7.3 billion - Citigroup

During the first quarter of 2011, the Company determinedthat it no longer had the intent to hold $12.7 billion of HTMsecurities to maturity. As a result, the Company reclassified$10.0 billion carrying value of mortgage-backed, other assetbacked,state and municipal, and corporate debt securities fromInvestments held-to-maturity to Trading account assets. TheCompany also sold an additional $2.7 billion of such HTMsecurities, recognizing a corresponding receivable from theunsettled sales as of March 31, 2011. As a result of these actions,a net pretax loss of $709 million ($427 million after tax) wasrecognized in the Consolidated Statement of Income for thethree months ended March 31, 2011, composed of grossunrealized gains of $311 million included in Other revenue,gross unrealized losses of $1,387 million included in Otherthan-temporary-impairmentlosses on investments, and netrealized gains of $367 million included in Realized gains(losses) on sales of investments. Prior to the reclassification,unrealized losses totalling $1,656 million pretax ($1,012 millionafter tax) had been reflected in AOCI (see table below) and havenow been reflected in the Consolidated Statement of Income, asdetailed above.Citigroup reclassified and sold the securities as part of itsoverall efforts to mitigate its risk-weighted assets (RWA) inorder to comply with significant new regulatory capitalrequirements which, although not yet implemented or formallyadopted, are nonetheless currently being used to assess theforecasted capital adequacy of the Company and other large U.S.banking organizations. These regulatory capital changes, whichwere largely unforeseen when the Company initially reclassifiedthe debt securities from Trading account assets and Investmentsavailable-for-sale to Investments held-to-maturity in the fourthquarter of 2008 (see note 1 to the table below), include: (i) theU.S. Basel II credit and operational risk capital standards; (ii)the Basel Committee‘s agreed-upon, and the U.S.-proposed,revisions to the market risk capital rules, which significantlyincreased the risk weightings for certain trading book positions;(iii) the Basel Committee‘s substantial issuance of Basel III,which raised the quantity and quality of required regulatorycapital and materially increased RWA for securitizationexposures; and (iv) certain regulatory capital-related provisionsin The Dodd-Frank Wall Street Reform and ConsumerProtection Act of 2010.Through March 31, 2012, the Company has sold substantially all of the $12.7 billion of HTM securities that were reclassified toTrading account assets in the first quarter of 2011. The carrying value and fair value of debt securities at the date of reclassification orsale were as follows:Amortizedcost (2)Net unrealizedlossrecognized inAOCICarryingvalue (3)In millions of dollarsHeld-to-maturity debt securities transferredto Trading account assets or sold (1)Mortgage-backed securitiesPrime $ 3,410 $ 528 $ 2,882 $ 131 $131 $ 2,882Alt-A 5,357 896 4,461 605 188 4,878Subprime 240 7 233 5 36 202Non-U.S. residential 317 75 242 76 2 316Commercial 117 18 99 22 — 121Total mortgage-backed securities $ 9,441 $ 1,524 $ 7,917 $ 839 $357 $ 8,399State and municipal $ 900 $ 8 $ 892 $ 68 $ 7 $ 953Corporate 3,569 115 3,454 396 41 3,809Asset-backed securities 456 9 447 50 2 495Total held-to-maturity debt securities transferredto Trading account assets or sold (1) $ 14,366 $ 1,656 $ 12,710 $ 1,353 $407 $ 13,656(1) During the fourth quarter of 2008, $6.647 billion and $6.063 billion carrying value of these debt securities were transferred from Trading account assets andInvestments available-for-sale to Investments held-to-maturity, respectively. The transfer of these debt securities from Trading account assets was in response tothe significant deterioration in market conditions, which was especially acute during the fourth quarter of 2008.(2) For securities transferred to held-to-maturity from Trading account assets, amortized cost is defined as the fair value amount of the securities at the date oftransfer plus any accretion income and less any impairments recognized in earnings subsequent to transfer. For securities transferred to held-to-maturity fromavailable-for-sale, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less anyimpairment recognized in earnings.(3) Held-to-maturity securities are carried on the Consolidated Balance Sheet at amortized cost and the changes in the value of these securities other than impairmentcharges are not reported in the financial statements.GrossgainsGrosslossesFairvalue110CITIGROUP – 2012 FIRST QUARTER 10-Q