Citibank 2014 Annual Report Download - page 215

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total lifetime pool default 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.
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 likely be 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 following table presents the total OTTI recognized in earnings for the year ended December 31, 2014:
OTTI on Investments and Other Assets Year ended December 31, 2014
In millions of dollars AFS (1) HTM Other Assets 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 $ 21 $ 5 $— $ 26
Less: portion of impairment loss recognized in AOCI (before taxes) 8 — — 8
Net impairment losses recognized in earnings for securities that the Company does not intend
to sell nor will likely be required to sell $ 13 $ 5 $— $ 18
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 380 26 — 406
Total impairment losses recognized in earnings $393 $31 $— $424
(1) Includes OTTI on non-marketable equity securities.
The following table presents the total OTTI recognized in earnings for the year ended December 31, 2013:
OTTI on Investments and Other Assets Year ended December 31, 2013
In millions of dollars AFS (1) HTM Other Assets (2) 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 $ 9 $154 $ — $163
Less: portion of impairment loss recognized in AOCI (before taxes) — 98 — 98
Net impairment losses recognized in earnings for securities that the Company does not intend
to sell nor will likely be required to sell $ 9 $ 56 $ — $ 65
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) 269 — 201 470
Total impairment losses recognized in earnings $278 $ 56 $ 201 $535
(1) Includes OTTI on non-marketable equity securities.
(2) The impairment charge relates to the carrying value of Citi’s then-remaining 35% interest in the Morgan Stanley Smith Barney joint venture (MSSB), offset by the equity pickup from MSSB during the respective periods
that was recorded in Other revenue.