7.3 billion - Citigroup

The following table provides information about certain mortgage loans HFS carried at fair value at March 31, 2012 and December 31,2011:In millions of dollars March 31, 2012 December 31, 2011Carrying amount reported on the Consolidated Balance Sheet $2,862 $6,213Aggregate fair value in excess of unpaid principal balance 126 274Balance of non-accrual loans or loans more than 90 days past due — —Aggregate unpaid principal balance in excess of fair value for non-accrual loans orloans more than 90 days past due — —The changes in fair values of these mortgage loans arereported in Other revenue in the Company‘s ConsolidatedStatement of Income. There was no change in fair value duringthe three months ended March 31, 2012 due to instrumentspecificcredit risk. The change in fair value during the threemonths ended March 31, 2011 due to instrument-specific creditrisk resulted in a loss of $0.4 million. Related interest incomecontinues to be measured based on the contractual interest ratesand reported as such in the Consolidated Statement of Income.Certain consolidated VIEsThe Company has elected the fair value option for all qualifiedassets and liabilities of certain VIEs that were consolidated uponthe adoption of SFAS 167 on January 1, 2011, including certainprivate label mortgage securitizations, mutual fund deferredsales commissions and collateralized loan obligation VIEs. TheCompany elected the fair value option for these VIEs as theCompany believes this method better reflects the economic risks,since substantially all of the Company‘s retained interests inthese entities are carried at fair value.With respect to the consolidated mortgage VIEs, theCompany determined the fair value for the mortgage loans andlong-term debt utilizing internal valuation techniques. The fairvalue of the long-term debt measured using internal valuationtechniques is verified, where possible, to prices obtained fromindependent vendors. Vendors compile prices from varioussources and may apply matrix pricing for similar securitieswhen no price is observable. Security pricing associated withlong-term debt that is valued using observable inputs isclassified as Level 2 and debt that is valued using one or moresignificant unobservable inputs is classified as Level 3. The fairvalue of mortgage loans of each VIE is derived from thesecurity pricing. When substantially all of the long-term debt ofa VIE is valued using Level 2 inputs, the correspondingmortgage loans are classified as Level 2. Otherwise, themortgage loans of a VIE are classified as Level 3.With respect to the consolidated mortgage VIEs for whichthe fair value option was elected, the mortgage loans areclassified as Loans on Citigroup‘s Consolidated Balance Sheet.The changes in fair value of the loans are reported as Otherrevenue in the Company‘s Consolidated Statement of Income.Related interest revenue is measured based on the contractualinterest rates and reported as Interest revenue in the Company‘sConsolidated Statement of Income. Information about thesemortgage loans is included in the table below. The change infair value of these loans due to instrument-specific credit riskwas a loss of $15 million and $95 million for the three monthsended March 31, 2012 and 2011, respectively.The debt issued by these consolidated VIEs is classified aslong-term debt on Citigroup‘s Consolidated Balance Sheet. Thechanges in fair value for the majority of these liabilities arereported in Other revenue in the Company‘s ConsolidatedStatement of Income. Related interest expense is measuredbased on the contractual interest rates and reported as such inthe Consolidated Statement of Income. The aggregate unpaidprincipal balance of long-term debt of these consolidated VIEsexceeded the aggregate fair value by $955 million and $984million as of March 31, 2012 and December 31, 2011,respectively.179CITIGROUP – 2012 FIRST QUARTER 10-Q