Citibank 2015 Annual Report Download - page 227

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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:
In millions of dollars
Accretable
yield
Carrying
amount of loan
receivable 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)
Increase to expected cash flows 23 — —
FX translation/other (9) (45) (11)
Balance at December 31, 2014 (2) $ 56 $ 421 $ 60
Purchases (1) $ 3 $ 54 $ —
Disposals/payments received (5) (162) (9)
Accretion (13) 13 —
Builds (reductions) to the allowance — — 9
Increase to expected cash flows 1 — —
FX translation/other (9) (76) (44)
Balance at December 31, 2015 (2) $ 33 $ 250 $ 16
(1) 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 level-yield method and $5 million and $8 million accounted for
under the cost-recovery method in 2015 and 2014, respectively.