in Private Equity and Real Estate Ventures and Certain Equity Method and Other 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 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. Changes in the fair values of these investments are classified in Other revenue in the Company’s Consolidated Statement of Income. Citigroup also elects the fair value option for certain nonmarketable equity securities whose risk is managed with derivative instruments that are accounted for at fair value through earnings. These securities are classified as Trading account assets on Citigroup’s Consolidated Balance Sheet. Changes in the fair value of these securities and the related derivative instruments are recorded in Principal transactions. 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.

The following table provides information about certain mortgage loans HFS carried at fair value: December 31, 2015

In millions of dollars

Carrying amount reported on the Consolidated Balance Sheet

$

745 $

December 31, 2014 1,447

Aggregate fair value in excess of unpaid principal balance

20

67

Balance of non-accrual loans or loans more than 90 days past due





Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due





The changes in the fair values of these mortgage loans are reported in Other revenue in the Company’s Consolidated Statement of Income. There was no net change in fair value during the years ended December 31, 2015 and 2014 due to instrument-specific credit risk. Related interest income continues to be measured based on the contractual interest rates and reported as Interest revenue in the Consolidated Statement of Income.

152

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. 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 following table provides information about the carrying value of structured notes, disaggregated by type of embedded derivative instrument: In billions of dollars

December 31, 2015

Interest rate linked

$

December 31, 2014

9.6 $

10.9

Foreign exchange linked

0.3

0.3

Equity linked

9.9

8.0

Commodity linked

1.4

1.4

Credit linked

2.5

1.6

Total

22.8 $

$

The change in the fair value of these structured liabilities is reported in Principal transactions in the Company’s Consolidated Statement of Income. Changes in the fair value of these structured liabilities include an economic component for accrued interest, which is included in the change in fair value reported in Principal transactions.

23.1

Certain Non-Structured Liabilities The Company has elected the fair value option for certain nonstructured liabilities with fixed and floating interest rates. The Company has elected the fair value option where the interestrate 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 the fair value of these non-structured liabilities is reported in Principal transactions in the Company’s Consolidated Statement of Income. Related interest expense on non-structured liabilities is measured based on the contractual interest rates and reported as Interest expense in the Consolidated Statement of Income.

The following table provides information about long-term debt carried at fair value: December 31, 2014

December 31, 2015

In millions of dollars

Carrying amount reported on the Consolidated Balance Sheet

$

Aggregate unpaid principal balance in excess of (less than) fair value

25,293 $

26,180 (151)

1,569

The following table provides information about short-term borrowings carried at fair value: December 31, 2015

In millions of dollars

Carrying amount reported on the Consolidated Balance Sheet

$

Aggregate unpaid principal balance in excess of (less than) fair value

1,207 $ 130

153

December 31, 2014 1,496 31

27. PLEDGED ASSETS, COLLATERAL, GUARANTEES AND COMMITMENTS

respectively, of collateral that may not be sold or repledged by the secured parties.

Pledged Assets In connection with the Company’s financing and trading activities, the Company has pledged assets to collateralize its obligations under repurchase agreements, secured financing agreements, secured liabilities of consolidated VIEs and other borrowings. The approximate carrying values of the significant components of pledged assets recognized on the Company’s Consolidated Balance Sheet included:

Lease Commitments Rental expense (principally for offices and computer equipment) was $1.3 billion, $1.4 billion and $1.5 billion for the years ended December 31, 2015, 2014 and 2013, respectively. Future minimum annual rentals under noncancellable leases, net of sublease income, are as follows: In millions of dollars

In millions of dollars

Investment securities

$

Loans Trading account assets Total

$

2015

2014

2016

210,604 $

173,015

2017

1,002

203,568

214,530

2018

778

97,205

111,832

2019

698

499,377

2020

511,377 $

$

567

Thereafter

In addition, included in Cash and due from banks at December 31, 2015 and 2014 were $5.0 billion and $6.2 billion, respectively, of cash segregated under federal and other brokerage regulations or deposited with clearing organizations.

1,238

4,483 $

Total

8,766

Guarantees Citi provides a variety of guarantees and indemnifications to its 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 that 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. As such, Citi believes such amounts bear no relationship to the anticipated losses, if any, on these guarantees. The following tables present information about Citi’s guarantees:

Collateral At December 31, 2015 and 2014, the approximate fair value of collateral received by the Company that may be resold or repledged, excluding the impact of allowable netting, was $347.5 billion and $362.7 billion, respectively. This collateral was received in connection with resale agreements, securities borrowings and loans, derivative transactions and margined broker loans. At December 31, 2015 and 2014, a substantial portion of the collateral received by the Company had been sold or repledged in connection with repurchase agreements, securities sold, not yet purchased, securities borrowings and loans, pledges to clearing organizations, segregation requirements under securities laws and regulations, derivative transactions and bank loans. In addition, at December 31, 2015 and 2014, the Company had pledged $405 billion and $378 billion,

Maximum potential amount of future payments In billions of dollars at December 31, 2015 except carrying value in millions

Expire within 1 year

Financial standby letters of credit

$

23.8 $

Expire after 1 year

Total amount outstanding

73.0 $

96.8 $

Carrying value (in millions of dollars)

153

Performance guarantees

7.4

4.1

11.5

24

Derivative instruments considered to be guarantees

3.6

74.9

78.5

1,779



0.2

0.2

17

79.0



79.0



84.2



84.2





51.7

51.7

56

Loans sold with recourse Securities lending indemnifications(1) (1)

Credit card merchant processing

Custody indemnifications and other Total

$

198.0 $

154

203.9 $

401.9 $

2,029

Maximum potential amount of future payments In billions of dollars at December 31, 2014 except carrying value in millions

Financial standby letters of credit

Expire within 1 year $

25.4 $

Performance guarantees

Expire after 1 year

Total amount outstanding

73.0 $

98.4 $

Carrying value (in millions of dollars) 242

7.1

4.8

11.9

29

12.5

79.2

91.7

2,806



0.2

0.2

15

Securities lending indemnifications

115.9



115.9



Credit card merchant processing(1)

86.0



86.0



Derivative instruments considered to be guarantees Loans sold with recourse (1)

Custody indemnifications and other Total (1)

— $

246.9 $

48.9 206.1 $

48.9 453.0 $

54 3,146

The carrying values of securities lending indemnifications and credit card merchant processing were not material for either period presented, as the probability of potential liabilities arising from these guarantees is minimal.

Financial Standby Letters of Credit Citi 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 Citi. Standby letters of credit protect a third party from defaults on contractual obligations. Financial standby letters of credit include (i) guarantees of payment of insurance premiums and reinsurance risks that support industrial revenue bond underwriting; (ii) settlement of payment obligations to clearing houses, including futures and over-the-counter derivatives clearing (see further discussion below); (iii) support options and purchases of securities in lieu of escrow deposit accounts; and (iv) letters of credit that backstop loans, credit facilities, promissory notes and trade acceptances.

instruments). Credit derivatives sold by Citi are excluded from the tables above as they are disclosed separately in Note 23 to the Consolidated Financial Statements. In instances where Citi’s maximum potential future payment is unlimited, the notional amount of the contract is disclosed. Loans Sold with Recourse Loans sold with recourse represent Citi’s obligations to reimburse the buyers for loan losses under certain circumstances. Recourse refers to the clause in a sales agreement under which a seller/lender will fully reimburse the buyer/investor for any losses resulting from the purchased loans. This may be accomplished by the seller taking back any loans that become delinquent. In addition to the amounts shown in the tables above, Citi has recorded a repurchase reserve for its potential repurchases or make-whole liability regarding residential mortgage representation and warranty claims related to its whole loan sales to the U.S. government-sponsored enterprises (GSEs) and, to a lesser extent, private investors. The repurchase reserve was approximately $152 million and $224 million at December 31, 2015 and 2014, respectively, and these amounts are included in Other liabilities on the Consolidated Balance Sheet.

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 and an underlying instrument, reference credit or index, where there is little or no initial investment, and whose terms require or permit net settlement. For a discussion of Citi’s derivatives activities, see Note 23 to the Consolidated Financial Statements. Derivative instruments considered to be guarantees include only those instruments that require Citi to make payments to the counterparty based on changes in an underlying instrument 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 brokerdealer (such counterparties are considered to be dealers in these markets and may, therefore, not hold the underlying

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: (i) providing transaction processing services to various merchants with respect to its private-label cards; and 155

Other Guarantees and Indemnifications

(ii) potential liability for bank card transaction processing services. 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 (i) above, Citi has the primary contingent liability with respect to its portfolio of private-label merchants. The risk of loss is mitigated as the cash flows between Citi and the merchant are settled on a net basis, and Citi has the right to offset any payments with cash flows otherwise due to the merchant. To further mitigate this risk, Citi may delay settlement, require a merchant to make an escrow deposit, include event triggers to provide Citi 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, Citi is contingently liable to credit or refund cardholders. With regard to (ii) above, Citi has a potential liability for bank card transactions where Citi provides the transaction processing services as well as those where a third party provides the services and Citi acts as a secondary guarantor, should that processor fail to perform. Citi’s maximum potential contingent liability related to both bank card and private-label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid charge-back transactions at any given time. At December 31, 2015 and 2014, this maximum potential exposure was estimated to be $84 billion and $86 billion, respectively. However, Citi believes that the maximum exposure is not representative of the actual potential loss exposure based on its historical experience. 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. Citi 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 December 31, 2015 and 2014, the losses incurred and the carrying amounts of Citi’s contingent obligations related to merchant processing activities were immaterial.

Credit Card Protection Programs Citi, through its credit card businesses, 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 Citi’s maximum exposure to loss cannot be quantified. The protection is limited to certain types of purchases and losses, and it is not possible to quantify the purchases that would qualify for these benefits at any given time. Citi 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 December 31, 2015 and 2014, the actual and estimated losses incurred and the carrying value of Citi’s obligations related to these programs were immaterial. Other Representation and Warranty Indemnifications In the normal course of business, Citi provides standard representations and warranties to counterparties in contracts in connection with numerous transactions and also provides indemnifications, including 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 Citi with comparable indemnifications. While such representations, warranties and 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 Citi’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. 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. As a result, these indemnifications are not included in the tables above. Value-Transfer Networks Citi is a member of, or shareholder in, hundreds of valuetransfer networks (VTNs) (payment, clearing and settlement systems as well as exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to pay a pro rata share of the losses incurred by the organization due to another member’s default on its obligations. Citi’s potential obligations may be limited to its membership interests in the VTNs, contributions to the VTN’s funds, or, in limited cases, the obligation may be unlimited. The maximum exposure cannot be estimated as this would require an assessment of future claims that have not yet

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.

156

Futures and Over-the-Counter Derivatives Clearing Citi provides clearing services for clients executing exchangetraded futures and over-the-counter (OTC) derivatives contracts with central counterparties (CCPs). Based on all relevant facts and circumstances, Citi has concluded that it acts as an agent for accounting purposes in its role as clearing member for these client transactions. As such, Citi does not reflect the underlying exchange-traded futures or OTC derivatives contracts in its Consolidated Financial Statements. See Note 23 for a discussion of Citi’s derivatives activities that are reflected in its Consolidated Financial Statements. As a clearing member, Citi collects and remits cash and securities collateral (margin) between its clients and the respective CCP. There are two types of margin: initial margin and variation margin. Where Citi obtains benefits from or controls cash initial margin (e.g., retains an interest spread), cash initial margin collected from clients and remitted to the CCP is reflected within Brokerage Payables (payables to customers) and Brokerage Receivables (receivables from brokers, dealers and clearing organizations), respectively. However, for OTC derivatives contracts where Citi has contractually agreed with the client that (i) Citi will pass through to the client all interest paid by the CCP on cash initial margin; (ii) Citi will not utilize its right as clearing member to transform cash margin into other assets; and (iii) Citi does not guarantee and is not liable to the client for the performance of the CCP, cash initial margin collected from clients and remitted to the CCP is not reflected on Citi’s Consolidated Balance Sheet. The total amount of cash initial margin collected and remitted in this manner was approximately $4.3 billion and $3.2 billion as of December 31, 2015 and 2014, respectively. Variation margin due from clients to the respective CCP, or from the CCP to clients, reflects changes in the value of the client’s derivative contracts for each trading day. As a clearing member, Citi is exposed to the risk of non-performance by clients (e.g., failure of a client to post variation margin to the CCP for negative changes in the value of the client’s derivative contracts). In the event of non-performance by a client, Citi would move to close out the client’s positions. The CCP would typically utilize initial margin posted by the client and held by the CCP, with any remaining shortfalls required to be paid by Citi as clearing member. Citi generally holds incremental cash or securities margin posted by the client, which would typically be expected to be sufficient to mitigate Citi’s credit risk in the event the client fails to perform. As required by ASC 860-30-25-5, securities collateral posted by clients is not recognized on Citi’s Consolidated Balance Sheet.

occurred. Citi believes the risk of loss is remote given historical experience with the VTNs. Accordingly, Citi’s participation in VTNs is not reported in the guarantees tables above, and there are no amounts reflected on the Consolidated Balance Sheet as of December 31, 2015 or 2014 for potential obligations that could arise from Citi’s involvement with VTN associations. Long-Term Care Insurance Indemnification 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 $6.3 billion at December 31, 2015, compared to $6.2 billion at December 31, 2014) 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 Citi must indemnify the ceding insurance company for any losses actually incurred in connection with the LTC policies. Since 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 December 31, 2015 and 2014 related to this indemnification. Citi continues to closely monitor its potential exposure under this indemnification obligation.

Carrying Value—Guarantees and Indemnifications At December 31, 2015 and 2014, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the tables above amounted to approximately $2.0 billion and $3.1 billion, respectively. The carrying value of financial and performance guarantees is included in Other liabilities, as is the carrying value of the liability for loans sold with recourse. 157

Collateral Cash collateral available to Citi to reimburse losses realized under these guarantees and indemnifications amounted to $52 billion and $63 billion at December 31, 2015 and 2014, respectively. Securities and other marketable assets held as collateral amounted to $33 billion and $59 billion at December 31, 2015 and 2014, respectively. The majority of collateral is held to reimburse losses realized under securities lending indemnifications. Additionally, letters of credit in favor of Citi held as collateral amounted to $4.2 billion and $4.0 billion at December 31, 2015 and 2014, respectively. Other property may also be available to Citi to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.

Performance risk Citi 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. Citi’s internal ratings are in line with the related external rating system. On certain underlying referenced assets or entities, ratings are not available. Such referenced assets are included in the “not rated” category. The maximum potential amount of the future payments related to the outstanding guarantees 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 that are classified based upon internal and external credit ratings. 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. As such, Citi believes such amounts bear no relationship to the anticipated losses, if any, on these guarantees. Maximum potential amount of future payments Investment grade

In billions of dollars at December 31, 2015

Financial standby letters of credit

$

69.2 $

Noninvestment grade

Not rated

15.4 $

Total 12.2 $

96.8

Performance guarantees

6.6

4.1

0.8

11.5

Derivative instruments deemed to be guarantees





78.5

78.5

Loans sold with recourse





0.2

0.2

Securities lending indemnifications





79.0

79.0

Credit card merchant processing





84.2

84.2

Custody indemnifications and other

51.6

Total

$

127.4 $

0.1 19.6 $



51.7

254.9 $

401.9

Maximum potential amount of future payments Noninvestment grade

Investment grade

In billions of dollars at December 31, 2014

Financial standby letters of credit

$

9.5 $

98.4

7.3

3.9

0.7

11.9

Derivative instruments deemed to be guarantees





91.7

91.7

Loans sold with recourse





0.2

0.2

Securities lending indemnifications





115.9

115.9

Credit card merchant processing





86.0

86.0

48.8 $

Total

158

129.1 $

15.9 $

Total

Performance guarantees

Custody indemnifications and other

73.0 $

Not rated

0.1 19.9 $



48.9

304.0 $

453.0

Credit Commitments and Lines of Credit The table below summarizes Citigroup’s credit commitments:

U.S.

In millions of dollars

Commercial and similar letters of credit

Outside of U.S.

December 31, December 31, 2014 2015

1,248 $

4,854 $

6,102 $

6,634

1,343

1,853

3,196

5,674

12,648

2,078

14,726

16,098

9,177

1,345

10,522

9,242

Credit card lines

481,897

91,160

573,057

612,049

Commercial and other consumer loan commitments

178,957

92,119

271,076

243,680

$

One- to four-family residential mortgages Revolving open-end loans secured by one- to four-family residential properties Commercial real estate, construction and land development

Other commitments and contingencies Total

$

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.

3,943

6,039

9,982

10,663

689,213 $

199,448 $

888,661 $

904,040

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 cancellable by providing notice to the cardholder or without such notice as permitted by local law.

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.

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 thirdparty receivables, to provide note issuance or revolving underwriting facilities and to invest in the form of equity. 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.

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.

Other commitments and contingencies Other commitments and contingencies include committed or unsettled regular-way reverse repurchase agreements and all other transactions related to commitments and contingencies not reported on the lines above.

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 159

28. CONTINGENCIES

Litigation and Regulatory Contingencies Overview. In addition to the matters described below, in the ordinary course of business, Citigroup, its affiliates and subsidiaries, and current and former officers, directors and employees (for purposes of this section, sometimes collectively referred to as Citigroup and Related Parties) routinely are named as defendants in, or as parties to, various legal actions and proceedings. Certain of these actions and proceedings assert claims or seek relief in connection with alleged violations of consumer protection, fair lending, securities, banking, antifraud, antitrust, anti-money laundering, employment and other statutory and common laws. Certain of these actual or threatened legal actions and proceedings include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief, and in some instances seek recovery on a class-wide basis. In the ordinary course of business, Citigroup and Related Parties also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. In addition, certain affiliates and subsidiaries of Citigroup are banks, registered broker-dealers, futures commission merchants, investment advisers or other regulated entities and, in those capacities, are subject to regulation by various U.S., state and foreign securities, banking, commodity futures, consumer protection and other regulators. In connection with formal and informal inquiries by these regulators, Citigroup and such affiliates and subsidiaries receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of their regulated activities. From time to time Citigroup and Related Parties also receive grand jury subpoenas and other requests for information or assistance, formal or informal, from federal or state law enforcement agencies including, among others, various United States Attorneys’ Offices, the Asset Forfeiture and Money Laundering Section and other divisions of the Department of Justice, the Financial Crimes Enforcement Network of the United States Department of the Treasury, and the Federal Bureau of Investigation relating to Citigroup and its customers. Because of the global scope of Citigroup’s operations, and its presence in countries around the world, Citigroup and Related Parties are subject to litigation and governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal) in multiple jurisdictions with legal and regulatory regimes that may differ substantially, and present substantially different risks, from those Citigroup and Related Parties are subject to in the United States. In some instances Citigroup and Related Parties may be involved in proceedings involving the same subject matter in multiple jurisdictions, which may result in overlapping, cumulative or inconsistent outcomes. Citigroup seeks to resolve all litigation and regulatory matters in the manner management believes is in the best interests of Citigroup and its shareholders, and contests liability, allegations of wrongdoing and, where applicable, the

Accounting and Disclosure Framework ASC 450 governs the disclosure and recognition of loss contingencies, including potential losses from litigation and regulatory matters. ASC 450 defines a “loss contingency” as “an existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur.” It imposes different requirements for the recognition and disclosure of loss contingencies based on the likelihood of occurrence of the contingent future event or events. It distinguishes among degrees of likelihood using the following three terms: “probable,” meaning that “the future event or events are likely to occur”; “remote,” meaning that “the chance of the future event or events occurring is slight”; and “reasonably possible,” meaning that “the chance of the future event or events occurring is more than remote but less than likely.” These three terms are used below as defined in ASC 450. Accruals. ASC 450 requires accrual for a loss contingency when it is “probable that one or more future events will occur confirming the fact of loss” and “the amount of the loss can be reasonably estimated.” In accordance with ASC 450, Citigroup establishes accruals for contingencies, including the litigation and regulatory matters disclosed herein, when Citigroup believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued, unless some higher amount within the range is a better estimate than any other amount within the range. 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. Disclosure. ASC 450 requires disclosure of a loss contingency if “there is at least a reasonable possibility that a loss or an additional loss may have been incurred” and there is no accrual for the loss because the conditions described above are not met or an exposure to loss exists in excess of the amount accrued. In accordance with ASC 450, if Citigroup has not accrued for a matter because Citigroup believes that a loss is reasonably possible but not probable, or that a loss is probable but not reasonably estimable, and the matter thus does not meet the criteria for accrual, and the reasonably possible loss is material, it discloses the loss contingency. In addition, Citigroup discloses matters for which it has accrued if it believes a reasonably possible exposure to material loss exists in excess of the amount accrued. In accordance with ASC 450, Citigroup’s disclosure includes an estimate of the reasonably possible loss or range of loss for those matters as to which an estimate can be made. ASC 450 does not require disclosure of an estimate of the reasonably possible loss or range of loss where an estimate cannot be made. Neither accrual nor disclosure is required for losses that are deemed remote.

160

amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter. Inherent Uncertainty of the Matters Disclosed. Certain of the matters disclosed below involve 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’ or claimants’ alleged damages frequently are not quantified or factually supported in the complaint or statement of claim. Other matters relate to regulatory investigations or proceedings, as to which there may be no objective basis for quantifying the range of potential fine, penalty, or other remedy. As a result, Citigroup is often unable to estimate the loss in such matters, even if it believes that a loss is probable or reasonably possible, until developments in the case or investigation have yielded additional information sufficient to support a quantitative assessment of the range of reasonably possible loss. Such developments may include, among other things, discovery from adverse parties or third parties, rulings by the court on key issues, analysis by retained experts, and engagement in settlement negotiations. Depending on a range of factors, such as the complexity of the facts, the novelty of the legal theories, the pace of discovery, the court’s scheduling order, the timing of court decisions, and the adverse party’s willingness to negotiate in good faith toward a resolution, it may be months or years after the filing of a case or commencement of an investigation before an estimate of the range of reasonably possible loss can be made. Matters as to Which an Estimate Can Be Made. For some of the matters disclosed below, Citigroup is currently able to estimate a reasonably possible loss or range of loss in excess of amounts accrued (if any). For some of the matters included within this estimation, an accrual has been made because a loss is believed to be both probable and reasonably estimable, but an exposure to loss exists in excess of the amount accrued. In these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no accrual has been made because a loss, although estimable, is believed to be reasonably possible, but not probable; in these cases the estimate reflects the reasonably possible loss or range of loss. As of December 31, 2015, Citigroup estimates that the reasonably possible unaccrued loss for these matters ranges up to approximately $3.5 billion in the aggregate. These estimates are based on currently available information. As available information changes, the matters for which Citigroup is able to estimate will change, and the estimates themselves will change. In addition, while many estimates presented in financial statements and other financial disclosures involve significant judgment and may be subject to significant uncertainty, estimates of the range of reasonably possible loss arising from litigation and regulatory proceedings are subject to particular uncertainties. For example, at the time of making an estimate, (i) Citigroup may have only preliminary, incomplete, or inaccurate information about the facts underlying the claim; (ii) its assumptions about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse parties or regulators, may prove to be wrong; and (iii) the outcomes it is

attempting to predict are often not amenable to the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that Citigroup had not accounted for in its estimate because it had deemed such an outcome to be remote. For all these reasons, the amount of loss in excess of accruals ultimately incurred for the matters as to which an estimate has been made could be substantially higher or lower than the range of loss included in the estimate. Matters as to Which an Estimate Cannot Be Made. For other matters disclosed below, Citigroup is not currently able to estimate the reasonably possible loss or range of loss. Many of these matters remain in very preliminary stages (even in some cases where a substantial period of time has passed since the commencement of the matter), 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 statement of claim or asserted its defenses, nor has it engaged in any negotiations with the adverse party (whether a regulator or a private party). For all these reasons, Citigroup cannot at this time estimate the reasonably possible loss or range of loss, if any, for these matters. Opinion of Management as to Eventual Outcome. Subject to the foregoing, it is the opinion of Citigroup’s management, based on current knowledge and after taking into account its current legal accruals, that the eventual outcome of all matters described in this Note would not be likely to have a material adverse effect on the consolidated financial condition of Citigroup. Nonetheless, given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could, from time to time, have a material adverse effect on Citigroup’s consolidated results of operations or cash flows in particular quarterly or annual periods. Allied Irish Bank Litigation In 2003, Allied Irish Bank (AIB) filed a complaint in the United States District Court for the Southern District of New York seeking to hold Citibank and Bank of America, N.A., former prime brokers for AIB’s subsidiary Allfirst Bank (Allfirst), liable for losses incurred by Allfirst as a result of fraudulent and fictitious foreign currency trades entered into by one of Allfirst’s traders. In December 2015, the remaining parties reached a settlement that released all claims against Citibank. A notice of voluntary dismissal with prejudice was filed on January 14, 2016. Additional information concerning this action is publicly available in court filings under docket number 03 Civ. 3748 (S.D.N.Y.) (Batts, J.). Commodities Financing Contracts Beginning in May 2014, Citigroup became aware of reports of potential fraud relating to the financing of physical metal stored at the Qingdao and Penglai ports in China. Citibank and Citigroup Global Markets Limited (CGML) have contracts with a counterparty in relation to the provision of financing to that counterparty, collateralized by physical metal 161

stored at these ports, with the agreements providing that the counterparty would repurchase the inventory at a specified date in the future (typically three to six months). Pursuant to the agreements, the counterparty is responsible for providing clean title to the inventory, insuring it, and attesting that there are no third party encumbrances. The counterparty is a nonChinese subsidiary of a large multinational corporation, and the counterparty’s obligations under the contracts are guaranteed by the parent company. On July 22, 2014, Citibank and CGML commenced proceedings in the Commercial Court in London to enforce their rights against the counterparty under the relevant agreements in relation to approximately $285 million in financing. That counterparty and a Chinese warehouse provider previously brought actions in the English courts to establish the parties’ rights and obligations under these agreements. In early December 2014, the English court conducted a preliminary trial concerning, among other issues, the question of whether Citibank and/or CGML had appropriately accelerated their counterparty’s obligation to repay under the applicable agreements, given these facts and circumstances. The High Court in London issued a judgment on May 22, 2015 holding that the Citigroup affiliates had properly served bring forward event notices, but that because the metal had not been properly delivered, the counterparty did not yet have to pay Citibank and CGML. As a result of various filings by the parties, on January 15, 2016, Citibank and CGML were informed by the English Court of Appeal (i) that their application for permission to appeal certain aspects of the High Court’s 2015 judgment had been granted; and (ii) that the counterparty had also been given permission to appeal certain aspects of the 2015 judgment. Various procedural matters continue. Additional information concerning this action is publicly available in court filings under the claim reference: Mercuria Energy Trading PTE Ltd & Another v. Citibank, N.A. & Another, Claim No. 2014 Folio 709, Appeal Nos. 2015/2407 (Citigroup) and 2015/2395 (Mercuria) as regards the appeals. The financings at issue are carried at fair value. As with any position carried at fair value, Citigroup adjusts the positions and records a gain or loss on the Consolidated Statement of Income in accordance with GAAP.

and other structured or leveraged instruments, which have suffered losses as a result of the credit crisis. These matters have been filed in state and federal courts across the U.S. and in foreign tribunals, as well as in arbitrations before the Financial Industry Regulatory Authority (FINRA) and other arbitration associations. 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), FINRA, state attorneys general, the U.S. Department of Justice and subdivisions thereof, the Office of the Special Inspector General for the Troubled Asset Relief Program, bank regulators, and other government agencies and authorities, in connection with various formal and informal (and, in many instances, industry-wide) inquiries concerning Citigroup’s 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, marketing, trading, servicing and underwriting of CDOs and MBS, its origination, sale or other transfer, servicing, and foreclosure of residential mortgages, and its origination and securitization of auto loans. Mortgage-Related Litigation and Other Matters Securities Actions: Beginning in November 2007, Citigroup and Related Parties were named as defendants in a variety of class and individual securities actions filed by investors in Citigroup’s equity and debt securities in state and federal courts relating to Citigroup’s disclosures regarding its exposure to subprime-related assets. Citigroup and Related Parties have been named as defendants in a variety of putative class actions and individual actions arising out of Citigroup’s exposure to CDOs and other assets that declined in value during the financial crisis. Many of these matters have been dismissed or settled. These actions assert a wide range of claims, including claims under the federal securities laws, foreign securities laws, ERISA, and state law. Additional information concerning certain of these actions is publicly available in court filings under the docket numbers 10 Civ. 9646 (S.D.N.Y.) (Stein, J.), 11 Civ. 7672 (S.D.N.Y.) (Koeltl, J.), 13-4488, 13-4504, and 15-2461 (2d Cir.). Beginning in November 2007, certain Citigroup affiliates also have been named as defendants arising out of their activities as underwriters of securities in actions brought by investors in securities issued by public companies adversely affected by the credit crisis. Many of these matters have been dismissed or settled. As a general matter, issuers indemnify underwriters in connection with such claims, but in certain of these matters Citigroup affiliates are not being indemnified or may in the future cease to be indemnified because of the financial condition of the issuer. Mortgage-Backed Securities and CDO Investor Actions: Beginning in July 2010, Citigroup and Related Parties have been named as defendants in complaints filed by purchasers of MBS and CDOs sold or underwritten by Citigroup. The complaints generally assert that defendants made material misrepresentations and omissions about the credit quality of

Credit Crisis-Related Litigation and Other Matters Citigroup and Related Parties have been named as defendants in numerous legal actions and other proceedings asserting claims for damages and related relief for losses arising from the global financial credit crisis that began in 2007. Such matters include, among other types of proceedings, claims asserted by: (i) individual investors and purported classes of investors in Citigroup’s common and preferred stock and debt, alleging violations of the federal securities laws, foreign laws, state securities and fraud law, and the Employee Retirement Income Security Act (ERISA); and (ii) individual investors and purported classes of investors in securities and other investments underwritten, issued or marketed by Citigroup, including securities issued by other public companies, collateralized debt obligations (CDOs), mortgage-backed securities (MBS), auction rate securities, investment funds, 162

the assets underlying the securities or the manner in which those assets were selected, and typically assert claims under Section 11 of the Securities Act of 1933, state blue sky laws, and/or common-law misrepresentation-based causes of action. The majority of these matters have been resolved through settlement or otherwise. As of December 31, 2015, the aggregate original purchase amount of the purchases at issue in the pending litigations was approximately $1.2 billion, and the aggregate original purchase amount of the purchases covered by tolling agreements with investors threatening litigation was approximately $500 million. Additional information concerning certain of these actions is publicly available in court filings under the docket numbers 13-1729-II (Tenn. Ch. Ct.) (McCoy, C.), 650212/2012 (N.Y. Sup. Ct.) (Kornreich, J.), and 12 Civ. 3868 (S.D.N.Y.) (Forrest, J.). Mortgage-Backed Security Repurchase Claims: Various parties to MBS securitizations and other interested parties have asserted that certain Citigroup affiliates breached representations and warranties made in connection with mortgage loans sold into securitization trusts (private-label securitizations). Typically, these claims are based on allegations that securitized mortgages were not underwritten in accordance with the applicable underwriting standards. Citigroup also has received numerous inquiries, demands for loan files, and requests to toll (extend) the applicable statutes of limitation for representation and warranty claims relating to its private-label securitizations. These inquiries, demands and requests have been made by trustees of securitization trusts and others. On April 7, 2014, Citigroup entered into an agreement with 18 institutional investors represented by Gibbs & Bruns LLP regarding the resolution of representation and warranty repurchase claims related to certain legacy securitizations. Pursuant to the agreement, Citigroup made a binding offer to the trustees of 68 Citigroup-sponsored mortgage securitization trusts to pay $1.125 billion to the trusts to resolve these claims, plus certain fees and expenses. The 68 trusts covered by the agreement represent all of the trusts established by Citigroup’s legacy Securities and Banking business during 2005-2008 for which Citigroup affiliates made representations and warranties to the trusts. The trustees accepted the settlement for 64 trusts in whole, and four in part. Pursuant to the terms of the settlement agreement, the trustees’ acceptance was subject to a judicial approval proceeding. On December 18, 2015, the court filed a decision and order approving the trustees’ entry into the settlement and finding that the trustees, in entering the settlement, had exercised their authority reasonably and in good faith. Additional information concerning this proceeding is publicly available in court filings under the docket number 653902/2014 (N.Y. Sup. Ct.) (Friedman, J.). To date, trustees have filed six actions against Citigroup seeking to enforce certain of these contractual repurchase claims that were excluded from the April 7, 2014 settlement in connection with four private-label securitizations. Citigroup has reached an agreement with the trustees to resolve three of these actions, and those actions were dismissed with prejudice on January 26, 2016. The remaining three actions are in various stages of discovery. In the aggregate, plaintiffs are

asserting repurchase claims in the remaining actions as to approximately 2,900 loans that were securitized into these three securitizations, as well as any other loans that are later found to have breached representations and warranties. Additional information concerning these actions is publicly available in court filings under the docket numbers 13 Civ. 2843 (S.D.N.Y.) (Daniels, J.), 13 Civ. 6989 (S.D.N.Y.) (Daniels, J.), 653816/2013 (N.Y. Sup. Ct.) (Kornreich, J.), 653919/2014 (N.Y. Sup. Ct.), 653929/2014 (N.Y. Sup. Ct.), and 653930/2014 (N.Y. Sup. Ct.). Mortgage-Backed Securities Trustee Actions: On June 18, 2014, a group of investors in 48 RMBS trusts for which Citibank served or currently serves as trustee filed a complaint in New York State Supreme Court in BLACKROCK ALLOCATION TARGET SHARES: SERIES S. PORTFOLIO, ET AL. V. CITIBANK, N.A. The complaint, like those filed against other RMBS trustees, alleges that Citibank failed to pursue contractual remedies against securitization sponsors and servicers. This action was withdrawn without prejudice, effective December 17, 2014. On November 24, 2014, largely the same group of investors filed an action in the United States District Court for the Southern District of New York, captioned FIXED INCOME SHARES: SERIES M ET AL. V. CITIBANK N.A., alleging similar claims relating to 27 MBS trusts for which Citibank allegedly served or currently serves as trustee. On September 8, 2015, the United States District Court for the Southern District of New York dismissed all claims as to 24 of the 27 trusts and allowed certain of the claims to proceed as to the other three trusts. Additional information concerning this action is publicly available in court filings under the docket number 14-cv-9373 (S.D.N.Y.) (Furman, J.). On November 24, 2015, largely the same group of investors filed another action in the New York State Supreme Court, captioned FIXED INCOME SHARES: SERIES M, ET AL. V. CITIBANK N.A., related to the 24 trusts dismissed from the federal court action and one additional trust, asserting claims similar to the original complaint filed in state court. Additional information concerning this action is publicly available in court filings under the docket number 653891/2015 (N.Y. Sup. Ct.) (Ramos, J.). On August 19, 2015, the Federal Deposit Insurance Corporation as receiver for a financial institution filed a civil action against Citibank in the United States District Court for the Southern District of New York, captioned FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR GUARANTY BANK V. CITIBANK N.A. The complaint concerns one RMBS trust for which Citibank formerly served as trustee, and alleges that Citibank failed to pursue contractual remedies against the sponsor and servicers of that trust. Additional information concerning this action is publicly available in court filings under the docket number 15cv-6574 (S.D.N.Y.) (Carter, J.). Counterparty and Investor Actions In 2010, Abu Dhabi Investment Authority (ADIA) commenced an arbitration (ADIA I) against Citigroup before the International Center for Dispute Resolution (ICDR), alleging statutory and common law claims in connection with 163

its $7.5 billion investment in Citigroup in December 2007. ADIA sought rescission of the investment agreement or, in the alternative, more than $4 billion in damages. On October 14, 2011, the arbitration panel issued a final award and statement of reasons finding in favor of Citigroup on all claims asserted by ADIA. On March 4, 2013, the United States District Court for the Southern District of New York denied ADIA’s petition to vacate the arbitration award and granted Citigroup’s crosspetition to confirm. ADIA appealed and, on February 19, 2014, the United States Court of Appeals for the Second Circuit affirmed the judgment. Additional information concerning this action is publicly available in court filings under the docket numbers 12 Civ. 283 (S.D.N.Y.) (Daniels, J.), 13-1068-cv (2d Cir.), and 13-1500 (U.S.). On August 20, 2013, ADIA commenced a second arbitration (ADIA II) against Citigroup before the ICDR, alleging common law claims arising out of the same investment at issue in ADIA I. On August 28, 2013, Citigroup filed a complaint against ADIA in the United States District Court for the Southern District of New York seeking to enjoin ADIA II on the ground that it is barred by the court’s judgment confirming the arbitral award in ADIA I. On September 23, 2013, ADIA filed motions to dismiss Citigroup’s complaint and to compel arbitration. On November 25, 2013, the court denied Citigroup’s motion for a preliminary injunction and granted ADIA’s motions to dismiss and to compel arbitration. On December 23, 2013, Citigroup appealed that ruling to the United States Court of Appeals for the Second Circuit. On January 14, 2015, the Second Circuit affirmed the district court’s ruling. Additional information concerning this action is publicly available in court filings under the docket numbers 13 Civ. 6073 (S.D.N.Y.) (Castel, J.) and 13-4825 (2d Cir.).

obligations, asserting federal and state law claims arising from the collapse of the market in 2008, which plaintiffs contend Citigroup and other ARS underwriters and broker-dealers foresaw or should have foreseen, but failed adequately to disclose. Many of these matters have been dismissed or settled. Most of the remaining matters are in arbitrations pending before FINRA. Lehman Brothers Bankruptcy Proceedings On February 8, 2012, Citibank and certain Citigroup affiliates were named as defendants in an adversary proceeding asserting objections to proofs of claim totaling approximately $2.6 billion filed by Citibank and those affiliates, and claims under federal bankruptcy and state law to recover $2 billion deposited by Lehman Brothers Holdings Inc. (LBHI) with Citibank against which Citibank asserts a right of setoff. Plaintiffs also sought avoidance of a $500 million transfer and an amendment to a guarantee in favor of Citibank and other relief; plaintiffs dismissed, with prejudice, their claim to avoid the $500 million transfer pursuant to a stipulation entered by the court on March 12, 2015. Plaintiffs filed various amended complaints asserting additional claims and factual allegations, and amending certain previously asserted claims. Discovery related to the remaining claims is ongoing. Additional information concerning this action is publicly available in court filings under the docket numbers 12-01044 and 08-13555 (Bankr. S.D.N.Y.) (Chapman, J.). On July 21, 2014, an adversary proceeding was filed on behalf of Lehman Brothers Finance AG against Citibank, Citibank Korea Inc. and CGML asserting that defendants improperly have withheld termination payments under certain derivatives contracts. An amended complaint was filed by plaintiff on August 6, 2014. Plaintiff seeks to recover approximately $70 million, plus interest. Discovery is ongoing. Additional information concerning this action is publicly available in court filings under the docket numbers 14-02050 and 09-10583 (Bankr. S.D.N.Y.) (Chapman, J.).

Alternative Investment Fund-Related Litigation and Other Matters Citigroup and Related Parties have been named as defendants in a putative class action lawsuit filed in October 2012 on behalf of investors in CSO Ltd., CSO US Ltd., and Corporate Special Opportunities Ltd., whose investments were managed indirectly by a Citigroup affiliate. Plaintiffs asserted a variety of state common law claims, alleging that they and other investors were misled into investing in the funds and, later, not redeeming their investments. The complaint sought to recover more than $400 million on behalf of a putative class of investors. On August 10, 2015, the parties entered into an agreement providing for a class action settlement of the litigation. The court held a final settlement hearing on December 17, 2015 and entered an order approving the settlement on January 28, 2016. Additional information concerning this action is publicly available in court filings under the docket number 12-cv-7717 (S.D.N.Y.) (Woods, J.).

Terra Firma Litigation In December 2009, the general partners of two related private equity funds filed a complaint in New York state court, subsequently removed to the United States District Court for the Southern District of New York, asserting multi-billiondollar claims against Citigroup and certain of its affiliates arising out of the May 2007 auction of the music company, EMI, in which Citigroup affiliates acted as advisor to EMI and as a lender to plaintiffs’ acquisition vehicle. Following a jury trial, a verdict was returned in favor of Citigroup on November 4, 2010. Plaintiffs appealed from the entry of the judgment. On May 31, 2013, the United States Court of Appeals for the Second Circuit vacated the November 2010 jury verdict in favor of the defendants and ordered that the case be retried. On March 7, 2014, the parties stipulated to the dismissal of all remaining claims in the action, without prejudice to plaintiffs’ rights to re-file those claims in England. Additional information concerning this action is publicly available in court filings under the docket numbers 09 Civ. 10459 (S.D.N.Y.) (Rakoff, J.) and 11-0126-cv (2d Cir.).

Auction Rate Securities-Related Litigation and Other Matters Citigroup and Related Parties have been named as defendants in numerous actions and proceedings brought by Citigroup shareholders and purchasers or issuers of auction rate securities (ARS) and an issuer of variable rate demand 164

Credit Default Swaps Matters In April 2011, the European Commission (EC) opened an investigation (Case No COMP/39.745) into the credit default swap (CDS) industry. The scope of the investigation initially concerned the question of “whether 16 investment banks and Markit, the leading provider of financial information in the CDS market, have colluded and/or may hold and abuse a dominant position in order to control the financial information on CDS.” On July 2, 2013, the EC issued to Citigroup, CGMI, CGML, Citicorp North America Inc. and Citibank, as well as Markit, ISDA, and 12 other investment bank dealer groups, a statement of objections alleging that Citi and the other dealers colluded to prevent exchanges from entering the credit derivatives business in breach of Article 101 of the Treaty on the Functioning of the European Union. The statement of objections set forth the EC’s preliminary conclusions, did not prejudge the final outcome of the case, and did not benefit from the review and consideration of Citi’s arguments and defenses. Thereafter, Citi filed a reply and made oral submissions to the EC. On December 4, 2015, the EC informed Citi that it had closed its proceeding against Citi and the other investment bank dealer groups, without further action. In July 2009 and September 2011, the Antitrust Division of the U.S. Department of Justice served Civil Investigative Demands (CIDs) on Citi concerning potential anticompetitive conduct in the CDS industry. In addition, putative class action complaints were filed by various entities against Citigroup, CGMI and Citibank, among other defendants, alleging anticompetitive conduct in the CDS industry and asserting various claims under Sections 1 and 2 of the Sherman Act as well as a state law claim for unjust enrichment. On October 16, 2013, the U.S. Judicial Panel on Multidistrict Litigation centralized these putative class actions in the Southern District of New York for coordinated or consolidated pretrial proceedings before Judge Denise Cote. On September 30, 2015, the defendants, including Citigroup and Related Parties, entered into settlement agreements to settle all claims of the putative class, and on October 29, 2015, the court granted plaintiffs’ motion for preliminary approval of the proposed settlements. Additional information relating to this action is publicly available in court filings under the docket number 13 MD 2476 (S.D.N.Y.) (Cote, J.).

In August and September 2013, plaintiffs in the New York proceedings, together with their affiliates and principal, filed claims against CGML, Citibank and Citigroup arising out of the EMI auction in the High Court of Justice, Queen’s Bench Division and Manchester District Registry Mercantile Court in Manchester, England. The cases have since been transferred to the High Court of Justice, Queen’s Bench Division, Commercial Court in London. On March 7, 2014, the parties to the separate proceedings filed by Terra Firma in 2013 before the High Court of Justice, Queen’s Bench Division, consented to the service by plaintiffs of an amended complaint incorporating the claims that would have proceeded to trial in the United States District Court for the Southern District of New York in July 2014, had the New York action not been dismissed. A trial (which is based on allegations of fraudulent misrepresentations) is scheduled to begin in London on June 7, 2016. Additional information concerning this action is publicly available in court filings under the claim reference Terra Firma Investments (GP) 2 Ltd. & Ors v Citigroup Global Markets Ltd. & Ors (CL-2013-000293). Tribune Company Bankruptcy Certain Citigroup affiliates have been named as defendants in adversary proceedings related to the Chapter 11 cases of Tribune Company (Tribune) filed in the United States Bankruptcy Court for the District of Delaware, asserting claims arising out of the approximately $11 billion leveraged buyout of Tribune in 2007. On August 2, 2013, the Litigation Trustee, as successor plaintiff to the Official Committee of Unsecured Creditors, filed a fifth amended complaint in the adversary proceeding KIRSCHNER v. FITZSIMONS, ET AL. The complaint seeks to avoid and recover as actual fraudulent transfers the transfers of Tribune stock that occurred as a part of the leveraged buyout. Several Citigroup affiliates are named as “Shareholder Defendants” and are alleged to have tendered Tribune stock to Tribune as a part of the buyout. Several Citigroup affiliates are named as defendants in certain actions brought by Tribune noteholders, also seeking to recover the transfers of Tribune stock that occurred as a part of the leveraged buyout, as alleged state-law constructive fraudulent conveyances. Finally, Citigroup Global Markets Inc. (CGMI) has been named in a separate action as a defendant in connection with its role as advisor to Tribune. The noteholders’ claims were previously dismissed, and an appeal to the United States Court of Appeals for the Second Circuit is pending. A motion to dismiss the action against CGMI in its role as advisor to Tribune is pending. In the FITZSIMONS action, claims against certain Citigroup affiliates have been dismissed or reduced in amount by various orders. Additional information concerning these actions is publicly available in court filings under the docket numbers 08-13141 (Bankr. D. Del.) (Carey, J.), 11 MD 02296 (S.D.N.Y.) (Sullivan, J.), 12 MC 2296 (S.D.N.Y.) (Sullivan, J.), and 13-3992 (2d Cir.).

Foreign Exchange Matters Regulatory Actions: Government and regulatory agencies in the U.S. and in other jurisdictions are conducting investigations or making inquiries regarding Citigroup’s foreign exchange business. Citigroup is fully cooperating with these and related investigations and inquiries. Antitrust and Other Litigation: Numerous foreign exchange dealers, including Citigroup and Citibank, are named as defendants in putative class actions that are proceeding on a consolidated basis in the United States District Court for the Southern District of New York under the caption IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION. The plaintiffs in these actions allege that the defendants colluded to manipulate the 165

WM/Reuters rate (WMR), thereby causing the putative classes to suffer losses in connection with WMR-based financial instruments. The plaintiffs assert federal and state antitrust claims and claims for unjust enrichment, and seek compensatory damages, treble damages and declaratory and injunctive relief. On March 31, 2014, plaintiffs in the putative class actions filed a consolidated amended complaint. Citibank, Citigroup, and Citibank Korea Inc., as well as numerous other foreign exchange dealers, were named as defendants in a putative class action captioned SIMMTECH CO. v. BARCLAYS BANK PLC, ET AL. (SIMMTECH) that was proceeding before the same court. The plaintiff sought to represent a putative class of persons who traded foreign currency with the defendants in Korea, alleging that the class suffered losses as a result of the defendants’ alleged WMR manipulation. The plaintiff asserted federal and state antitrust claims, and sought compensatory damages, treble damages and declaratory and injunctive relief. Additionally, Citibank and Citigroup, as well as numerous other foreign exchange dealers, were named as defendants in a putative class action captioned LARSEN v. BARCLAYS BANK PLC, ET AL. (LARSEN), that was proceeding before the same court. The plaintiff sought to represent a putative class of persons or entities in Norway who traded foreign currency with defendants, alleging that the class suffered losses as a result of defendants’ alleged WMR manipulation. The plaintiff asserted federal antitrust and unjust enrichment claims, and sought compensatory damages, treble damages and declaratory and injunctive relief. Citigroup and Citibank, along with other defendants, moved to dismiss all of these actions. On January 28, 2015, the court issued an opinion and order denying the motion as to the IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION plaintiffs, but dismissing the claims of the SIMMTECH and LARSEN plaintiffs in their entirety on the grounds that their federal claims were barred by the Foreign Trade Antitrust Improvements Act and their state claims had an insufficient nexus to New York. Additional information concerning these actions is publicly available in court filings under the docket numbers 13 Civ. 7789, 13 Civ. 7953, and 14 Civ. 1364 (S.D.N.Y.) (Schofield, J.). Additional actions have been consolidated in the IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION proceeding, including lawsuits brought by, or on behalf of putative classes of, investors that transacted in exchange-traded foreign exchange futures contracts and/or options on foreign exchange futures contracts on certain exchanges. The plaintiffs allege that they suffered losses as a result of the defendants’ alleged manipulation of, and collusion with respect to, the foreign exchange market. The plaintiffs allege violations of the Commodity Exchange Act, the Sherman Act, and/or the Clayton Act, and seek compensatory damages, treble damages and declaratory and injunctive relief. On December 15, 2015, the court entered an order preliminarily approving a proposed settlement between the Citi defendants and classes of plaintiffs who traded foreign exchange instruments in the spot market and on exchanges.

The proposed settlement provides for the Citi defendants to receive a release in exchange for a payment of $394 million (which was made on December 18, 2015) plus a separate payment of $8 million (which is due upon final approval of the settlement by the court). Additional information concerning these actions is publicly available in court filings under the following docket numbers: 15 Civ. 1350; 15 Civ. 2705; 15 Civ. 4230; 15 Civ. 4436; and 15 Civ. 4926 (S.D.N.Y.) (Schofield, J.). On May 21, 2015, an action captioned NYPL v. JPMORGAN CHASE & CO., ET. AL was brought in the United States District Court for the Northern District of California against Citigroup, as well as numerous other foreign exchange dealers. The plaintiff seeks to represent a putative class of “consumers and businesses in the United States who directly purchased supracompetitive foreign currency exchange rates” from defendants for their end use. The plaintiff filed an amended complaint on June 11, 2015, alleging violations of the Sherman Act, and seeking compensatory damages, treble damages and declaratory and injunctive relief. On November 9, 2015, the court granted the defendants’ motion to transfer the action to the United States District Court for the Southern District of New York for possible consolidation with IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION. Additional information concerning this action is publicly available in court filings under the docket numbers 15 Civ. 2290 (N.D. Cal.) (Chhabria, J.) and 15 Civ. 9300 (S.D.N.Y.) (Schofield, J.). On June 3, 2015, an action captioned ALLEN v. BANK OF AMERICA CORPORATION, ET AL. was brought in the United States District Court for the Southern District of New York against Citigroup, as well as numerous other foreign exchange dealers. The plaintiff seeks to represent a putative class of participants, beneficiaries, and named fiduciaries of qualified Employee Retirement Income Security Act (ERISA) plans for whom a defendant provided foreign exchange transactional services or authorized or permitted foreign exchange transactional services involving a plan’s assets in connection with its exercise of authority or control regarding an ERISA plan. The plaintiff alleges violations of ERISA, and seeks compensatory damages, restitution, disgorgement and declaratory and injunctive relief. On June 29, 2015, ALLEN was consolidated with IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION for discovery purposes only. Additional information concerning this action is publicly available in court filings under the docket number 15 Civ. 4285 (S.D.N.Y.) (Schofield, J.). In September 2015, putative class actions captioned BÉLAND v. ROYAL BANK OF CANADA, ET AL. and STAINES v. ROYAL BANK OF CANADA, ET AL. were filed in the Quebec Superior Court of Justice and the Ontario Superior Court of Justice, respectively, against Citigroup and Related Parties, as well as numerous other foreign exchange dealers. Plaintiffs allege that defendants conspired to fix the prices and supply of currency purchased in the foreign exchange market, and that this manipulation caused investors to pay inflated rates for currency and/or to receive deflated rates for currency. Plaintiffs assert claims under the Canadian 166

Competition Act and the Quebec Civil Code and/or for civil conspiracy, unjust enrichment and waiver of tort. Plaintiffs seek compensatory and punitive damages, or disgorgement, on behalf of putative classes of all persons in Quebec or in Canada who entered into a foreign exchange instrument or participated in a fund or investment vehicle that entered into a foreign exchange instrument between January 1, 2003 and December 31, 2013. Additional information concerning these actions is publicly available in court filings under the docket numbers 200-06-000189-152 (C.S.Q. Quebec) and CV-15-536174 (Ont. S.C.J.). On September 16, 2015, an action captioned NEGRETE v. CITIBANK, N.A. was filed in the United States District Court for the Southern District of New York. Plaintiffs allege that Citibank, N.A. engaged in conduct in connection with plaintiffs’ foreign exchange trading that caused them losses. Plaintiffs assert claims for fraud, breach of contract, and negligence, and seek compensatory damages, punitive damages and injunctive relief. On November 17, 2015, Citi filed a motion to dismiss and a motion to stay discovery pending resolution of the motion to dismiss. On December 7, 2015, the court granted Citi’s motion for a stay of discovery. Additional information concerning this action is publicly available in court filings under the docket number 15 Civ. 7250 (S.D.N.Y.) (Sweet, J.). Derivative Actions and Related Proceedings: In June 2015, Citigroup was named as a defendant in IRA FOR THE BENEFIT OF VICTORIA SHAEV V. CITIGROUP INC. The complaint was filed by a putative stockholder in New York Supreme Court seeking to inspect Citigroup’s books and records pursuant to Section 220 of Chapter 8 of the Delaware Corporations Law with regard to various matters, including Citigroup’s participation and activity in foreign exchange markets. On January 26, 2016, the court granted Citigroup’s motion to dismiss the complaint. Additional information concerning this action is publicly available in court filings under the docket number 652339/2015 (N.Y. Sup. Ct.).

derivative instruments tied to USD LIBOR. Each of these putative classes alleges that the panel bank defendants conspired to suppress USD LIBOR: (i) OTC purchasers assert claims under the Sherman Act and for unjust enrichment and breach of the implied covenant of good faith and fair dealing; and (ii) purchasers of exchange-traded derivative instruments assert claims under the Commodity Exchange Act and the Sherman Act and for unjust enrichment. Individual actions commenced by various Charles Schwab entities also were consolidated into the LIBOR MDL. The plaintiffs seek compensatory damages and restitution for losses caused by the alleged violations, as well as treble damages under the Sherman Act. The Schwab and OTC plaintiffs also seek injunctive relief. Additional actions have been consolidated in the LIBOR MDL proceeding, including (i) lawsuits filed by, or on behalf of putative classes of, community and other banks, savings and loans institutions, credit unions, municipalities and purchasers and holders of LIBOR-linked financial products; and (ii) lawsuits filed by putative classes of lenders and adjustable rate mortgage borrowers. The plaintiffs allege that defendant panel banks artificially suppressed USD LIBOR in violation of applicable law and seek compensatory and other damages. Additional information relating to these actions is publicly available in court filings under the following docket numbers: 12 Civ. 4205; 12 Civ. 5723; 12 Civ. 5822; 12 Civ. 6056; 12 Civ. 6693; 12 Civ. 7461; 13 Civ. 346; 13 Civ. 407; 13 Civ. 1016, 13 Civ. 1456, 13 Civ. 1700, 13 Civ. 2262, 13 Civ. 2297; 13 Civ. 4018; 13 Civ. 7720; 14 Civ. 146 (S.D.N.Y.) (Buchwald, J.); 12 Civ. 6294 (E.D.N.Y.) (Seybert, J.); 12 Civ. 6571 (N.D. Cal.) (Conti, J.); 12 Civ. 10903 (C.D. Cal.) (Snyder, J.); 13 Civ. 48 (S.D. Cal.) (Sammartino, J.); 13 Civ. 62 (C.D. Cal.) (Phillips, J.); 13 Civ. 106 (N.D. Cal.) (Beller, J.); 13 Civ. 108 (N.D. Cal.) (Ryu, J.); 13 Civ. 109 (N.D. Cal.) (Laporte, J.); 13 Civ. 122 (C.D. Cal.) (Bernal, J.); 13 Civ. 334, 13 Civ. 335 (S.D. Iowa) (Pratt, J.); 13 Civ. 342 (E.D. Va.) (Brinkema, J.); 13 Civ. 1466 (S.D. Cal.) (Lorenz, J.); 13 Civ. 1476 (E.D. Cal.) (Mueller, J.); 13 Civ. 2149 (S.D. Tex.) (Hoyt, J.); 13 Civ. 2244 (N.D. Cal.) (Hamilton, J.); 13 Civ. 2921 (N.D. Cal.) (Chesney, J.); 13 Civ. 2979 (N.D. Cal.) (Tigar, J.); 13 Civ. 4352 (E.D. Pa.) (Restrepo, J.); 13 Civ. 5278 (N.D. Cal.) (Vadas, J.); 15 Civ. 1334 (S.D.N.Y.) (Buchwald, J.); and 15 Civ. 2973 (S.D.N.Y.) (Buchwald, J.). On August 4, 2015, the court in IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION granted in part defendants’ motions to dismiss various individual actions that were previously stayed, dismissing plaintiffs’ antitrust claims for failure to state a claim, and holding that plaintiffs cannot pursue certain other claims based on lack of personal jurisdiction or the operation of the applicable statute of limitations. The court allowed certain of plaintiffs’ claims for common law fraud, breach of contract, unjust enrichment and tortious interference to proceed. On October 8, 2015, the City of Philadelphia and the Pennsylvania Intergovernmental Cooperation Authority amended their complaint in response to the court’s August 4, 2015 decision. Additional information concerning these

Interbank Offered Rates-Related Litigation and Other Matters Regulatory Actions: The CFTC and a consortium of state attorneys general, as well as government and regulatory agencies in other jurisdictions, are conducting investigations or making inquiries regarding submissions made by panel banks to bodies that publish various interbank offered rates and other benchmark rates. As members of a number of such panels, Citigroup subsidiaries have received requests for information and documents. Citigroup is cooperating with the investigations and inquiries and is responding to the requests. Antitrust and Other Litigation: Citigroup and Citibank, along with other U.S. Dollar (USD) LIBOR panel banks, are defendants in a multi-district litigation (MDL) proceeding before the United States District Court for the Southern District of New York captioned IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION (the LIBOR MDL). Consolidated amended complaints were filed on behalf of two separate putative classes of plaintiffs: (i) over-the-counter (OTC) purchasers of derivative instruments tied to USD LIBOR; and (ii) purchasers of exchange-traded 167

Interchange Fees Litigation Beginning in 2005, several putative class actions were filed against Citigroup and Related Parties, together with Visa, MasterCard and other banks and their affiliates, in various federal district courts and consolidated with other related cases in a multi-district litigation proceeding before Judge Gleeson in the United States District Court for the Eastern District of New York (Interchange MDL). This proceeding is captioned IN RE PAYMENT CARD INTERCHANGE FEE AND MERCHANT DISCOUNT ANTITRUST LITIGATION. The plaintiffs, merchants that accept Visa- and MasterCard-branded payment cards as well as membership associations that claim to represent certain groups of merchants, allege, among other things, that defendants have engaged in conspiracies to set the price of interchange and merchant discount fees on credit and debit card transactions and to restrain trade through various Visa and MasterCard rules governing merchant conduct, all in violation of Section 1 of the Sherman Act and certain California statutes. Supplemental complaints also have been filed against defendants in the putative class actions alleging that Visa’s and MasterCard’s respective initial public offerings were anticompetitive and violated Section 7 of the Clayton Act, and that MasterCard’s initial public offering constituted a fraudulent conveyance. On January 14, 2014, the court entered a final judgment approving the terms of a class settlement providing for, among other things, a total payment to the class of $6.05 billion; a rebate to merchants participating in the damages class settlement of 10 basis points on interchange collected for a period of eight months by the Visa and MasterCard networks; and changes to certain network rules. On July 28, 2015, various objectors to the class settlement filed motions in the U.S. District Court to vacate the court’s prior approval of the class settlement, alleging improprieties by two of the lawyers involved in the Interchange MDL. Various objectors appealed from the final class settlement approval order with the United States Court of Appeals for the Second Circuit, which heard oral argument regarding the appeals on September 28, 2015. Additional information concerning these consolidated actions is publicly available in court filings under the docket number MDL 05-1720 (E.D.N.Y.) (Brodie, J.) and 12-4671 (2d Cir.). Numerous merchants, including large national merchants, have requested exclusion from the class settlements, and some of those opting out have filed complaints against Visa, MasterCard, and in some instances one or more issuing banks. One of these suits, 7-ELEVEN, INC., ET AL. v. VISA INC., ET AL., brought on behalf of numerous individual merchants, names Citigroup as a defendant. On December 5, 2014, the Interchange MDL, including the opt-out cases, was transferred from Judge Gleeson to Judge Brodie. Additional information concerning these actions is publicly available in court filings under the docket numbers MDL 05-1720 (E.D.N.Y.) (Brodie, J.).

actions is publicly available in court filings under the docket number 11 MD 2262 (S.D.N.Y.) (Buchwald, J.). On June 30, 2014, the United States Supreme Court granted a petition for a writ of certiorari in GELBOIM, ET AL. v. BANK OF AMERICA CORP., ET AL. with respect to the dismissal by the United States Court of Appeals for the Second Circuit of an appeal by the plaintiff class of indirect OTC purchasers of U.S. debt securities. On January 21, 2015, the Supreme Court ruled that, contrary to the Second Circuit’s opinion, the plaintiffs had a right to appeal, and remanded the case to the Second Circuit for consideration of the plaintiffs’ appeal on the merits. The Second Circuit heard oral argument on November 13, 2015. Additional information concerning this appeal is publicly available in court filings under the docket numbers 13-3565 (2d Cir.), 13-3636 (2d Cir.), and 13-1174 (U.S.). Citigroup and Citibank, along with other USD LIBOR panel banks, also are named as defendants in an individual action filed in the United States District Court for the Southern District of New York on February 13, 2013, captioned 7 WEST 57th STREET REALTY CO. v. CITIGROUP, INC., ET AL. The plaintiff alleges that the defendant panel banks manipulated USD LIBOR to keep it artificially high and that this manipulation affected the value of plaintiffs’ OTC municipal bond portfolio in violation of federal and state antitrust laws and federal RICO law. The plaintiff seeks compensatory damages, treble damages where authorized by statute, and declaratory relief. On March 31, 2015, the United States District Court for the Southern District of New York dismissed this action. On June 1, 2015, the plaintiff moved for leave to file a second amended complaint. Additional information concerning this action is publicly available in court filings under the docket number 13 Civ. 981 (Gardephe, J.). On May 2, 2014, plaintiffs in the class action SULLIVAN v. BARCLAYS PLC, ET AL. pending in the United States District Court for the Southern District of New York filed a second amended complaint naming Citigroup and Citibank, N.A. as defendants. Plaintiffs claim to have suffered losses as a result of purported EURIBOR manipulation and assert claims under the Commodity Exchange Act, the Sherman Act and the federal RICO law, and for unjust enrichment. On September 11, 2014, the court granted the U.S. Department of Justice’s motion to stay discovery for eight months, until May 12, 2015. Plaintiffs filed a fourth amended complaint on August 13, 2015. Defendants filed a motion to dismiss on October 14, 2015. Additional information concerning this action is publicly available in court filings under the docket number 13 Civ. 2811 (S.D.N.Y.) (Castel, J.).

168

ISDAFIX-Related Litigation and Other Matters Regulatory Actions: Government and regulatory agencies in the U.S., including the CFTC, are conducting investigations or making inquiries concerning submissions for the global benchmark for fixed interest rate swaps (ISDAFIX) and trading in products that reference ISDAFIX. Citigroup is fully cooperating with these and related investigations and inquiries. Antitrust and Other Litigation. Beginning in September 2014, various plaintiffs filed putative class action complaints in the United States District Court for the Southern District of New York against Citigroup and other U.S. dollar (USD) ISDAFIX panel banks, which are proceeding on a consolidated basis. On February 12, 2015, plaintiffs filed an amended complaint alleging that the defendants colluded to manipulate ISDAFIX, thereby causing the putative class to suffer losses in connection with USD interest rate derivatives purchased from the defendants. Plaintiffs assert federal and various common law claims and seek compensatory damages, treble damages where authorized by statute, restitution and declaratory and injunctive relief. On April 13, 2015, defendants filed a motion to dismiss the claims in plaintiffs’ amended consolidated complaint. Additional information concerning these actions is publicly available in court filings under the consolidated lead docket number 14 Civ. 7126 (S.D.N.Y.) (Furman, J.).

Citigroup’s and certain of its affiliates’ present and former directors and officers. The plaintiffs asserted claims derivatively for violation of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, waste of corporate assets, and unjust enrichment in connection with the defendants’ alleged failure to exercise appropriate oversight and management of BSA and AML laws and regulations and related consent decrees concerning Citigroup’s subsidiaries Banco Nacional de Mexico, or Banamex, and BUSA. On December 14, 2015, plaintiffs, with the permission of the court, filed an amended complaint naming additional present and former directors and officers of Citigroup affiliates as defendants. Defendants’ motion to dismiss the amended complaint was filed on January 22, 2016. Additional information concerning this action is publicly available in court filings under the docket number 15 Civ. 7501 (S.D.N.Y.) (Furman, J.). Oceanografia Fraud and Related Matters Regulatory Actions: As a result of Citigroup’s announcement in the first quarter of 2014 of a fraud discovered in a Petróleos Mexicanos (Pemex) supplier program involving Oceanografía SA de CV (OSA), a Mexican oil services company and a key supplier to Pemex, the SEC commenced a formal investigation and the U.S. Department of Justice requested information regarding Banamex’s dealings with OSA. The SEC inquiry has included requests for documents and witness testimony. Citi continues to cooperate fully with these inquiries. Derivative Actions and Related Proceedings: Beginning in April 2014, Citigroup has been named as a defendant in two complaints filed by its stockholders seeking to inspect Citigroup’s books and records pursuant to Section 220 of Chapter 8 of the Delaware Corporations Law with regard to various matters, including the OSA fraud. On April 24, 2015, in the action brought by Oklahoma Firefighters Pension & Retirement System, the Court of Chancery issued a decision adopting the Master in Chancery’s September 30, 2014 recommendation granting in part and denying in part plaintiff’s request to inspect Citigroup’s books and records. On May 5, 2015, Citigroup answered a similar complaint filed by Key West Municipal Firefighters & Police Officers’ Retirement Trust Fund. Additional information concerning these actions is publicly available in court filings under the docket numbers C.A. No. 9587-ML (Del. Ch.) (LeGrow, M.) and C.A. No. 10468-ML (Del. Ch.) (LeGrow, M.).

Money Laundering Inquiries Regulatory Actions: Citigroup and Related Parties, including Citigroup’s indirect, wholly owned subsidiary Banamex USA (BUSA), a California state-chartered bank, have received grand jury subpoenas issued by the United States Attorney’s Office for the District of Massachusetts concerning, among other issues, policies, procedures and activities related to BUSA, Citibank and related parties’ compliance with Bank Secrecy Act (BSA) and anti-money laundering (AML) requirements under applicable federal laws and banking regulations. Citigroup and BUSA also have received inquiries and requests for information from other regulators, including the Financial Crimes Enforcement Network, concerning BSAand AML-related issues. Citigroup is cooperating fully with these inquiries. Citibank has received a subpoena from the United States Attorney for the Eastern District of New York in connection with its investigation of alleged bribery, corruption and money laundering associated with the Federation Internationale de Football Association (FIFA), and the potential involvement of financial institutions in that activity. The subpoena requests information relating to, among other things, banking relationships and transactions at Citibank and its affiliates associated with certain individuals and entities identified as having had involvement with the alleged corrupt conduct. Citi is cooperating with the authorities in this matter. Derivative Actions and Related Proceedings: On September 22, 2015, a derivative action captioned FIREMAN’S RETIREMENT SYSTEM OF ST. LOUIS, ET AL. v. CORBAT, ET AL. was filed in the United States District Court for the Southern District of New York on behalf of Citigroup (as nominal defendant) against certain of

Parmalat Litigation and Related Matters On July 29, 2004, Dr. Enrico Bondi, the Extraordinary Commissioner appointed under Italian law to oversee the administration of various Parmalat companies, filed a complaint in New Jersey state court against Citigroup and Related Parties alleging, among other things, that the defendants “facilitated” a number of frauds by Parmalat insiders. On October 20, 2008, following trial, a jury rendered a verdict in Citigroup’s favor on Parmalat’s claims and in favor of Citibank, N.A. on three counterclaims. Parmalat has exhausted all appeals, and the judgment is now final. Additional information concerning this action is publicly available in court filings under the docket number 169

A-2654-08T2 (N.J. Sup. Ct.). Following the jury verdict awarding $431 million in damages on Citigroup’s counterclaim, Citigroup has taken steps to enforce that judgment in the Italian courts. On August 29, 2014, the Court of Appeal of Bologna affirmed the decision in the full amount of $431 million, to be paid in Parmalat shares. Parmalat has appealed the judgment to the Italian Supreme Court. Prosecutors in Parma and Milan, Italy, brought criminal proceedings against certain current and former Citigroup employees (along with numerous other investment banks and certain of their current and former employees, as well as former Parmalat officers and accountants). On April 18, 2011, the Milan criminal court acquitted the sole Citigroup defendant of market-rigging charges. The Milan prosecutors appealed part of that judgment and sought administrative remedies against Citigroup under Italian Administrative Law 231. On February 5, 2014, the Milan Court of Appeal restricted the remedy to an administrative fine of €500,000, which was later upheld by the Italian Supreme Court. Additionally, the Parmalat administrator filed a purported civil complaint against Citigroup in the context of the Parma criminal proceedings. On March 5, 2015, the Parma criminal court accepted plea bargain agreements from each of the defendants (eight current and former Citigroup employees) and closed the criminal proceedings that had been commenced by prosecutors in Parma. As a result of the agreements entered into by the individuals, the Parma criminal court was no longer able to hear the civil complaint filed by the Parmalat administrator against Citigroup. On June 16, 2015, the Parmalat administrator refiled the claim in an Italian civil court in Milan, this time claiming damages of €1.8 billion against Citigroup and Related Parties and other financial institutions. A preliminary hearing in this new Milan proceeding is scheduled for April 19, 2016.

and assert claims of alleged collusion under the antitrust laws and manipulation under the Commodity Exchange Act. These actions were filed in the United States District Court for the Southern District of New York, the Northern District of Illinois, the Southern District of Alabama and the District of the Virgin Islands. In December 2015, the cases were consolidated before Judge Paul G. Gardephe in the United States District Court for the Southern District of New York by the Judicial Panel on Multidistrict Litigation. Additional information relating to these actions is publicly available in court filings under the docket number: 15-MD-2673 (S.D.N.Y.) (Gardephe, J.). Settlement Payments Payments required in settlement agreements described above have been made or are covered by existing litigation accruals.

Regulatory Review of Student Loan Servicing Citibank is currently subject to regulatory investigation concerning certain student loan servicing practices. Citibank is cooperating with the investigation. Similar servicing practices have been the subject of an enforcement action against at least one other institution. In light of that action and the current regulatory focus on student loans, regulators may order that Citibank remediate customers and/or impose penalties or other relief. Sovereign Securities Matters Regulatory Actions: Government and regulatory agencies in the U.S. and in other jurisdictions are conducting investigations or making inquiries regarding Citigroup’s sales and trading activities in connection with sovereign securities. Citigroup is fully cooperating with these investigations and inquiries. Antitrust and Other Litigation: Beginning in July 2015, CGMI, along with numerous other U.S. Treasury primary dealer banks, have been named as defendants in a number of substantially similar putative class actions involving allegations that they colluded to manipulate U.S. Treasury securities markets. The actions are based upon the defendants’ roles as registered primary dealers of U.S. Treasury securities 170

29. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Citigroup expects to amend its Registration Statement on Form S-3 with the SEC (File No. 33-192302) to add its wholly owned subsidiary, Citigroup Global Markets Holdings Inc. (CGMHI), as a co-registrant. Any securities issued by CGMHI under the Form S-3 will be fully and unconditionally guaranteed by Citigroup. The following are the Condensed Consolidating Statements of Income and Comprehensive Income for the years ended December 31, 2015, 2014 and 2013, Condensed Consolidating Balance Sheet as of December 31, 2015 and 2014 and Condensed Consolidating Statement of Cash Flows for the years ended December 31, 2015, 2014 and 2013 for Citigroup Inc., the parent holding company (Citigroup parent company), CGMHI, other Citigroup subsidiaries and eliminations and total consolidating adjustments. “Other Citigroup subsidiaries and eliminations” 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 and investment in subsidiaries. These Condensed Consolidating Financial Statements have been prepared and presented in accordance with SEC Regulation S-X Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” 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.

171

Condensed Consolidating Statements of Income and Comprehensive Income Year ended December 31, 2015 Citigroup parent company

In millions of dollars

Revenues Dividends from subsidiaries Interest revenue Interest revenue—intercompany Interest expense Interest expense—intercompany Net interest revenue Commissions and fees Commissions and fees—intercompany Principal transactions Principal transactions—intercompany Other income Other income—intercompany Total non-interest revenues Total revenues, net of interest expense Provisions for credit losses and for benefits and claims Operating expenses Compensation and benefits Compensation and benefits—intercompany Other operating Other operating—intercompany Total operating expenses Income (loss) before income taxes and equity in undistributed income of subsidiaries Provision (benefit) for income taxes Equity in undistributed income of subsidiaries Income (loss) from continuing operations Income (loss) from discontinued operations, net of taxes Net income (loss) before attribution of noncontrolling interests Net income attributable to noncontrolling interests Net income (loss) after attribution of noncontrolling interests Comprehensive income Other comprehensive income (loss) Comprehensive income

$

— 4,389 272 997 1,295 2,369 4,854 214 10,365 (8,709) 426 1,079 8,229 10,598 —

$

(58) $ 59 271 247 519 $

5,003 — 1,948 1,164 8,115

$

11,301 $ (1,340) 4,601 17,242 $ —

2,483 537 — 1,946 —

$

$

17,242 —

$

1,946 9

$

17,242

$

1,937

$ $

(6,128) $ 11,114 $

$ $

$ $ $ $

$ $

$

13,500 9 2,880 4,563 (475) (1,199) — — 1,012 (1,733) 3,294 (3,054) (481) 11,820 —

CGMHI

172

$

Other Citigroup subsidiaries and eliminations

$ $

$ $ $

$ $

$ $ $

— 54,153 (3,152) 6,361 (820) 45,460 6,994 (214) (5,369) 10,442 8,148 1,975 21,976 67,436 7,913

Consolidating adjustments $

$ $

$ $ $

(13,500) — — — — — — — — — — — — (13,500) —

Citigroup consolidated $

$ $

$ $ $

16,824 $ (59) 19,627 (1,411) 34,981 $

— — — — —

24,542 $ 8,243 — 16,299 $ (54)

(13,500) $ — (4,601) (18,101) $ —

24,826 7,440 — 17,386 (54)

$

16,245 81

$

(18,101) $ —

17,332 90

$

16,164

$

(18,101) $

17,242

(6,367) $ 9,797 $

6,492 $ (11,609) $

(6,128) 11,114

$

$

(125) $ 1,812 $

$

— 58,551 — 11,921 — 46,630 11,848 — 6,008 — 11,868 — 29,724 76,354 7,913

$

21,769 — 21,846 — 43,615

Condensed Consolidating Statements of Income and Comprehensive Income Year ended December 31, 2014 Citigroup parent company

In millions of dollars

Revenues Dividends from subsidiaries Interest revenue Interest revenue—intercompany Interest expense Interest expense—intercompany Net interest revenue Commissions and fees Commissions and fees—intercompany Principal transactions Principal transactions—intercompany Other income Other income—intercompany Total non-interest revenues Total revenues, net of interest expense Provisions for credit losses and for benefits and claims Operating expenses Compensation and benefits Compensation and benefits—intercompany Other operating Other operating—intercompany Total operating expenses Income (loss) before income taxes and equity in undistributed income of subsidiaries Provision (benefit) for income taxes Equity in undistributed income of subsidiaries Income (loss) from continuing operations Income (loss) from discontinued operations, net of taxes Net income (loss) before attribution of noncontrolling interests Net income attributable to noncontrolling interests Net income (loss) after attribution of noncontrolling interests Comprehensive income Other comprehensive income (loss) Comprehensive income

$

$ $

$ $ $ $

$ $

CGMHI

8,900 12 3,109 5,055 (618) (1,316) — — 13 (672) 1,037 (131) 247 7,831 —

$

158 38 1,572 212 1,980

$

$ $

$ $ $

$

Other Citigroup subsidiaries and eliminations

— 4,210 144 1,010 1,258 2,086 5,185 95 (1,115) 3,822 425 1,206 9,618 11,704 —

$

5,156 — 6,082 1,651 12,889

$

$ $

$ $ $

$

Consolidating adjustments

— 57,461 (3,253) 7,625 (640) 47,223 7,847 (95) 7,800 (3,150) 8,034 (1,075) 19,361 66,584 7,467

$

18,645 (38) 23,438 (1,863) 40,182

$

$ $

$ $ $

$

5,851 $ (643) 816 7,310 $ —

(1,185) $ 600 — (1,785) $ —

18,935 7,240

$

11,695 (2)

$

$

7,310 —

$

(1,785) $ 8

11,693 184

$

7,310

$

(1,793) $

(4,083) $ 3,227 $

194 $ (1,599) $

$

$ $

173

(8,900) — — — — — — — — — — — — (8,900) — — — — — —

Citigroup consolidated $

$ $

$ $ $ $

$

— 61,683 — 13,690 — 47,993 13,032 — 6,698 — 9,496 — 29,226 77,219 7,467 23,959 — 31,092 — 55,051

(8,900) $ — (816) (9,716) $ —

14,701 7,197 — 7,504 (2)

$

(9,716) $ —

7,502 192

11,509

$

(9,716) $

7,310

(4,760) 6,749

$ $

4,566 $ (5,150) $

(4,083) 3,227

Condensed Consolidating Statements of Income and Comprehensive Income Year ended December 31, 2013 Citigroup parent company

In millions of dollars

Revenues Dividends from subsidiaries Interest revenue Interest revenue—intercompany Interest expense Interest expense—intercompany Net interest revenue Commissions and fees Commissions and fees—intercompany Principal transactions Principal transactions—intercompany Other income Other income—intercompany Total non-interest revenues Total revenues, net of interest expense Provisions for credit losses and for benefits and claims Operating expenses Compensation and benefits Compensation and benefits—intercompany Other operating Other operating—intercompany Total operating expenses Income (loss) before income taxes and equity in undistributed income of subsidiaries Provision (benefit) for income taxes Equity in undistributed income of subsidiaries Income (loss) from continuing operations Income (loss) from discontinued operations, net of taxes Net income (loss) before attribution of noncontrolling interests Net income attributable to noncontrolling interests Net income (loss) after attribution of noncontrolling interests Comprehensive income Other comprehensive income (loss) Comprehensive income

$

$ $

$ $ $ $

$ $

$

13,044 14 3,220 5,995 (436) (2,325) — — (257) (387) 3,770 (2,987) 139 10,858 — 136 52 474 189 851

CGMHI $

$ $

$ $ $ $

$

10,007 $ (1,638) 2,014 13,659 $ —

Other Citigroup subsidiaries and eliminations

— 4,475 159 1,067 1,425 2,142 4,871 27 389 1,491 571 928 8,277 10,419 18

$

5,169 — 3,461 2,856 11,486

$

$ $

$ $ $

$

— 58,481 (3,379) 9,115 (989) 46,976 8,070 (27) 7,170 (1,104) 5,347 2,059 21,515 68,491 8,496

Consolidating adjustments $

$ $

$ $ $

18,662 $ (52) 20,506 (3,045) 36,071 $

(1,085) $ (249) — (836) $ —

23,924 8,073 — 15,851 270

$

$

(13,044) — — — — — — — — — — — — (13,044) — — — — — —

Citigroup consolidated $

$ $

$ $ $ $

— 62,970 — 16,177 — 46,793 12,941 — 7,302 — 9,688 — 29,931 76,724 8,514

$

23,967 — 24,441 — 48,408

(13,044) $ — (2,014) (15,058) $ —

19,802 6,186 — 13,616 270

$

13,659 —

$

(836) $ 25

16,121 202

$

(15,058) $ —

13,886 227

$

13,659

$

(861) $

15,919

$

(15,058) $

13,659

$ $

(2,237) $ 11,422 $

(139) $ (1,000) $

(3,138) $ 12,781 $

3,277 $ (11,781) $

(2,237) 11,422

174

Condensed Consolidating Balance Sheet December 31, 2015 Citigroup parent company

In millions of dollars

Assets Cash and due from banks Cash and due from banks—intercompany Federal funds sold and resale agreements Federal funds sold and resale agreements—intercompany Trading account assets Trading account assets—intercompany Investments Loans, net of unearned income Loans, net of unearned income—intercompany Allowance for loan losses Total loans, net Advances to subsidiaries Investments in subsidiaries Other assets (1) Other assets—intercompany Total assets Liabilities and equity Deposits Deposits—intercompany Federal funds purchased and securities loaned or sold Federal funds purchased and securities loaned or sold— intercompany Trading account liabilities Trading account liabilities—intercompany Short-term borrowings Short-term borrowings—intercompany Long-term debt Long-term debt—intercompany Advances from subsidiaries Other liabilities Other liabilities—intercompany Stockholders’ equity Total liabilities and equity (1)

$

$ $

$

— 124 — — (8) 1,032 484 — — — — 104,405 221,362 25,819 58,207 411,425

$

$

— — — 185 — 1,036 146 — 141,914 — 36,453 3,560 6,274 221,857 411,425

Other Citigroup subsidiaries and eliminations

Consolidating adjustments

592 1,403 178,178 15,035 124,731 1,765 402 1,068 — (3) 1,065 — — 36,860 30,737 390,768

$

20,308 (1,527) 41,497 (15,035) 125,233 (2,797) 342,069 616,549 — (12,623) $ 603,926 $ (104,405) — 230,054 (88,944) $ 1,150,379

$

— — 122,459

$

$

22,042 62,386 2,045 188 34,916 2,530 51,171 — 55,482 10,967 26,582 390,768

(22,227) 55,126 (3,081) 20,745 (34,916) 56,831 (51,171) (36,453) 54,827 (17,241) 196,015 $ 1,150,379 $

CGMHI $

$ $

$ $

$

907,887 — 24,037

$ $

$

— — — — — — — — — — — — (221,362) — — (221,362) — — —

Citigroup consolidated $

$ $

$

20,900 — 219,675 — 249,956 — 342,955 617,617 — (12,626) 604,991 — — 292,733 — 1,731,210

$

907,887 — 146,496

— — — — — — — — — — (221,362) (221,362) $

— 117,512 — 21,079 — 201,275 — — 113,869 — 223,092 1,731,210

Other assets for Citigroup parent company at December 31, 2015 included $21.8 billion of placements to Citibank and its branches, of which $13.9 billion had a remaining term of less than 30 days.

175

Condensed Consolidating Balance Sheet December 31, 2014

Citigroup parent company

In millions of dollars

Assets Cash and due from banks Cash and due from banks—intercompany Federal funds sold and resale agreements Federal funds sold and resale agreements—intercompany Trading account assets Trading account assets—intercompany Investments Loans, net of unearned income Loans, net of unearned income—intercompany Allowance for loan losses Total loans, net Advances to subsidiaries Investments in subsidiaries Other assets(1) Other assets—intercompany Total assets Liabilities and equity Deposits Deposits—intercompany Federal funds purchased and securities loaned or sold Federal funds purchased and securities loaned or sold— intercompany Trading account liabilities Trading account liabilities—intercompany Short-term borrowings Short-term borrowings—intercompany Long-term debt Long-term debt—intercompany Advances from subsidiaries Other liabilities Other liabilities—intercompany Stockholders’ equity Total liabilities and equity (1)

$

$ $

$

— 125 — — (103) 707 830 — — — — 77,951 211,004 26,734 84,174 401,422

$

$

— — — 185 3 759 1,075 — 149,512 — 27,430 5,056 7,217 210,185 401,422

CGMHI $

$ $

$ $

$

Other Citigroup subsidiaries and eliminations

239 1,512 194,649 6,601 141,608 4,956 483 1,495 — (45) 1,450 — — 38,654 22,081 412,233

$

— — 149,773

$

22,170 76,965 4,853 2,042 30,862 3,062 39,145 — 49,968 8,385 25,008 412,233

$ $

$

$

Consolidating adjustments

31,869 (1,637) 47,921 (6,601) 155,281 (5,663) 332,130 643,140 — (15,949) 627,191 (77,951) — 243,245 (106,255) 1,239,530

$

899,332 — 23,665

$

$ $

$

(22,355) 62,068 (5,612) 55,218 (30,862) 70,506 (39,145) (27,430) 82,240 (15,602) 187,507 1,239,530 $

— — — — — — — — — — — — (211,004) — — (211,004) — — —

Citigroup consolidated $

$ $

$ $

32,108 — 242,570 — 296,786 — 333,443 644,635 — (15,994) 628,641 — — 308,633 — 1,842,181 — 899,332 — 173,438

— — — 139,036 — — — 58,335 — — — 223,080 — — — — — 137,264 — — (211,004) 211,696 (211,004) $ 1,842,181

Other assets for Citigroup parent company at December 31, 2014 included $42.7 billion of placements to Citibank and its branches, of which $33.9 billion had a remaining term of less than 30 days.

176

Condensed Consolidating Statement of Cash Flows Year ended December 31, 2015 Citigroup parent company

In millions of dollars

Net cash provided by (used in) operating activities of continuing operations Cash flows from investing activities of continuing operations Purchases of investments Proceeds from sales of investments Proceeds from maturities of investments Change in deposits with banks Change in loans Proceeds from sales and securitizations of loans Proceeds from significant disposals Payments due to transfers of net liabilities associated with significant disposals Change in federal funds sold and resales Changes in investments and advances—intercompany Other investing activities Net cash provided by (used in) investing activities of continuing operations Cash flows from financing activities of continuing operations Dividends paid Issuance of preferred stock Treasury stock acquired Proceeds (repayments) from issuance of long-term debt, net

CGMHI

Other Citigroup subsidiaries and eliminations

Consolidating adjustments

Citigroup consolidated

$

27,825

$

12,336

$

(424) $



$

39,737

$

— — 237 — — — —

$

(4) $ 53 — (8,414) — — —

(242,358) $ 141,417 81,810 23,902 1,353 9,610 5,932

— — — — — — —

$

(242,362) 141,470 82,047 15,488 1,353 9,610 5,932

— — (35,548) 3

— 8,037 1,044 (101)

$

(35,308) $

$

(1,253) $ 6,227 (5,452) 127

615

(18,929) 14,858 34,504 (2,523) $

— $ — — (139)

49,576

— — — —

(18,929) 22,895 — (2,621)

$



$

14,883

— $ — — (8,212)

— — — —

$

(1,253) 6,227 (5,452) (8,224)

Proceeds (repayments) from issuance of long-term debt— intercompany, net Change in deposits Change in federal funds purchased and repos Change in short-term borrowings

— — — (845)

12,557 — (27,442) (1,737)

(12,557) 8,555 500 (34,674)

— — — —

— 8,555 (26,942) (37,256)

Net change in short-term borrowings and other advances— intercompany Other financing activities

9,106 (428)

4,054 —

(13,160) —

— —

— (428)

Net cash provided by (used in) financing activities of continuing operations Effect of exchange rate changes on cash and due from banks Change in cash and due from banks Cash and due from banks at beginning of period Cash and due from banks at end of period Supplemental disclosure of cash flow information for continuing operations Cash paid during the year for income taxes Cash paid during the year for interest

$ $ $ $

$

7,482 — (1) 125 124

$ $ $

111 4,916

$

177

$

(12,707) — 244 1,751 1,995

$ $ $

175 2,346

$

$

(59,548) (1,055) (11,451) 30,232 18,781

$ $ $

4,692 4,769

$

$

— — — — —

$ $ $

— —

$

$

(64,773) (1,055) (11,208) 32,108 20,900

4,978 12,031

Non-cash investing activities Decrease in net loans associated with significant disposals reclassified to HFS

$



(9,063) $





(1,402)



(1,402)





(223)



(223)

— — —

— — —

(404) 28,600 276

— — —

(404) 28,600 276

(4,673) $



Decrease in investments associated with significant disposals reclassified to HFS



Decrease in goodwill and intangible assets associated with significant disposals reclassified to HFS Decrease in deposits with banks with significant disposals reclassified to HFS Transfers to loans HFS from loans Transfers to OREO and other repossessed assets Non-cash financing activities Decrease in long-term debt associated with significant disposals reclassified to HFS

$



178

$

$





$

$

$

$

(9,063)

(4,673)

Condensed Consolidating Statement of Cash Flows Year ended December 31, 2014 Citigroup parent company

In millions of dollars

Net cash provided by (used in) operating activities of continuing operations Cash flows from investing activities of continuing operations Purchases of investments Proceeds from sales of investments Proceeds from maturities of investments Change in deposits with banks Change in loans Proceeds from sales and securitizations of loans Proceeds from significant disposals Payments due to transfers of net liabilities associated with significant disposals Change in federal funds sold and resales Changes in investments and advances—intercompany Other investing activities Net cash provided by (used in) investing activities of continuing operations Cash flows from financing activities of continuing operations Dividends paid Issuance of preferred stock Treasury stock acquired Proceeds (repayments) from issuance of long-term debt, net

CGMHI

Other Citigroup subsidiaries and eliminations

$

5,940

$

(10,915) $

$

— 41 155 — — — —

$

(188) $ 42 — 4,183 — — —

— — (7,986) 5

— 8,832 3,549 (72)

$

(7,785) $

$

(633) $ 3,699 (1,232) (3,636)

16,346

51,318

Consolidating adjustments

Citigroup consolidated

$



$

46,343

(258,804) $ 135,741 93,962 36,733 1,170 4,752 346

— — — — — — —

$

(258,992) 135,824 94,117 40,916 1,170 4,752 346

(1,255) 5,635 4,437 (2,696)

— — — —

(1,255) 14,467 — (2,763)

$

20,021

$



$

28,582

— $ — — (634)

— — — 12,183

$

— — — —

$

(633) 3,699 (1,232) 7,913

Proceeds (repayments) from issuance of long-term debt— intercompany, net Change in deposits Change in federal funds purchased and repos Change in short-term borrowings

— — — 749

1,131 — (15,268) 143

(1,131) (48,336) (14,806) (1,991)

— — — —

— (48,336) (30,074) (1,099)

Net change in short-term borrowings and other advances— intercompany Capital contributions from parent Other financing activities

3,297 — (507)

1,212 8,500 —

(4,509) (8,500) (1)

— — —

— — (508)

Net cash provided by (used in) financing activities of continuing operations Effect of exchange rate changes on cash and due from banks Change in cash and due from banks Cash and due from banks at beginning of period Cash and due from banks at end of period

$ $ $

1,737 — (108) 233 125

$ $ $

$

235 5,632

$

$

$

(4,916) — 515 1,236 1,751

$ $ $

$

353 2,298

$

— — —

$

— — —

— — —

$

— — —

$

— — — — —

$ $ $

$

— —

$

4,632 14,001

$

(374) $ 15,100 321

— — —

$

(374) 15,100 321

$

(20,605) $ 500 (864)

— — —

$

(20,605) 500 (864)

$

(67,091) (2,432) 1,816 28,416 30,232

$ $ $

4,044 6,071

$

$

(70,270) (2,432) 2,223 29,885 32,108

Supplemental disclosure of cash flow information for continuing operations Cash paid during the year for income taxes Cash paid during the year for interest Non-cash investing activities Change in loans due to consolidation/deconsolidation of VIEs Transfers to loans held-for-sale from loans Transfers to OREO and other repossessed assets Non-cash financing activities Decrease in deposits associated with reclassifications to HFS Increase in short-term borrowings due to consolidation of VIEs Decrease in long-term debt due to deconsolidation of VIEs

179

Condensed Consolidating Statements of Cash Flows Year ended December 31, 2013 Citigroup parent company

In millions of dollars

Net cash provided by (used in) operating activities of continuing operations Cash flows from investing activities of continuing operations Purchases of investments Proceeds from sales of investments Proceeds from maturities of investments Change in deposits with banks Change in loans Proceeds from sales and securitizations of loans Change in federal funds sold and resales Changes in investments and advances—intercompany Other investing activities Net cash provided by (used in) investing activities of continuing operations Cash flows from financing activities of continuing operations Dividends paid Issuance of preferred stock Redemption of preferred stock Treasury stock acquired Proceeds (repayments) from issuance of long-term debt, net

$

(7,881) $

$



$

63,244

(220,789) $ 130,715 84,598 (73,113) (30,198) 9,123 7,112 (5,108) (2,607)

— — — — — — — — —

$

(220,823) 131,100 84,831 (66,871) (30,198) 9,123 4,274 — (2,774)

$

$

7,848

$

1,081

$

(100,267) $



$

(91,338)

(314) $ 4,192 (94) (837) (13,426)

— — — — 53

$

— — — — 3,784

— — — — —

$

(314) 4,192 (94) (837) (9,589)

$

(34) $ — — 6,242 — — (2,838) (2,118) (171)

76,817

Citigroup consolidated

— 385 233 — — — — 7,226 4

Net change in short-term borrowings and other advances— intercompany Capital contributions from parent Other financing activities

Supplemental disclosure of cash flow information for continuing operations Cash paid during the year for income taxes Cash paid during the year for interest Non-cash investing activities Change in loans due to consolidation/deconsolidation of VIEs Transfers to loans held-for-sale from loans Transfers to OREO and other repossessed assets Non-cash financing activities Increase in short-term borrowings due to consolidation of VIEs

(5,692) $

Consolidating adjustments

$

Proceeds (repayments) from issuance of long-term debt— intercompany, net Change in deposits Change in federal funds purchased and repos Change in short-term borrowings

Net cash provided by (used in) financing activities of continuing operations Effect of exchange rate changes on cash and due from banks Discontinued operations Net cash used in discontinued operations Change in cash and due from banks Cash and due from banks at beginning of period Cash and due from banks at end of period

CGMHI

Other Citigroup subsidiaries and eliminations

$

— — — (359)

(202) — 2,768 1,130

202 37,713 (10,492) (572)

— — — —

— 37,713 (7,724) 199

11,402 — (451)

(13,149) 12,330 —

1,747 (12,330) (1)

— — —

— — (452)

$ $

113 —

$ $

$ $

— 80 153 233

$ $

$ $

20,051 $ (1,558) $

— —

$ $

(10) $ (4,967) $ 33,383 28,416 $

— — — —

$ $

$

— $ (1,681) $ 2,917 1,236 $

$

(71) $ 6,514

(20) $ 2,575

4,586 6,566

$

— —

$

4,495 15,655

$

— — —

— — —

6,718 17,300 325

$

— — —

$

6,718 17,300 325

$



180

$

2,930 —



$

6,718



$

23,094 (1,558) — (10) (6,568) 36,453 29,885

6,718

30. SUBSEQUENT EVENT Venezuela Citi uses the U.S. dollar as the functional currency for its operations in Venezuela. On February 17, 2016, the Venezuelan government announced changes to its foreign exchange controls. Based on this announcement, Citi expects to begin using the SIMADI rate in the first quarter of 2016 to remeasure its net bolivar-denominated monetary assets, despite the possibly limited availability of U.S. dollars (notwithstanding the fact that it has been described as a free floating rate) and although the new SIMADI rate may not necessarily be reflective of economic reality. Re-measurement of Citi’s bolivar-denominated assets and liabilities due to changes in the exchange rate is recorded in earnings. At the expected minimum new SIMADI rate of 202 bolivars per U.S. dollar, Citi estimates that it will incur an approximate $172 million foreign currency loss in the first quarter of 2016, which could increase if the bolivar continues to devalue in the new SIMADI market. Additionally, Citi expects its revenues and expenses will be translated at the SIMADI rate beginning in the first quarter of 2016. Because the new foreign exchange control rules have not yet been officially published and are thus not yet effective, however, the impact to Citi’s results of operations as a result of the February 17th announcement is not yet certain.

181

31. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) 2014

2015 In millions of dollars, except per share amounts

Revenues, net of interest expense

Fourth

Third

Second

Fourth

First

Third

Second

First

$ 18,456 $ 18,692 $ 19,470 $ 19,736 $ 17,899 $ 19,689 $ 19,425 $ 20,206

Operating expenses

11,134

10,669

10,928

10,884

14,426

12,955

15,521

12,149

2,514

1,836

1,648

1,915

2,013

1,750

1,730

1,974

4,808 $

6,187 $

6,894 $

6,937 $

1,460 $

4,984 $

2,174 $

6,083

1,403

1,881

2,036

2,120

1,077

2,068

1,921

2,131

3,405 $

4,306 $

4,858 $

4,817 $

383 $

2,916 $

(45)

(10)

6

(5)

(1)

(16)

3,360 $

4,296 $

4,864 $

4,812 $

382 $

2,900 $

25

5

18

42

$

3,335 $

4,291 $

4,846 $

4,770 $

344 $

2,841 $

181 $

3,944

$

1.04 $

1.36 $

1.51 $

1.51 $

0.06 $

0.89 $

0.03 $

1.23

1.02

1.36

1.52

1.51

0.06

0.88

0.03

1.24

Income from continuing operations

1.03

1.36

1.51

1.51

0.06

0.88

0.03

1.22

Net income

1.02

1.35

1.51

1.51

0.06

0.88

0.03

1.23

High

55.87

60.34

57.39

54.26

56.37

53.66

49.58

55.20

Low

49.88

49.00

51.52

46.95

49.68

46.90

45.68

46.34

Close

51.75

49.61

55.24

51.52

54.11

51.82

47.10

47.60

0.05

0.05

0.05

0.01

0.01

0.01

0.01

0.01

Provisions for credit losses and for benefits and claims Income from continuing operations before income taxes

$

Income taxes Income from continuing operations

$

Income (loss) from discontinued operations, net of taxes Net income before attribution of noncontrolling interests

$

Noncontrolling interests Citigroup’s net income

38

59

253 $ (22) 231 $ 50

3,952 37 3,989 45

Earnings per share(1) Basic Income from continuing operations Net income Diluted

Common stock price per share

Dividends per share of common stock

This Note to the Consolidated Financial Statements is unaudited due to the Company’s individual quarterly results not being subject to an audit. (1) Due to averaging of shares, quarterly earnings per share may not sum to the totals reported for the full year.

[End of Consolidated Financial Statements and Notes to Consolidated Financial Statements]

182

Exhibit 99.03

Consent of Independent Registered Public Accounting Firm

The Board of Directors Citigroup Inc.: We consent to the incorporation by reference in the Registration Statements on: • Form S-3

Nos. 33-54093, 33-52281, 33-59791, 33-68760, 33-62903, 33-63663, 333-12439, 333-20803, 333-21143, 333-27155, 333-32065, 333-37992, 333-42575, 333-44549, 333-46628, 333-48474, 333-49442, 333-50338, 333-51201, 333-56088, 333-68949, 333-57364, 333-68989, 333-75554, 333-82741, 333-83741, 333-102206, 333-103940, 333-105316, 333-106510, 333-106598, 333-108047, 333-117615, 333-122925, 333-125845, 333-126744, 333-132177, 333-132370, 333-132373, 333-135163, 333-135867, 333-142849, 333-146471, 333-152454, 333-154914, 333-157386, 333-157459, 333-172554, 333-172555, 333-172562, 333-186425, 333-191056, and 333-192302

• Form S-8

Nos. 333-58460, 333-58458, 333-02811, 333-56589, 333-63016, 333-101134, 333-107166, 333-124635, 333-163852, 333-166242, 333-166215, 333-173683, 333-181647, 333-203791, 333-203792 and 333-211479

of Citigroup Inc. of our reports dated February 26, 2016, with respect to the consolidated balance sheet of Citigroup Inc. and subsidiaries (the “Company” or “Citigroup”) as of December 31, 2015 and 2014, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2015, and Citigroup’s effectiveness of internal control over financial reporting as of December 31, 2015, which reports appear in the December 31, 2015 Annual Report on Form 10-K of Citigroup.

/s/ KPMG LLP New York, New York February 26, 2016, except as to Notes 3, 15, 16, 17 and 22 which are as of June 17, 2016.

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FORM 8-K Citigroup Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Ex...

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