Citibank 2012 Annual Report Download - page 223

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16. LOANS
Citigroup loans are reported in two categories—Consumer and Corporate.
These categories are classified primarily according to the segment and
subsegment that manages the loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the
Global Consumer Banking and Local Consumer Lending businesses. The
following table provides information by loan type:
In millions of dollars 2012 2011
Consumer loans
In U.S. offices
Mortgage and real estate (1) $125,946 $139,177
Installment, revolving credit, and other 14,070 15,616
Cards 111,403 117,908
Commercial and industrial 5,344 4,766
Lease financing —1
$256,763 $277,468
In offices outside the U.S.
Mortgage and real estate (1) $ 54,709 $ 52,052
Installment, revolving credit, and other 36,182 34,613
Cards 40,653 38,926
Commercial and industrial 20,001 19,975
Lease financing 781 711
$152,326 $146,277
Total Consumer loans $409,089 $423,745
Net unearned income (418) (405)
Consumer loans, net of unearned income $408,671 $423,340
(1) Loans secured primarily by real estate.
Included in the loan table above are lending products whose terms
may give rise to additional 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 additional inherent risk.
During the years ended December 31, 2012 and 2011, the Company
sold and/or reclassified (to held-for-sale) $4.3 billion and $21.0 billion,
respectively, of Consumer loans. The Company did not have significant
purchases of Consumer loans during the years ended December 31, 2012 or
December 31, 2011.
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.
Delinquency Status
Delinquency status is carefully monitored and considered a key indicator
of credit quality of Consumer loans. Substantially all of the U.S. residential
first mortgage loans use the 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 the OTS method of reporting delinquencies, which 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. As a result
of OCC guidance issued in the first quarter of 2012, 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. As a result of OCC guidance
issued in the third quarter of 2012, mortgage loans in regulated bank entities
discharged through Chapter 7 bankruptcy, other than FHA-insured 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 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 open-ended 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 are modified under those respective agencies’
guidelines, and payments are not always required in order to re-age a
modified loan to current.