Citibank 2013 Annual Report Download - page 233

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15. LOANS
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
Global Consumer Banking businesses in Citicorp and in Citi Holdings. The
following table provides information by loan type:
In millions of dollars 2013 2012
Consumer loans
In U.S. offices
Mortgage and real estate (1) $108,453 $125,946
Installment, revolving credit, and other 13,398 14,070
Cards 115,651 111,403
Commercial and industrial 6,592 5,344
$244,094 $256,763
In offices outside the U.S.
Mortgage and real estate (1) $ 55,511 $ 54,709
Installment, revolving credit, and other 33,182 33,958
Cards 36,740 40,653
Commercial and industrial 24,107 22,225
Lease financing 769 781
$150,309 $152,326
Total Consumer loans $394,403 $409,089
Net unearned income (572) (418)
Consumer loans, net of unearned income $393,831 $408,671
(1) Loans secured primarily by real estate.
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, 2013 and 2012, the Company sold
and/or reclassified to held-for-sale $11.5 billion and $4.3 billion, respectively,
of Consumer loans. During the year ended December 31, 2013, Citi acquired
approximately $7 billion of loans related to the acquisition of Best Buy’s U.S.
credit card portfolio. The Company did not have significant purchases of
Consumer loans during the year ended December 31, 2012.
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 monitored and considered a key indicator of credit
quality of Consumer loans. Substantially all of the U.S. residential first
mortgage loans use the Mortgage Banking 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 the Office of Thrift Supervision
(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. 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
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.