-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PDCxSwTfG+uGLDnJlR3Su7rd27y+FVQ469dDkB5Zp8tSOR/x7zY8NW+1duupP/g1 6QmBE4kh/HfvtZv21JrikA== 0000912057-01-007939.txt : 20010322 0000912057-01-007939.hdr.sgml : 20010322 ACCESSION NUMBER: 0000912057-01-007939 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITICORP CENTRAL INDEX KEY: 0000020405 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 132614988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-05738 FILM NUMBER: 1574527 BUSINESS ADDRESS: STREET 1: 399 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10043 BUSINESS PHONE: 2125591000 MAIL ADDRESS: STREET 1: 425 PARK AVE- 2ND F STREET 2: ATTN: LEGAL AFFAIRS OFFICE CITY: NEW YORK STATE: NY ZIP: 10043 FORMER COMPANY: FORMER CONFORMED NAME: FIRST NATIONAL CITY CORP DATE OF NAME CHANGE: 19740414 FORMER COMPANY: FORMER CONFORMED NAME: CITY BANK OF NEW YORK NATIONAL ASSOCIATI DATE OF NAME CHANGE: 19680903 10-K405 1 a2042041z10-k405.txt FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K For Annual and Transition Reports Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934 (Mark One) /X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000 OR /_/ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______to _______ --------------- Commission file number: 1-5738 CITICORP (Exact name of Registrant as specified in its charter) Delaware 06-1515595 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 399 Park Avenue New York, New York 10043 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (800) 285-3000 Securities registered pursuant to Section 12(b) of the Act: None TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ------------------- ----------------------------------------- Citicorp Capital III 7.10% New York Stock Exchange Capital Securities (and Registrant's guarantee obligations with respect thereto) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No /_/. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ Because the Registrant is an indirect wholly-owned subsidiary of Citigroup Inc., none of its outstanding voting stock is held by nonaffiliates. As of the date hereof, 1,000 shares of the Registrant's Common Stock, $0.01 par value per share, were issued and outstanding. Documents Incorporated by Reference: None REDUCED DISCLOSURE FORMAT The Registrant meets the conditions set forth in General Instruction I (1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format. CITICORP ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED DECEMBER 31, 2000 - -------------------------------------------------------------------------------- TABLE OF CONTENTS FORM 10-K ITEM NUMBER PAGE - ----------- ---- PART I 1. Business.....................................................2-7 2. Properties.....................................................7 3. Legal Proceedings..............................................7 4. Omitted Pursuant to General Instruction I.........Not applicable PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters..................................8 6. Omitted Pursuant to General Instruction I.........Not applicable 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............9-40 7A. Quantitative and Qualitative Disclosures About Market Risk....41 8. Financial Statements and Supplementary Data...................41 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................41 PART III 10-13. Omitted Pursuant to General Instruction I........Not applicable PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ....................................41 Exhibit Index.................................................43 Signatures....................................................44 Index to Consolidated Financial Statements...................F-1 1 PART I ITEM 1. BUSINESS THE COMPANY Citicorp, a diversified financial services company, conducts its activities through Global Consumer, Global Corporate Bank, Global Investment Management and Private Banking, Associates, and Investment Activities. Its staff of 173,000 (including 88,000 outside the U.S.) serves individuals, businesses, governments, and financial institutions in over 100 countries and territories. Citicorp, a U.S. bank holding company, is the sole shareholder of Citibank, N.A. (Citibank), its major subsidiary. As used in this Form 10-K, unless the context otherwise requires, "Citicorp" and "the Company" refer to Citicorp and its consolidated subsidiaries. On November 30, 2000, Citigroup, the Company's ultimate parent, completed its acquisition of Associates First Capital Corporation (Associates). Subsequent to the acquisition, Associates was contributed to and became a wholly-owned subsidiary of Citicorp and Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America (ACONA), a subsidiary of Associates. Associates' and ACONA's debt securities and commercial paper will no longer be separately rated. The consolidated financial statements give retroactive effect to the contribution as a combination of entities under common control in a transaction accounted for in a manner similar to the pooling of interests method. On October 8, 1998, Citicorp, which was incorporated in 1967, merged with and into a newly formed, wholly-owned subsidiary of Travelers Group Inc. (Travelers). Following the effectiveness of the merger, that subsidiary, which was incorporated in 1998 under the laws of the state of Delaware, changed its name to Citicorp, and Travelers changed its name to Citigroup Inc. (Citigroup). The merger was accounted for under the pooling of interests method. Additionally, as of October 8, 1998, the shares of Citicorp common stock held in treasury were retired. The effect of these transactions was an elimination of Citicorp common stock and Citicorp preferred stock, with an offsetting adjustment to surplus, resulting in no change in the amount of Citicorp's total stockholder's equity. On August 4, 1999, CitiFinancial Credit Company (formerly Commercial Credit Company) (CCC), an indirect wholly-owned subsidiary of Citigroup, was contributed to and became a subsidiary of Citicorp Banking Corporation, a wholly-owned subsidiary of Citicorp. The consolidated financial statements give retroactive effect to the contribution as a combination of entities under common control in a transaction accounted for in a manner similar to the pooling of interests method. Citicorp is authorized to issue 10,000 shares of common stock, par value $.01 each, of which 1,000 shares are outstanding, and 1,000 shares of preferred stock, par value $1.00 each, of which none are outstanding. Citigroup indirectly owns all the outstanding shares of Citicorp common stock. Citigroup is a diversified holding company whose businesses provide a broad range of financial services to consumer and corporate customers in over 100 countries and territories. Citigroup's activities are conducted through Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, Associates, and Investment Activities. The periodic reports of Citigroup provide additional business and financial information concerning that company and its consolidated subsidiaries. Citicorp is regulated under the Bank Holding Company Act of 1956 (the BHC Act) and is subject to examination by the Board of Governors of the Federal Reserve System (the FRB). Citibank is a member of the Federal Reserve System and is subject to regulation and examination by the Office of the Comptroller of the Currency (the OCC). GLOBAL CONSUMER Global Consumer delivers a wide array of banking, lending, and investment services, including the issuance of credit and charge cards, in 51 countries and territories. Global Consumer creates products and platforms to meet the expanding needs of the world's growing middle class. CITIBANKING NORTH AMERICA delivers banking, lending, and investment services to customers through 367 branches and through electronic delivery systems. Through its MORTGAGE BANKING unit, Global Consumer originates and services mortgages and student loans for customers across the United States. The NORTH AMERICA CARDS unit offers products such as MasterCard(R), VISA(R) and Diners Club across North America. As of December 31, 2000, the North America bankcards business had 44 million accounts and $88 billion of managed receivables, which represented approximately 17% of the U.S. credit card receivables market. New accounts are primarily acquired through direct marketing efforts, over the Internet, and portfolio acquisitions. 2 The CITIFINANCIAL unit of Global Consumer provides community-based lending services through its branch network system. As of December 31, 2000, CitiFinancial maintained 1,270 loan offices in the U.S. and Canada. Loans to consumers include real estate-secured loans, unsecured and partially secured personal loans, and loans to finance consumer goods purchases. The INTERNATIONAL unit of Global Consumer provides full-service banking and lending, including credit and charge cards, and investment services in the developed markets of Western Europe and Japan, and in the emerging markets of Asia, Latin America and Central & Eastern Europe, Middle East & Africa through more than 1,000 branches in 49 countries and territories. In these markets, Global Consumer has approximately 12 million credit and charge card member accounts. E-CONSUMER is the business responsible for developing and implementing Global Consumer's Internet financial services products and e-commerce solutions. e-Consumer's mission is to build and deliver new forms of financial services that meet the changing needs of customers and to facilitate all aspects of e-commerce as it grows with the new digital economy. During 2000, e-Consumer launched Citibank Online, an enhanced Internet banking service, C2it, a person-to-anywhere (P2A) online payment system, and MyCiti, an online account aggregation site, and entered into an online strategic alliance with America Online. GLOBAL CORPORATE BANK Global Corporate Bank serves corporations, financial institutions, governments, and other participants in 100 countries and territories. THE GLOBAL RELATIONSHIP BANK (GRB) provides banking and financial services to large multinational companies. A dedicated relationship team serves each parent company and its subsidiaries everywhere they operate. Product offerings are determined by the demands of these sophisticated customers. Core products include cash management, foreign exchange, structured products, derivatives, securities custody, trade services and loan products. On a Citigroup basis, GRB is managed jointly with Salomon Smith Barney. During the second quarter of 2000, GRB strengthened its position in the U.S. leasing market through the purchase of Copelco, a prominent vendor leasing company. Citibank has a long-standing presence in emerging markets, which include all locations outside North America, Western Europe and Japan. EMERGING MARKETS CORPORATE BANKING (EM CORPORATE) business offers a wide array of banking and financial services products that help multinational and local companies fulfill their financial goals or needs. Citicorp's Embedded Bank and Emerging Local Corporate strategies focus on its plans to gain market share in selected emerging market countries and to establish Citibank as a local bank as well as a leading international bank. Citibank typically enters a country to serve global customers, providing them with cash management, trade services, short-term loans and foreign-exchange services. Then, Citibank offers project finance, fixed-income issuance and trading and, later, introduces securities custody, loan syndications and derivatives services. Finally, as a brand image is established and services for locally headquartered companies become significant, consumer banking services may be offered. In June 2000, EM Corporate completed the acquisition of a majority interest in Bank Handlowy, Poland's largest corporate bank. GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING Global Investment Management and Private Banking is comprised of CITIBANK ASSET MANAGEMENT along with the pension administration businesses of Global Retirement Services and THE CITIGROUP PRIVATE BANK. Citibank Asset Management offers a broad range of asset management products and services from global investment centers around the world, including mutual funds, closed-end funds, managed accounts, and pension administration to institutional, high net worth and retail clients. Clients include private and public retirement plans, endowments, foundations, banks, central banks, insurance companies, other corporations, government agencies and high net worth and other individuals. Client relationships may be introduced through the cross marketing and distribution channels within Citigroup or through Citibank Asset Management's own sales force. The Citigroup Private Bank provides personalized wealth management services for high net worth clients through more than 90 offices in 32 countries and territories, generating fee and interest income from investment funds management and customer trading activity, trust and fiduciary services, custody services and banking and lending activities. Its Relationship Managers and Product Specialists use their knowledge about their clients' individual needs and goals to bring them an array of personal wealth management services. 3 ASSOCIATES Associates, which provides finance, leasing, insurance and related services to consumers and businesses in the United States and internationally, is organized into five primary business units: U.S. credit card, U.S. consumer branch, U.S. home equity, commercial and international finance. Associates' U.S. credit card business offers private label retail credit card and revolving programs (Private Label Cards) and VISA(R) and MasterCard(R) retail bankcard credit card products (Retail Bankcards) to customers throughout the United States. Various credit-related and other insurance products are also provided, including credit life, credit accident and health, accidental death and dismemberment, involuntary unemployment and personal property insurance. In addition, the U.S. credit card business provides emergency roadside assistance and auto club services. Associates' U.S. consumer finance business offers a variety of consumer finance and insurance products and services to customers throughout the United States. Finance products and services offered by this business include home equity loans, personal loans, automobile financing and retail sales finance. In addition, Associates, through certain subsidiaries and third parties, makes available various credit-related and other insurance products to its U.S. consumer finance customers, including credit life, credit accident and health, involuntary unemployment, personal property insurance and other non-credit products. Associates' commercial business offers a variety of commercial finance and insurance products to customers in the United States and Canada. Finance products and services offered by this business in the United States and Canada include retail and wholesale financing and leasing products and services for heavy-duty (Class 8) and medium-duty (Classes 3 through 7) trucks and truck trailers and construction, material handling and other industrial and communications equipment. Associates engages in a number of other commercial activities, including auto fleet leasing and fleet management services, government guaranteed lending, employee relocation services, truck trailer rental services, warehouse lending and public finance. Associates, through certain subsidiaries and third parties, also makes available various credit-related and other insurance products to its commercial segment customers and other customers, including commercial auto and dealers' open lot physical damage, credit life and motor truck cargo insurance, and commercial and public auto liability insurance. Associates also offers specialty lines including general liability, directors and officers and errors and omission insurance, and personal lines including homeowner and recreational vehicle insurance. Associates' international finance business offers a variety of consumer finance products and services to customers in Japan, Canada, the United Kingdom, Puerto Rico, Sweden, Hong Kong, Spain, India, Mexico, Taiwan, Ireland, Philippines and Norway. Commercial financing products are also offered in the United Kingdom, Hong Kong, Puerto Rico, France, Mexico, Japan, India and Spain. Associates, through certain subsidiaries and other third parties, also offers various credit-related and other insurance products to its customers, including credit life, credit accident and health, accidental death and dismemberment, involuntary unemployment and personal property insurance. The characteristics of the international finance business' customers are similar to those of their counterparts in the U.S. consumer finance, U.S. credit card and commercial business. INVESTMENT ACTIVITIES The Company's Investment Activities segment consists primarily of its venture capital activities, securities transactions related to certain corporate investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature. CORPORATE/OTHER Corporate/Other includes net corporate treasury results, corporate staff and other corporate expenses, certain intersegment eliminations, and the remainder of Internet-related development activities (e-Citi) not allocated to the individual businesses. The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043; telephone number (800) 285-3000. COMPETITION Citicorp and its subsidiaries are subject to intense competition in all aspects of their businesses from both bank and non-bank institutions that provide financial services and, in some of their activities, from government agencies. 4 REGULATION The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 (BHC Act) registered with, and subject to examination by, the Federal Reserve Board (FRB). The subsidiary depository institutions of the Company (the banking subsidiaries), including its principal bank subsidiary, Citibank, N.A. (Citibank), are subject to supervision and examination by their respective federal and state banking authorities. The nationally chartered subsidiary banks, including Citibank, are supervised and examined by the Office of the Comptroller of the Currency (OCC); federal savings association subsidiaries are regulated by the Office of Thrift Supervision (OTS); and state-chartered depository institutions are supervised by the banking departments within their respective states (New York, Delaware, South Dakota, and Utah), as well as the Federal Deposit Insurance Corporation (FDIC). The FDIC also has back-up enforcement authority with respect to each of the banking subsidiaries, the deposits of which are insured by the FDIC, up to applicable limits. The Company also controls (either directly or indirectly) overseas banks, branches, and agencies. In general, the Company's overseas activities are regulated by the FRB and OCC, and are also regulated by supervisory authorities of the host countries. The Company's banking subsidiaries are also subject to requirements and restrictions under federal, state, and foreign law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be made and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Company's banking subsidiaries. The activities of U.S. bank holding companies are generally limited to the business of banking, managing or controlling banks, and other activities that the FRB determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, under the Gramm-Leach-Bliley Act (the GLB Act), which became effective in most significant respects on March 11, 2000, bank holding companies, such as the Company, all of whose controlled depository institutions are "well capitalized" and "well managed", as defined in Federal Reserve Regulation Y, and which obtain satisfactory Community Reinvestment Act ratings, have the ability to declare themselves to be "financial holding companies" and engage in a broader spectrum of activities, including insurance underwriting and brokerage (including annuities), and underwriting and dealing securities without a revenue limit and without limits on the amounts of equity securities it may hold in conducting its underwriting and dealing activities. The Company's declaration to become a financial holding company became effective on the first eligible date. Financial holding companies that do not continue to meet all of the requirements for such status will, depending on which requirement they fail to meet, face not being able to undertake new activities or acquisitions that are financial in nature, or losing their ability to continue those activities that are not generally permissible for bank holding companies. Section 20 of the Glass-Steagall Act, which prohibited a member bank of the Federal Reserve System, such as Citibank, from being affiliated with a company that is principally engaged in underwriting and dealing in securities, was repealed, effective March 11, 2000, as part of the GLB Act. Accordingly, the Company is permitted to operate without regard to revenue limits on "ineligible" securities activities and to acquire other securities firms without regard to such limits. The repeal of Section 20 also permits the Company's securities subsidiaries to organize, sponsor, distribute, and advise open-end mutual funds in the United States, as well as outside the United States. Under the BHC Act, nonbank acquisitions in the U.S. have generally been limited to 5% of voting shares unless the FRB determines that the acquisition is so closely related to banking as to be a proper incident to banking or managing or controlling banks. Under the GLB Act, financial holding companies are able to make acquisitions in companies that engage in activities that are financial in nature, both in the U.S. and outside of the United States. No prior approval of the FRB is generally required for such acquisitions except for the acquisition of U.S. depository institutions and foreign banks. In addition, under a new merchant banking authority added by the GLB Act, financial holding companies are authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the investment in duration, does not manage the company on a day-to-day basis, and the investee company does not cross-market with any of the financial holding company's controlled depository institutions. This authority applies to investments both in the U.S. and outside the United States. Regulations interpreting and conditioning this authority have been promulgated. Bank holding companies also retain their authority, subject to prior specific or general FRB consent, to acquire less than 20 percent of the voting securities of a company that does not do business in the United States, and 20 percent or more of the voting securities of any such company if the FRB finds by regulation or order that its activities are usual in connection with banking or finance outside the United States. In general, bank holding companies that are not financial holding companies may engage in a broader range of activities outside the United States than they may engage in inside the United States, including sponsoring, distributing, and advising open-end mutual funds, and underwriting and dealing in debt, and to a limited extent, equity securities, subject to local country laws. Subject to certain limitations and restrictions, a U.S. bank holding company, with the prior approval of the FRB, may acquire an out-of-state bank. Banks in states that do not prohibit out-of-state mergers may merge with the approval of the appropriate federal bank regulatory agency. A national or state bank may establish a de novo branch out of state if such branching is expressly permitted by the other state. A federal savings association is generally permitted to open a de novo branch in any state. 5 Outside the U.S., subject to certain requirements for prior FRB consent or notice, the Company may acquire banks and Citibank may establish branches subject to local laws and to U.S. laws prohibiting companies from doing business in certain countries. The Company's earnings and activities are affected by legislation, by actions of its regulators, and by local legislative and administrative bodies and decisions of courts in the foreign and domestic jurisdictions in which the Company and its subsidiaries conduct business. For example, these include limitations on the ability of certain subsidiaries to pay dividends to their intermediate holding companies and on the abilities of those holding companies to pay dividends to the Company (see Note 26 of Notes to Consolidated Financial Statements). It is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company's ability to serve as a source of strength to its banking subsidiaries. Various federal and state statutory provisions limit the amount of dividends that subsidiary banks and savings associations can pay to their holding companies without regulatory approval. In addition to these explicit limitations, the federal regulatory agencies are authorized to prohibit a banking subsidiary or bank holding company from engaging in an unsafe or unsound banking practice. Depending upon the circumstances, the agencies could take the position that paying a dividend would constitute an unsafe or unsound banking practice. Numerous other federal and state laws also affect the Company's earnings and activities including federal and state consumer protection laws. Legislation may be enacted or regulation imposed in the U.S. or its political subdivisions, or in any other jurisdiction in which the Company does business, to further regulate banking and financial services or to limit finance charges or other fees or charges earned in such activities. There can be no assurance whether any such legislation or regulation will place additional limitations on the Company's operations or adversely affect its earnings. The preceding statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. There are various legal restrictions on the extent to which a bank holding company and certain of its nonbank subsidiaries can borrow or otherwise obtain credit from banking subsidiaries or engage in certain other transactions with or involving those banking subsidiaries. In general, these restrictions require that any such transactions must be on terms that would ordinarily be offered to unaffiliated entities and secured by designated amounts of specified collateral. Transactions between a banking subsidiary and the holding company or any nonbank subsidiary are limited to 10 percent of the banking subsidiary's capital stock and surplus, and as to the holding company and all such nonbank subsidiaries in the aggregate, to 20 percent of the bank's capital stock and surplus. The Company's right to participate in the distribution of assets of any subsidiary upon the subsidiary's liquidation or reorganization will be subject to the prior claims of the subsidiary's creditors. In the event of a liquidation or other resolution of an insured depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any obligation of the institution to its stockholders, including any depository institution holding company (such as the Company) or any stockholder or creditor thereof. In the liquidation or other resolution of a failed U.S. insured depository institution, deposits in U.S. offices and certain claims for administrative expenses and employee compensation are afforded a priority over other general unsecured claims, including deposits in offices outside the U.S., non-deposit claims in all offices, and claims of a parent such as the Company. Such priority creditors would include the FDIC, which succeeds to the position of insured depositors. A financial institution insured by the FDIC that is under common control with a failed or failing FDIC-insured institution can be required to indemnify the FDIC for losses resulting from the insolvency of the failed institution, even if this causes the affiliated institution also to become insolvent. Any obligations or liability owed by a subsidiary depository institution to its parent company is subordinate to the subsidiary's cross-guarantee liability with respect to commonly controlled insured depository institutions and to the rights of depositors. Under FRB policy, a bank holding company is expected to act as a source of financial strength to each of its banking subsidiaries and commit resources to their support. As a result of that policy, the Company may be required to commit resources to its subsidiary banks in certain circumstances. However, under the GLB Act, the FRB is not able to compel a bank holding company to remove capital from its regulated securities or insurance subsidiaries in order to commit such resources to its subsidiary banks. The Company and its U.S. insured depository institution subsidiaries are subject to risk-based capital and leverage guidelines issued by U.S. regulators for banks, savings associations, and bank holding companies. The regulatory agencies are required by law to take specific prompt actions with respect to institutions that do not meet minimum capital standards and have defined five capital tiers, the highest of which is "well-capitalized." As of December 31, 2000, the Company's bank and thrift subsidiaries, including Citibank, 6 were "well capitalized." See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for capital analysis. A bank is not required to repay a deposit at a branch outside the U.S. if the branch cannot repay the deposit due to an act of war, civil strife, or action taken by the government in the host country, unless the bank has expressly agreed in writing to do so. The GLB Act included the most extensive consumer privacy provisions ever enacted by Congress. These provisions, among other things, require full disclosure of the Company's privacy policy to consumers and mandate offering the consumer the ability to "opt out" of having non-public customer information disclosed to third parties. Pursuant to these provisions, the federal banking regulators have adopted privacy regulations. In addition, the states are permitted to adopt more extensive privacy protections through legislation or regulation. There can be no assurance whether any such legislation or regulation will place additional limitations on the Company's operations or adversely affect its earnings. The preceding statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. The earnings of the Company, Citibank, and their subsidiaries and affiliates are affected by general economic conditions and the conduct of monetary and fiscal policy by the U.S. government and by governments in other countries in which they do business. Legislation is from time to time introduced in Congress that may change banking statutes and the operating environment of the Company and its banking subsidiaries in substantial and unpredictable ways. The Company cannot determine whether any such proposed legislation will be enacted, and if enacted, the ultimate effect that any such potential legislation or implementing regulations would have upon the financial condition or results of operations of the Company or its subsidiaries. ITEM 2. PROPERTIES The Company's executive offices are located at 399 Park Avenue, New York, New York. 399 Park Avenue is a 39-story building of which two-thirds is presently owned by Citibank and is occupied by Citigroup and certain of its subsidiaries, including the principal offices of Citigroup and Citibank. Citibank has entered into a contract to purchase the balance of 399 Park Avenue, in exchange for its ownership interest in Citigroup Center. The exchange is scheduled to close before the end of the second quarter of 2001. Citibank currently owns one-third of Citigroup Center, a 59-story multi-use complex located at 153 East 53rd Street, New York, New York. Citigroup and certain of its subsidiaries occupy this office space in Citigroup Center and will, after the exchange described above, continue to occupy it under a long-term lease. Citibank owns a building in Long Island City, New York and leases a building located at 111 Wall Street in New York City, which are totally occupied by Citigroup and certain of its subsidiaries. In addition, Citicorp or its subsidiaries own or lease real estate located throughout the United States. Outside the U.S., Citicorp or its subsidiaries own or lease major corporate premises in various cities throughout the world. Citicorp and its subsidiaries own approximately 35% of the space they occupy worldwide. ITEM 3. LEGAL PROCEEDINGS In the ordinary course of business, Citicorp and its subsidiaries are defendants or co-defendants in various litigation matters incidental to and typical of the businesses in which they are engaged. In the opinion of the Company's management, the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on the Company and its subsidiaries' results of operations, financial condition or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Pursuant to General Instruction I of Form 10-K, the information required by Item 4 is omitted. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Citigroup indirectly owns all of the outstanding common stock of Citicorp. ITEM 6. SELECTED FINANCIAL DATA Pursuant to General Instruction I of Form 10-K, the information required by Item 6 is omitted. 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ACQUISITION OF ASSOCIATES On November 30, 2000, Citigroup completed its acquisition of Associates. Subsequent to the acquisition, Associates was contributed to and became a wholly-owned subsidiary of Citicorp and Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America (ACONA), a subsidiary of Associates. Associates' and ACONA's debt securities and commercial paper will no longer be separately rated. The consolidated financial statements give retroactive effect to the acquisition in a transaction accounted for in a manner similar to a pooling of interests, with all periods presented as if Citicorp and Associates had always been combined. Certain reclassifications and adjustments have been recorded to conform the accounting policies and presentations of Citicorp and Associates. MANAGED BASIS REPORTING The discussion that follows includes amounts reported in the historical financial statements (owned basis) adjusted to include certain effects of securitization activity, receivables held for securitization, and receivables sold with servicing retained (managed basis). On an owned basis, for securitized receivables, amounts that would otherwise be reported as net interest revenue, as fee and commission revenue, and as credit losses on loans are instead reported as fee and commission revenue (for servicing fees) and as other revenue (for the remaining cash flows to which Citicorp is entitled, which are net of credit losses). Because credit losses are a component of these cash flows, Citicorp's revenues over the terms of these transactions may vary depending upon the credit performance of the securitized receivables. However, Citicorp's exposure to credit losses on the securitized receivables is contractually limited to these cash flows. Additionally, the net earnings on retained securitization interest and receivables held for securitization, as well as gains from subsequent sales in revolving securitization structures are included in fees and commissions in the consolidated statement of income. On a managed basis, these earnings are reclassified and presented as if the receivables had neither been held for securitization nor sold. 9 BUSINESS FOCUS (1) The table below shows the core income (loss) for each of Citicorp's businesses for the two years ended December 31:
IN MILLIONS OF DOLLARS 2000 1999 - --------------------------------------------------------------------------------------- GLOBAL CONSUMER Citibanking North America $ 566 $ 398 Mortgage Banking 272 225 North America Cards 1,381 1,182 CitiFinancial 481 388 - --------------------------------------------------------------------------------------- Total North America 2,700 2,193 - --------------------------------------------------------------------------------------- Western Europe 345 275 Japan 139 87 Asia 563 356 Latin America 208 222 Central and Eastern Europe, Middle East and Africa 59 46 - --------------------------------------------------------------------------------------- Total Emerging Markets Consumer Banking 830 624 - --------------------------------------------------------------------------------------- Total International 1,314 986 - --------------------------------------------------------------------------------------- e-Consumer (202) (111) Other (90) (68) - --------------------------------------------------------------------------------------- TOTAL GLOBAL CONSUMER 3,722 3,000 - --------------------------------------------------------------------------------------- GLOBAL CORPORATE BANK The Global Relationship Bank 842 635 Emerging Markets Corporate Banking 1,610 1,162 - --------------------------------------------------------------------------------------- TOTAL GLOBAL CORPORATE Bank 2,452 1,797 - --------------------------------------------------------------------------------------- GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING Citibank Asset Management (1) (10) The Citigroup Private Bank 324 269 - --------------------------------------------------------------------------------------- TOTAL GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING 323 259 - --------------------------------------------------------------------------------------- ASSOCIATES 1,381 1,402 INVESTMENT ACTIVITIES 1,375 522 Corporate/Other (477) (241) e-Citi (65) (50) - --------------------------------------------------------------------------------------- TOTAL CORPORATE/OTHER (542) (291) - --------------------------------------------------------------------------------------- CORE INCOME 8,711 6,689 - --------------------------------------------------------------------------------------- Restructuring-related items and merger-related costs, after-tax(2) (530) (118) Associates Housing Finance charge, after-tax(3) (71) -- - --------------------------------------------------------------------------------------- NET INCOME $ 8,110 $ 6,571 - ---------------------------------------------------------------------==================
(1) Restated to reflect the acquisition of Associates. See Note 2 of Notes to Consolidated Financial Statements. (2) The after-tax restructuring-related items and merger-related costs in the 2000 period included $405 million of restructuring charges, $43 million of accelerated depreciation, credits for the reversal of prior charges of $40 million and $122 million of merger-related costs. The 1999 period included restructuring charges of $104 million, $112 million of accelerated depreciation and credits for the reversal of prior charges of $98 million. See Note 13 of Notes to Consolidated Financial Statements. (3) In January 2000, Associates discontinued the loan origination operations of its Housing Finance unit. - ------------------------------------------------------------------------------ INCOME ANALYSIS The income analysis reconciles amounts shown in the Consolidated Statements of Income on page F-3 to the basis presented in the business segment discussions.
IN MILLIONS OF DOLLARS 2000 1999 - -------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 42,458 $ 36,633 Effect of securitization activities 2,459 2,707 Associates Housing Finance charge 47 -- - -------------------------------------------------------------------------------------- ADJUSTED REVENUES, NET OF INTEREST EXPENSE 44,964 39,340 - -------------------------------------------------------------------------------------- Total operating expenses 24,243 21,377 Restructuring-related items and merger-related costs (738) (189) Associates Housing Finance charge (25) -- - -------------------------------------------------------------------------------------- ADJUSTED OPERATING EXPENSES 23,480 21,188 - -------------------------------------------------------------------------------------- Provision for credit losses 5,339 4,760 Effect of securitization activities 2,459 2,707 Associates Housing Finance charge (40) -- - -------------------------------------------------------------------------------------- ADJUSTED PROVISION FOR CREDIT LOSSES 7,758 7,467 - -------------------------------------------------------------------------------------- CORE INCOME BEFORE INCOME TAXES 13,726 10,685 Taxes on core income 5,015 3,996 - -------------------------------------------------------------------------------------- CORE INCOME 8,711 6,689 Restructuring-related items and merger-related costs, after-tax (530) (118) Associates Housing Finance charge, after-tax (71) -- - -------------------------------------------------------------------------------------- NET INCOME $ 8,110 $ 6,571 - ------------------------------------------------------------------====================
10 RESULTS OF OPERATIONS INCOME Citicorp reported 2000 core income of $8.711 billion, up 30% from $6.689 billion in 1999. Core income in 2000 excluded $530 million in after-tax restructuring-related items and merger-related costs, and $71 million (after-tax) related to the discontinuation of Associates' housing finance loan origination operations. Core income in 1999 excluded $118 million for after-tax restructuring-related items. Net income in 2000 was $8.110 billion, up 23% from $6.571 billion in 1999. Core income growth of $2.0 billion in 2000 was led by Investment Activities which improved $853 million or 163%, as well as Global Consumer which increased $722 million or 24% and Global Corporate Bank which was up $655 million or 36%. Global Investment Management and Private Banking core income increased $64 million or 25%, while Associates core income declined $21 million. REVENUES, NET OF INTEREST EXPENSE Adjusted revenues, net of interest expense of $45.0 billion in 2000 were up $5.6 billion or 14% from 1999. Global Corporate Bank revenues of $10.1 billion in 2000 were up $1.6 billion or 18% from 1999, with increases of $830 million or 20% in GRB, driven by growth in transaction services, equity derivatives, and structured products, and $735 million or 17% in EM Corporate, reflecting broad-based revenue growth. Global Consumer revenues reflected strong performance across most businesses in 2000 and were up $1.2 billion or 6% from 1999 to $20.5 billion. The Global Consumer revenue growth was led by an $843 million or 7% increase in North America, and a $477 million or 7% increase in International. Global Investment Management and Private Banking revenues of $2.0 billion grew $421 million or 27% in 2000, reflecting continued growth in assets under management and business volumes and the impact of acquisitions in Citibank Asset Management. Associates revenues in 2000 were up $1.4 billion or 16% to $10.3 billion. Investment Activities revenues in 2000 increased $1.4 billion or 163%, primarily reflecting increases in venture capital results and gains on the exchange of certain Latin American bonds. SELECTED REVENUE ITEMS Net interest revenue as calculated from the Consolidated Statement of Income was $22.2 billion in 2000, up $1.4 billion or 7% from 1999, reflecting business volume growth in most markets and acquisitions in Global Corporate Bank, Global Consumer and Associates. Net interest revenue, adjusted for the effect of securitization activity, of $28.4 billion was up $1.9 billion or 7% in 2000. Total commissions and fee revenues of $11.1 billion were up $2.0 billion or 22% in 2000, primarily as a result of volume-related growth, assets under fee-based management, and the impact of acquisitions. Aggregate trading and foreign exchange revenues of $3.1 billion in 2000 were up $610 million or 25% from 1999, reflecting strong results in GRB. Securities transactions revenues in 2000 were up $519 million to $835 million primarily from gains on the exchange of certain Latin American bonds. Other revenue of $5.2 billion increased $1.2 billion from 1999, primarily reflecting higher venture capital results partially offset by lower securitization activities. OPERATING EXPENSES Adjusted operating expenses, which exclude restructuring and merger-related costs, grew $2.3 billion or 11% to $23.5 billion in 2000. Global Corporate Bank expenses were up $592 million or 11% in 2000, primarily attributable to higher incentive compensation and the acquisition of Copelco in GRB, partially offset by lower year 2000 and European Economic Monetary Union (EMU) expenses. EM Corporate expenses rose $229 million or 11% in 2000, as a result of the acquisition of Bank Handlowy, investment spending in selected countries and other volume related increases. Expenses increased in Global Consumer by $643 million or 7% in 2000, reflecting higher business volumes, including acquisitions, and increases in e-Consumer. Associates expenses increased $733 million or 17% in 2000, reflecting business growth and acquisitions. Global Investment Management and Private Banking expenses increased $305 million or 26% in 2000, driven by acquisitions and investments in sales and marketing activities, technology, and product development. 11 RESTRUCTURING-RELATED ITEMS AND MERGER-RELATED COSTS Restructuring-related items and merger-related costs of $738 million ($530 million after-tax) in 2000 primarily consisted of exit costs related to the acquisition of Associates. Restructuring charges included the reconfiguration of branch operations, exiting certain activities, and the consolidation and integration of certain middle and back office functions, and are expected to be implemented over the next year. Also included in the costs were $158 million of merger-related costs, which included legal, advisory and SEC filing fees, as well as other costs of administratively closing the acquisition. Restructuring-related items and merger-related costs of $189 million ($118 million after-tax) in 1999 included charges as a result of the continuing implementation of the 1998 restructuring initiatives, as well as exit costs associated with new initiatives in the Global Consumer business. See Note 13 of Notes to Consolidated Financial Statements. PROVISION FOR CREDIT LOSSES The provision for credit losses was $5.3 billion in 2000, up $579 million or 12% from 1999. The adjusted provision for credit losses increased 4% to $7.8 billion in 2000. Associates adjusted provision for credit losses increased $767 million or 32% to $3.1 billion in 2000, which included a $210 million transportation loss provision relating to the truck loan and leasing portfolio. Global Consumer managed net credit losses in 2000 were $6.8 billion and the related loss ratio was 2.48% compared with $6.7 billion and 2.80% in 1999. The managed consumer loan delinquency ratio (90 days or more past due) was 1.78%, a decrease from 2.07% at the end of 1999. Global Corporate Bank credit losses decreased $7 million to $346 million in 2000. A decrease of $162 million in EM Corporate, primarily in Asia, was partially offset by an increase of $155 million in GRB. The increase in the GRB was due to losses on exposures in North America, recoveries on real estate loans in 1999, and losses at Copelco, which was acquired in the second quarter of 2000. Commercial cash-basis loans and other real estate owned (OREO) of $2.3 billion at December 31, 2000 were up from $1.9 billion a year earlier, primarily reflecting the impact of acquisitions, along with increases in North America, Associates, and Latin America, partially offset by improvements in Asia and the North America real estate portfolio. CAPITAL Total capital (Tier 1 and Tier 2) was $58.0 billion or 12.29% of net-risk adjusted assets, and Tier 1 capital was $39.7 billion or 8.41% at December 31, 2000. See page 38 for the components of Tier 1 and Tier 2 capital. GLOBAL CONSUMER
IN MILLIONS OF DOLLARS 2000 1999(1) - --------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 18,595 $ 16,985 Effect of credit card securitization activity 1,904 2,269 --------------------- ADJUSTED REVENUES, NET OF INTEREST EXPENSE 20,499 19,254 --------------------- Total operating expenses 10,344 9,768 Restructuring-related items (20) (87) --------------------- Adjusted operating expenses 10,324 9,681 --------------------- Provision for credit losses 2,350 2,472 Effect of credit card securitization activity 1,904 2,269 --------------------- Adjusted provision for credit losses 4,254 4,741 --------------------- CORE INCOME BEFORE TAXES 5,921 4,832 Income taxes 2,199 1,832 --------------------- CORE INCOME 3,722 3,000 Restructuring-related items, after-tax (14) (56) --------------------- NET INCOME $ 3,708 $ 2,944 - ------------------------------------------------===================== Average assets (IN BILLIONS OF DOLLARS) $ 176 $ 158 Return on assets 2.11% 1.86% - ------------------------------------------------===================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 2.11% 1.90% - ------------------------------------------------=====================
(1) Reclassified to conform to the 2000 presentation. 12 Global Consumer -- which provides banking, lending, and investment products and services, including credit and charge cards, to customers around the world -- reported core income of $3.722 billion in 2000, up $722 million or 24% from 1999. North America core income increased $507 million or 23% in 2000 reflecting strong performance across all businesses. In the International segment, the developed markets of Western Europe and Japan reported core income of $484 million in 2000 up $122 million from 1999 despite the foreign currency translation effects of a weakening Euro. Core income in the emerging markets increased $206 million or 33% in 2000 reflecting strong performance in Asia and in Central and Eastern Europe, Middle East and Africa. In Latin America, core income in 2000 declined $14 million from 1999 reflecting reduced revenue related to Confia, a Mexican bank acquired in August 1998. Net income of $3.708 billion in 2000 and $2.944 billion in 1999, included restructuring-related charges of $14 million ($20 million pretax) and $56 million ($87 million pretax), respectively. In 2000, Global Consumer recorded restructuring-related items totaling $20 million, including charges of $46 million for the reconfiguration of certain branch operations outside the U.S. and for the downsizing and consolidation of certain back office functions in the U.S., and accelerated depreciation charges on the planned disposition of certain premises and equipment assets, in excess of the normal scheduled depreciation on those assets of $30 million, offset by a reduction in restructuring reserves due to changes in estimates attributable to facts and circumstances arising subsequent to the original restructuring charges of $56 million. In 1999, Global Consumer recorded restructuring-related items totaling $87 million, including charges of $104 million, of which $82 million related to new initiatives primarily for the reconfiguration of certain consumer branch operations outside the U.S., downsizing of certain marketing operations, and costs associated with exiting a non-strategic business. The 1999 items also include accelerated depreciation charges of $114 million, offset by a reduction of restructuring reserves of $131 million. See Note 13 of Notes to Consolidated Financial Statements for a discussion of restructuring-related items. In 2000, Citicorp adopted the Federal Financial Institutions Examination Council's (FFIEC) revised Uniform Retail Classification and Account Management Policy, which provided guidance on the reporting of delinquent consumer loans and the timing of associated charge-offs for Citicorp's depository institution subsidiaries. The adoption of the policy resulted in additional net credit losses of approximately $90 million which were charged against the allowance for credit losses. NORTH AMERICA CITIBANKING NORTH AMERICA
IN MILLIONS OF DOLLARS 2000 1999(1) - ---------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $2,292 $2,110 Adjusted operating expenses (2) 1,325 1,360 Provision for credit losses 29 64 ------------------- CORE INCOME BEFORE TAXES 938 686 Income taxes 372 288 ------------------- CORE INCOME 566 398 Restructuring-related items, after-tax 9 1 ------------------- NET INCOME $ 575 $ 399 - ---------------------------------------------------------------------=================== Average assets (IN BILLIONS OF DOLLARS) $ 9 $ 9 Return on assets 6.39% 4.43% - ---------------------------------------------------------------------=================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 6.29% 4.42% - ---------------------------------------------------------------------===================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Citibanking North America -- which delivers banking, lending and investment services to customers through Citibank's branches and electronic delivery systems -- reported core income of $566 million in 2000, up $168 million or 42% from 1999 due to revenue growth, and continued expense reduction initiatives and credit cost improvements. Net income of $575 million in 2000 and $399 million in 1999 included restructuring-related credits of $9 million ($15 million pretax), and $1 million ($4 million pretax), respectively. 13 As shown in the following table, Citibanking grew accounts and customer deposits in 2000.
IN BILLIONS OF DOLLARS 2000 1999 - -------------------------------------------------------------------------------- Accounts (IN MILLIONS) 6.7 6.3 Average customer deposits $44.7 $42.1 Average loans $7.0 $7.4 - ------------------------------------------------------------====================
Revenues, net of interest expense, of $2.292 billion increased $182 million or 9% from 1999, reflecting growth in customer deposits and spreads, and increased investment product fees, partially offset by lower loan revenues. Investment product fees and commissions increased 24% in 2000. Adjusted operating expenses of $1.325 billion in 2000 declined $35 million or 3% from 1999. The provision for credit losses declined to $29 million in 2000 from $64 million in 1999. The net credit loss ratio of 0.91% in 2000 declined from 1.22% in 1999, and loans delinquent 90 days or more of $35 million or 0.48% at December 31, 2000 declined from $55 million or 0.78% at December 31, 1999. The declines in the provision for credit losses and delinquencies reflect continued improvement in the portfolio and a decline in loan volumes. MORTGAGE BANKING
IN MILLIONS OF DOLLARS 2000 1999(1) - -------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $829 $747 Adjusted operating expenses (2) 387 348 (BENEFIT) PROVISION FOR CREDIT LOSSES (11) 17 ---------------------- NET INCOME BEFORE TAXES 453 382 Income taxes 181 157 ---------------------- NET INCOME $272 $225 - ----------------------------------------------------------====================== Average assets (IN BILLIONS OF DOLLARS) $38 $29 Return on assets 0.72% 0.78% - ----------------------------------------------------------======================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Mortgage Banking -- which originates and services mortgages and student loans for customers across the United States -- reported net income of $272 million in 2000, up $47 million or 21% from 1999, reflecting growth in both the mortgage and student loan businesses and credit improvement in the mortgage portfolio. Net income in 2000 and 1999 also reflects the April 1999 acquisition of the principal operating assets and certain liabilities of Source One Mortgage Services Corporation (Source One). As shown in the following table, accounts grew 29% in 2000, reflecting loan growth in both mortgages and student loans and an increase in serviced mortgage accounts. In 2000, growth in mortgage loans reflects higher originations with a larger proportion at variable interest rates which are typically held on-balance sheet rather than securitized. Growth in mortgage originations and loans also reflects Source One.
IN BILLIONS OF DOLLARS 2000 1999 - -------------------------------------------------------------------------------- Accounts (IN MILLIONS)(1) 4.4 3.4 Average loans (1) $35.4 $27.5 Mortgage originations $19.1 $18.2 - ---------------------------------------------------------------=================
(1) Includes student loans. Revenues, net of interest expense, of $829 million in 2000 grew $82 million or 11% from 1999, reflecting loan growth and higher servicing income, partially offset by reduced spreads and lower securitization activity. Adjusted operating expenses increased $39 million or 11% in 2000, reflecting additional business volumes. The increase in both revenues and expenses for the year reflects the effect of Source One. The (benefit) provision for credit losses of ($11) million in 2000 declined from $17 million in 1999. The adoption of revised FFIEC write-off policies in 2000 added $17 million to net credit losses, which were charged against the allowance for credit losses, and 5 basis points to the 2000 net credit loss ratio. The 2000 net credit loss ratio was 0.13% (0.08% excluding the effect of FFIEC policy revisions) compared with 0.16% in 1999 and the ratio of loans delinquent 90 days or more was 1.99% at December 31, 2000 compared with 2.31% at December 31, 1999. The declines in the 2000 provision, the net credit loss ratio (excluding FFIEC), and the delinquency ratio principally reflect improvement in the mortgage portfolio. 14 NORTH AMERICA CARDS
IN MILLIONS OF DOLLARS 2000 1999(1) - -------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $6,300 $5,688 Effect of credit card securitization activity 1,904 2,269 -------------------- ADJUSTED REVENUES, NET OF INTEREST EXPENSE 8,204 7,957 Adjusted operating expenses (2) 2,932 2,849 Adjusted provision for credit losses (3) 3,075 3,234 -------------------- CORE INCOME BEFORE TAXES 2,197 1,874 Income taxes 816 692 -------------------- CORE INCOME 1,381 1,182 Restructuring-related items, after-tax 6 12 -------------------- NET INCOME $1,387 $1,194 - ------------------------------------------------------------==================== Average assets (IN BILLIONS OF DOLLARS) (4) $37 $28 Return on assets 3.75% 4.26% - ------------------------------------------------------------==================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets(5) 3.73% 4.22% - ------------------------------------------------------------====================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. (3) Adjusted for the effect of credit card securitization activity. (4) Adjusted for the effect of credit card securitization activity, managed average assets were $84 billion and $75 billion in 2000 and 1999, respectively. (5) Adjusted for the effect of credit card securitization activity, the return on managed assets, excluding restructuring-related items, was 1.64% in 2000 and 1.58% in 1999. Cards - North America bankcards and Diners Club -- reported core income of $1.381 billion in 2000, up $199 million or 17% from 1999, reflecting improvements in the bankcards business. Net income of $1.387 billion in 2000 and $1.194 billion in 1999, included restructuring-related credits of $6 million ($8 million pretax) and $12 million ($18 million pretax), respectively. Risk adjusted margin is a measure of profitability calculated as adjusted revenues less managed net credit losses as a percentage of average managed loans, consistent with the goal of matching the revenues generated by the loan portfolio with the credit risk undertaken. As shown in the following table, North America bankcards risk adjusted margin of 6.13% decreased 27 basis points from 1999 as lower spreads on the portfolio were partially offset by credit improvements and an increase in non-interest revenue, primarily interchange fees.
IN BILLIONS OF DOLLARS 2000 1999 - -------------------------------------------------------------------------------- Risk adjusted revenues (1) $4.8 $4.5 Risk adjusted margin % (2) 6.13% 6.40% - --------------------------------------------------------------==================
(1) Adjusted revenues less managed net credit losses. (2) Risk adjusted revenues as a percentage of average managed loans. Adjusted revenues, net of interest expense, of $8.204 billion in 2000 increased $247 million or 3% from 1999, reflecting receivable growth, including portfolio acquisitions, higher interchange fee revenues due to sales volume growth and increased fees from other cardmember services, offset by lower spreads. Spread compression in the portfolio reflects changes in portfolio mix, including an increased percentage of the portfolio priced at low introductory rates, and higher funding costs due to increased interest rates. As shown in the following table, on a managed basis, the North America bankcard portfolio experienced growth in accounts, sales, cards in force, and receivables in 2000, including the effect of portfolio acquisitions.
IN BILLIONS OF DOLLARS 2000 1999 - -------------------------------------------------------------------------------- Accounts (IN MILLIONS) 44.0 41.1 Cards in force (IN MILLIONS) 68 65 Total sales $188.0 $163.3 End-of-period managed receivables $ 87.7 $ 74.7 - -----------------------------------------------------------=====================
Adjusted operating expenses of $2.932 billion in 2000 increased $83 million or 3% from 1999, reflecting acquisitions and increased target-marketing efforts in North America bankcards. The adjusted provision for credit losses in 2000 was $3.075 billion compared with $3.234 billion in 1999. North America bankcards managed net credit losses in 2000 were $3.022 billion and the related loss ratio was 3.85%, compared with $3.158 billion and 4.54% 15 in 1999. North America bankcards managed loans delinquent 90 days or more were $1.140 billion or 1.31% of loans at December 31, 2000 compared with $1.066 billion or 1.44% at December 31, 1999. The improvement in the 2000 net credit loss ratio reflects industry-wide bankruptcy trends and credit risk management initiatives. CITIFINANCIAL
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $1,947 $1,615 Adjusted operating expenses (2) 848 693 Provision for credit losses 340 309 ----------------------- CORE INCOME BEFORE TAXES 759 613 Income taxes 278 225 ----------------------- CORE INCOME 481 388 Restructuring-related items, after-tax - (2) ----------------------- NET INCOME $ 481 $ 386 - -------------------------------------------------------------======================= Average assets (IN BILLIONS OF DOLLARS) $20 $16 Return on assets 2.41% 2.41% - ------------------------------------------------------------------------------------ EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 2.41% 2.43% - -------------------------------------------------------------=======================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. CitiFinancial -- which provides community-based lending services through its branch network and through cross-selling initiatives with other Citigroup businesses -- reported core income of $481 million in 2000 up $93 million or 24% from 1999, reflecting continued strong receivable growth, including the effects of acquisitions, and improved credit performance. Net income of $386 million in 1999 included restructuring-related items of $2 million ($3 million pretax). As shown in the following table, receivables grew 30% in 2000 resulting from higher volumes from CitiFinancial branches, and the cross-selling of products through other Citigroup distribution channels. At December 31, 2000, the portfolio consisted of 63% real estate-secured loans, 30% personal loans, and 7% sales finance and other, compared with 58%, 34% and 8% in 1999. The average net interest margin on receivables of 8.13% in 2000 declined from 8.85% in 1999, reflecting lower yields due to changes in portfolio mix toward more real estate secured loans and higher funding costs due to increased interest rates.
2000 1999 - ------------------------------------------------------------------------------------------- End-of-period managed receivables (IN BILLIONS) $20.1 $15.5 Average interest margin % 8.13% 8.85% - ----------------------------------------------------------------------=====================
Revenues, net of interest expense, of $1.947 billion in 2000 were up $332 million or 21% from 1999, reflecting continued strong receivables growth offset by lower spreads. Adjusted operating expenses of $848 million in 2000 increased $155 million or 22% from 1999 reflecting higher business volumes, including acquisitions. The provision for credit losses was $340 million in 2000 up from $309 million in 1999, primarily reflecting receivable growth. The net credit loss ratio of 1.96% in 2000 was down from 2.18% in 1999 and included a benefit of approximately 18 basis points related to changes in the write-off policy for certain bankrupt accounts. Loans delinquent 90 days or more were $277 million or 1.38% of loans in 2000 compared to $203 million or 1.31% in 1999. The increase in delinquencies from a year ago reflects the impact of previous acquisitions. 16 INTERNATIONAL CONSUMER WESTERN EUROPE
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $1,899 $1,991 Adjusted operating expenses (2) 1,137 1,283 Provisions for credit losses 222 268 ------------------------ CORE INCOME BEFORE TAXES 540 440 Income taxes 195 165 ------------------------ CORE INCOME 345 275 Restructuring-related items, after-tax - 2 ------------------------ NET INCOME $ 345 $ 277 - -------------------------------------------------------------------======================== Average assets (IN BILLIONS OF DOLLARS) $18 $19 Return on assets 1.92% 1.46% - -------------------------------------------------------------------======================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 1.92% 1.45% - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Western Europe -- which provides banking, lending and investment services, including credit and charge cards, to customers throughout the region -- reported core income of $345 million in 2000, up $70 million or 25% from 1999, reflecting growth across the region, particularly Germany. Net income of $277 million in 1999 included restructuring credits of $2 million ($4 million pretax). The net effect of foreign currency translation reduced income growth by approximately $54 million in 2000 and reduced revenue and expense and growth rates by 14 and 12 percentage points from 1999. As shown in the following table, Western Europe reported 7% account growth in 2000, primarily reflecting loan and deposit growth. However, loans and customer deposit volumes were reduced by the effect of foreign currency translation.
IN BILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 9.5 8.9 Average customer deposits $12.4 $13.7 Average loans $14.6 $15.3 - -------------------------------------------------------------------------------------------
Revenues, net of interest expense, of $1.899 billion in 2000 decreased $92 million or 5% from 1999 as higher investment product fees, loan growth and higher deposit spreads were more than offset by the effect of foreign currency translation. Adjusted operating expenses of $1.137 billion declined $146 million or 11% from 1999 as costs associated with higher business volumes were more than offset by lower regional office and technology expenses and the effect of foreign currency translation. The provision for credit losses was $222 million in 2000, down from $268 million in 1999. The adoption of revised FFIEC write-off policies in 2000 added $10 million to net credit losses, which were charged against the allowance for credit losses, and 7 basis points to the net credit loss ratio. The net credit loss ratio was 1.62% (1.55% excluding the effects of FFIEC policy revisions) in 2000, compared with 1.64% in 1999. Loans delinquent 90 days or more of $782 million or 5.09% of loans at December 31, 2000 decreased from $868 million or 5.75% at December 31, 1999. 17 JAPAN
IN MILLIONS OF DOLLARS 2000 1999 (1) - ------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $652 $392 Adjusted operating expenses (2) 417 239 Provisions for credit losses 20 12 ------------------------ INCOME BEFORE TAXES 215 141 Income taxes 76 54 ------------------------ NET INCOME $139 $87 - -------------------------------------------------------------------======================== Average assets (IN BILLIONS OF DOLLARS) $7 $5 Return on assets 1.99% 1.74% - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Japan -- which provides banking, lending and investment services, including credit and charge cards, to customers throughout the country -- reported net income of $139 million in 2000, up $52 million or 60% from 1999, reflecting expansion of the business, driven by growth in deposits, investment products, and mortgages. Net income growth in 2000 also reflects the Diners Club acquisition in the 2000 first quarter. Net foreign currency translation effects increased revenue growth by 2 percentage points, and expense growth by 4 percentage points. As shown in the following table, Japan reported strong growth in accounts, customer deposits, and loans. In 2000, the Diners Club acquisition added approximately $0.5 billion in loans and 0.6 million accounts.
IN BILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 2.8 2.0 Average customer deposits $13.6 $11.4 Average loans $ 3.2 $ 1.6 - ----------------------------------------------------------------------=====================
Revenues, net of interest expense, of $652 million in 2000 grew $260 million or 66% from 1999, reflecting higher deposit volumes and spreads, and growth in investment product fees and mortgage loans. Adjusted operating expenses increased $178 million or 74% in 2000, reflecting costs associated with expansion efforts and additional business volumes. In 2000, both revenue and expense increases also reflect the Diners Club acquisition. The provision for credit losses in 2000 was $20 million, up from $12 million in 1999. The net credit loss ratio of 0.63% in 2000 declined from 0.76% in 1999 and loans delinquent 90 days or more were $8 million or 0.22% of loans at December 31, 2000, down from $11 million or 0.49% at December 31, 1999. ASIA
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $2,109 $1,852 Adjusted operating expenses (2) 981 951 Provisions for credit losses 254 333 ------------------------ CORE INCOME BEFORE TAXES 874 568 Income taxes 311 212 ------------------------ CORE INCOME 563 356 Restructuring-related items, after-tax (4) (13) ------------------------ NET INCOME $ 559 $ 343 - -------------------------------------------------------------------======================== Average assets (IN BILLIONS OF DOLLARS) $27 $25 Return on assets 2.07% 1.37% - -------------------------------------------------------------------======================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 2.09% 1.42% - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Asia (excluding Japan) -- which provides banking, lending and investment services, including credit and charge cards, to customers throughout the region - -- reported core income of $563 million in 2000, up $207 million or 58% from 1999, reflecting loan growth, 18 particularly credit cards, higher investment product fees and deposit growth. Net income of $559 million in 2000 and $343 million in 1999, included restructuring-related charges of $4 million ($5 million pretax) and $13 million ($23 million pretax), respectively. In 2000, net foreign currency translation effects reduced revenue and expense growth by approximately 1 and 3 percentage points, respectively. As shown in the following table, Asia accounts grew 13% in 2000, reflecting growth in the cards business across the region, and favorable economic conditions in most countries.
IN BILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 8.1 7.2 Average customer deposits $33.8 $30.7 Average loans $22.2 $21.7 - ----------------------------------------------------------------------=====================
Revenues, net of interest expense, of $2.109 billion in 2000 increased $257 million or 14% from 1999 reflecting improvements in most countries driven by growth in cards, investment product fees, and deposits. Adjusted operating expenses of $981 million increased $30 million or 3% from 1999 reflecting increased variable compensation, including higher investment product sales commissions, and increased marketing costs, offset by lower expenses in certain countries resulting from previously implemented restructuring initiatives. The provision for credit losses in 2000 was $254 million compared with $333 million in 1999. The net credit loss ratio was 1.16% in 2000, compared with 1.32% in 1999. Loans delinquent 90 days or more were $335 million or 1.51% of loans at December 31, 2000, compared with $442 million or 1.93% at December 31, 1999. The declines in the net credit loss ratio and delinquencies from 1999 reflect favorable economic conditions in most countries. LATIN AMERICA
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $1,941 $1,970 Adjusted operating expenses (2) 1,350 1,194 Provision for credit losses 292 447 ------------------------ CORE INCOME BEFORE TAXES 299 329 Income taxes 91 107 ------------------------ CORE INCOME 208 222 Restructuring-related items, after-tax (31) (27) ------------------------ NET INCOME $ 177 $ 195 - -------------------------------------------------------------------======================== Average assets (IN BILLIONS OF DOLLARS) $12 $14 Return on assets 1.48% 1.39% - -------------------------------------------------------------------======================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 1.73% 1.59% - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Latin America - which provides banking, lending and investment services, including credit and charge cards, to customers throughout the region - reported core income of $208 million in 2000, down $14 million or 6% from 1999, reflecting reduced earnings related to Confia and lower business volumes due to weak economic conditions, partially offset by lower credit costs and an increase in earnings from Credicard, a 33%-owned Brazilian Card affiliate. Net income of $177 million in 2000 and $195 million in 1999 included restructuring-related charges of $31 million ($45 million pretax) and $27 million ($42 million pretax), respectively. In 2000, minimal growth in accounts and deposits reflected economic conditions in certain countries. The decline in average loans reflects the 2000 first quarter auto loan portfolio sale in Puerto Rico and credit risk management initiatives.
IN BILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 9.1 8.8 Average customer deposits $13.7 $13.5 Average loans $ 7.2 $ 8.0 - ----------------------------------------------------------------------=====================
19 Revenues, net of interest expense, of $1.941 billion in 2000 decreased $29 million or 1% from 1999 as higher Credicard earnings were offset by reduced revenues from Confia and business volume declines in certain countries, including the effect of the auto loan portfolio sale in Puerto Rico. Adjusted operating expenses of $1.350 billion increased $156 million or 13% from 1999 reflecting costs associated with new business initiatives, strategy changes in certain countries, and acquisitions in the region. The provision for credit losses was $292 million in 2000 compared to $447 million in 1999. The adoption of revised FFIEC write-off policies in 2000 added $41 million to net credit losses, which were charged against the allowance for credit losses, and 56 basis points to the net credit loss ratio. The net credit loss ratio was 4.62% (4.06% excluding the effect of FFIEC policy revisions) in 2000 down from 5.30% in 1999. Loans delinquent 90 days or more of $250 million or 3.66% of loans at December 31, 2000 decreased from $320 million or 4.10% at December 31, 1999. The decline in delinquent loans in 2000 reflects additional write-offs related to the adoption of revised FFIEC policies. CENTRAL & EASTERN EUROPE, MIDDLE EAST & AFRICA
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $418 $337 Adjusted operating expenses (2) 289 230 Provision for credit losses 33 32 ------------------------ CORE INCOME BEFORE TAXES 96 75 Income taxes 37 29 ------------------------ CORE INCOME 59 46 Restructuring-related items, after-tax 4 (17) ------------------------ NET INCOME $ 63 $ 29 - -------------------------------------------------------------------======================== Average assets (IN BILLIONS OF DOLLARS) $3 $3 Return on assets 2.10% 0.97% - -------------------------------------------------------------------======================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 1.97% 1.53% - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Central & Eastern Europe, Middle East & Africa (CEEMEA--including India and Pakistan) -- which provides banking, lending and investment services, including credit and charge cards, to customers throughout the region -- reported core income of $59 million in 2000, up $13 million or 28% from 1999, reflecting growth across the region, particularly India. Net income of $63 million in 2000 and $29 million in 1999 included restructuring-related items of $4 million ($5 million pretax) and ($17) million (($27) million pretax), respectively. Core income in 1999 includes a $16 million ($25 million pretax) gain related to an investment in an affiliate. The net effect of foreign currency translation reduced revenue and expense growth by approximately 5 and 6 percentage points, respectively, in 2000. As shown in the following table, CEEMEA reported 33% account growth in 2000 primarily reflecting growth in credit cards and customer deposits as franchise growth efforts continue across the region.
IN BILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- Accounts (IN MILLIONS) 2.8 2.1 Average customer deposits $3.9 $3.6 Average loans $1.9 $1.7 - -----------------------------------------------------------------------====================
Revenues, net of interest expense, of $418 million in 2000 increased $81 million or 24% from 1999 reflecting strong growth in cards and deposits, and higher spreads. Adjusted operating expenses of $289 million increased $59 million or 26% from 1999, reflecting higher business volumes and costs associated with franchise growth in the region. The provision for credit losses was $33 million in 2000 compared with $32 million in 1999. The adoption of revised FFIEC write-off policies in 2000 added $3 million to net credit losses, which were charged against the allowance for credit losses, and 15 basis points to the net credit loss ratio. The net credit loss ratio was 1.95% (1.80% excluding the effect of FFIEC policy revisions) in 2000, down from 1.96% in 1999 and loans delinquent 90 days or more of $32 million or 1.37% of loans at December 31, 2000 decreased from $46 million or 2.25% at December 31, 1999. 20 E-CONSUMER
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $173 $108 Adjusted operating expenses 498 295 ------------------------ LOSS BEFORE TAX BENEFITS (325) (187) Income tax benefits (123) (76) ------------------------ NET LOSS ($202) ($111) - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. e-Consumer -- the business responsible for developing and implementing Global Consumer Internet financial services products and e-commerce solutions -- reported net losses of $202 million in 2000, compared to $111 million in 1999. Revenues, net of interest expense, were $173 million in 2000, up from $108 million in 1999. Revenues in 2000 include gains related to the sale of certain Internet/e-commerce investments. Adjusted operating expenses of $498 million increased from $295 million in 1999, reflecting continued investment spending on Internet financial services. Expenses in 2000 include charges related to the termination of certain contracts and other initiatives. OTHER CONSUMER
IN MILLIONS OF DOLLARS 2000 1999 (1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $ 35 $175 Adjusted operating expenses (2) 160 239 Provision for credit losses - 25 ------------------------ LOSS BEFORE TAX BENEFITS (125) (89) Income tax benefits (35) (21) ------------------------ LOSS (90) (68) Restructuring-related items, after-tax 2 (12) ------------------------ NET LOSS ($88) ($80) - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Other Consumer -- which includes certain treasury operations and global marketing and other programs - reported losses before restructuring-related items of $90 million in 2000, compared with $68 million in 1999, reflecting lower treasury results, offset by lower marketing costs and reduced staff levels. Expenses in 2000 also reflect costs associated with the termination of certain global distribution initiatives. The 1999 revenues, expenses and provision for credit losses include the results of the private label cards business that was discontinued in early 2000. Net losses of $88 million in 2000 and $80 million in 1999 included restructuring-related items of $2 million ($2 million pretax) and ($12) million (($19) million pretax), respectively. 21 CONSUMER PORTFOLIO REVIEW In the consumer portfolio, credit loss experience is often expressed in terms of annualized net credit losses as a percentage of average loans. Pricing and credit policies reflect the loss experience of each particular product. Consumer loans are generally written off no later than a predetermined number of days past due on a contractual basis, or earlier in the event of bankruptcy. The number of days is set at an appropriate level according to loan product and country. The table below summarizes delinquency and net credit loss experience in both the managed and on-balance sheet loan portfolios in terms of loans 90 days or more past due, net credit losses, and as a percentage of related loans. CONSUMER LOAN DELINQUENCY AMOUNTS, NET CREDIT LOSSES, AND RATIOS
TOTAL 90 DAYS OR MORE AVERAGE NET CREDIT LOANS PAST DUE(1) LOANS LOSSES(1) --------------------------------------------------------- IN MILLIONS OF DOLLARS, EXCEPT LOAN AMOUNTS IN BILLIONS 2000 2000 1999 2000 2000 1999 - --------------------------------------------------------------------------------------------------------- Citibanking North America $ 7.3 $ 35 $ 55 $ 7.0 $ 64 $ 90 Ratio 0.48% 0.78% 0.91% 1.22% Mortgage Banking 41.7 828 696 35.4 46 43 Ratio 1.99% 2.31% 0.13% 0.16% North America Bankcards 86.8 1,140 1,066 78.5 3,022 3,158 Ratio 1.31% 1.44% 3.85% 4.54% Other Cards 1.7 6 21 1.8 65 49 Ratio 0.35% 1.31% 3.76% 3.00% CitiFinancial 20.1 277 203 17.4 340 295 Ratio 1.38% 1.31% 1.96% 2.18% Associates (2) 68.1 1,622 1,461 61.8 2,389 2,018 Ratio 2.38% 2.62% 3.87% 3.88% Western Europe 15.4 782 868 14.6 237 249 Ratio 5.09% 5.75% 1.62% 1.64% Japan 3.6 8 11 3.2 20 12 Ratio 0.22% 0.49% 0.63% 0.76% Asia 22.2 335 442 22.2 257 286 Ratio 1.51% 1.93% 1.16% 1.32% Latin America 6.8 250 320 7.2 332 419 Ratio 3.66% 4.10% 4.62% 5.30% CEEMEA 2.3 32 46 1.9 38 32 Ratio 1.37% 2.25% 1.95% 1.96% The Citigroup Private Bank (3) 26.4 61 120 24.2 23 19 Ratio 0.23% 0.54% 0.09% 0.10% Other 0.4 -- 4 0.3 -- 23 - --------------------------------------------------------------------------------------------------------- TOTAL MANAGED 302.8 5,376 5,313 275.5 6,833 6,693 RATIO 1.78% 2.07% 2.48% 2.80% - --------------------------------------------------------------------------------------------------------- Securitized receivables (60.6) (1,012) (916) (57.0) (2,228) (2,479) Loans held for sale (13.3) (110) (32) (8.7) (182) (121) - --------------------------------------------------------------------------------------------------------- Consumer loans $228.9 $4,254 $4,365 $ 209.8 $4,423 $4,093 Ratio 1.86% 2.24% 2.11% 2.24% - ------------------------------------------------=========================================================
(1) The ratios of 90 days or more past due and net credit losses are calculated based on end-of-period and average loans, respectively, both net of unearned income. (2) Associates results are reported in the Associates segment. (3) The Citigroup Private Bank results are reported as part of the Global Investment Management and Private Banking segment. 22 CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME
END OF PERIOD AVERAGE ------------------- ---------------------- IN BILLIONS OF DOLLARS 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------- TOTAL MANAGED $302.8 $257.2 $275.5 $239.3 Securitized receivables (60.6) (58.0) (57.0) (51.0) Loans held for sale (13.3) (4.6) (8.7) (5.5) ------------------- ------------------- CONSUMER LOANS $228.9 $194.6 $209.8 $182.8 - ---------------------------------------------==============================================
Total delinquencies 90 days or more past due in the managed portfolio were $5.376 billion with a related delinquency ratio of 1.78% at December 31, 2000, compared with $5.313 billion or 2.07% at December 31, 1999. Total managed net credit losses in 2000 were $6.833 billion and the related loss ratio was 2.48%, compared with $6.693 billion and 2.80% in 1999. For a discussion on trends by business, see business discussions on pages 12 - 21. Citicorp's allowance for credit losses of $8.961 billion is available to absorb all probable credit losses inherent in the portfolio. For analytical purposes only, the portion of Citicorp's allowance for credit losses attributed to the consumer portfolio was $4.973 billion as of December 31, 2000, down from $5.158 billion in 1999. The allowance as a percentage of loans on the balance sheet was 2.17% as of December 31, 2000, down from 2.65% at December 31, 1999 reflecting improved credit performance in the portfolio. The attribution of the allowance is made for analytical purposes only and may change from time to time.
IN BILLIONS OF DOLLARS 2000 1999 - -------------------------------------------------------------------------------- Allowance for credit losses (1) $4.973 $5.158 As a percentage of total consumer loans 2.17% 2.65% - --------------------------------------------------------------==================
(1) Includes $1.746 billion and $1.727 billion at December 31, 2000 and 1999, respectively, related to Associates. GLOBAL CONSUMER OUTLOOK The statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. BANKING/LENDING CITIBANKING NORTH AMERICA. 2000 was a year of continued success. Citibanking invested in programs and staff to improve operations and customer service while continuing to reduce overall expenses. In addition, Citibanking implemented its needs based sales approach through Citipro, a complimentary financial needs analysis that assesses customers' needs and recommends appropriate financial products to meet those needs. In 2001, Citibanking expects business volumes to increase, including loans, which have declined in the past year, however, lower interest rates may narrow spreads. On February 12, 2001, Citicorp agreed to acquire European American Bank (EAB), a state-chartered bank with $11.5 billion in deposits, $15.4 billion in assets and 97 branches in the New York area. The transaction, which upon completion will be immediately accretive to Citicorp's earnings, is subject to customary bank regulatory approvals and is expected to close in mid-2001. MORTGAGE BANKING. In 2000, Mortgage Banking increased core income by 21% over 1999. New loan production was 13% higher than 1999 as mortgage market share increased and was supported by the cross-sell success of its Citigroup affiliate, Salomon Smith Barney, financial consultants selling approximately $1 billion of mortgage products. Student Loans retained its top industry ranking for volume and continued to expand its Internet presence by sourcing 40% of new loan applications through its website versus 16% in 1999. In 2001, core income should improve over 2000 if increased refinancing activity occurs as a result of lower interest rates, by the development of Internet-based partnerships, and additional e-commerce volumes. Credit costs are not expected to improve further from 2000 due to volume growth and U.S. economic conditions. NORTH AMERICA CARDS. The Cards business achieved improved performance in 2000 despite a challenging interest rate environment and continuing competitive pressures. Despite lower spreads, return on managed assets increased as both net credit loss and expense ratios improved. In 2001, the business is expected to show continued growth as lower interest rates should help improve spreads; however, credit costs and delinquencies are expected to increase from 2000 levels as a result of the U.S. economic environment and continued business growth. 23 CITIFINANCIAL. The addition of approximately 100 new branches, successful integration of prior years' acquisitions, and the continuation of originating new volume through Citigroup affiliates contributed to the growth of the business in 2000. CitiFinancial will continue to pursue growth by expanding and developing new channels and diversifying its product offerings. As in the past, cross-selling opportunities among Citigroup affiliates will continue. The slowing U.S. economy may mitigate growth in 2001 and credit performance is expected to deteriorate as previous portfolio additions mature and the uncertain economic environment persists. INTERNATIONAL CONSUMER WESTERN EUROPE. The outlook for the Western Europe region appears to be favorable. The economic convergence of Eurozone is progressing and increasing its breadth with the inclusion of Greece as of January 2001. In 2001, the business will continue to focus on the development of Internet banking and investment products, along with consumer finance and cards. As social reforms take hold, an increasing recognition on the part of consumers that they will need to fund their own retirements is fueling a substantial investment product opportunity. Citigroup's strengths in distribution and consistent global advertising and marketing efforts will provide a strong platform to expand beyond the current European presence. JAPAN. The acquisition of Diners Japan in 2000 expanded the country's loan portfolio and contributed to both revenue and income growth. Growth was reported across all product categories in 2000 and is planned to continue in 2001. In 2001, the business focus will be on expanding cards, revolving credit, and investment products. While competitive pressures are expected to continue and compress spreads, the business plans to grow through volume and fee revenue increases. Credit costs are expected to increase modestly due to volume growth. CENTRAL & EASTERN EUROPE, MIDDLE EAST & AFRICA. The business experienced strong momentum in 2000 with a 28% increase in core income, driven by an expanded presence in the region and the rapid emergence of a middle class with increasing financial services needs. In 2000, revenue and account growth was driven by leadership in cards across the region, the development of the consumer finance franchise in key markets, and increased focus on investment and insurance product sales. The priorities for 2001 will be the growth of market share in established markets, further integration of acquisitions in India, Poland and Hungary, continued development of the new franchises, and the launch of innovative products and services using the Internet and mobile channels. The business plans to grow in 2001, despite increased competitive pressures. ASIA. The region recorded strong financial performance in 2000, driven by volume growth, expense management initiatives and favorable credit performance, despite pricing compression and currency devaluation in a number of countries. Credit costs in 2000 were low compared to the previous year, and are expected to increase modestly in 2001 to reflect business growth. The business focus in 2001 will be on continuing the 2000 momentum to expand the cards, revolving credit, and investment products portfolios. LATIN AMERICA. In 2000, the region continued to experience weak economic conditions in some of its countries. Tight controls in loan underwriting and collections resulted in improved credit performance, offsetting a portion of the revenue weakness. The termination and subsequent partial restoration of a subsidy from the Mexican government also impacted results. The business will continue to focus on products with reduced risk and population segments and continue to implement operating expense reduction programs. The partial restoration of the subsidy from the Mexican government coupled with expected improvement in the economic climate and stable credit costs should position the Latin American region for growth in 2001. E-CONSUMER. In 2000 the business launched several new product initiatives, including Citibank Online, C2it and MyCiti, and entered into a strategic alliance with America Online. Expenses in 2000 included one-time charges related to the termination of certain contracts and other initiatives. In 2001, the business will continue to develop and refine product offerings and focus on strategic alliances that will extend Citicorp's ability to deliver financial services via the Internet and improve cross selling opportunities with other Citigroup businesses. These efforts should position Citicorp to grow with the digital economy and improve product distribution and customer service capabilities. 24 GLOBAL CORPORATE BANK
IN MILLIONS OF DOLLARS 2000 1999 (1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $10,128 $8,563 Adjusted operating expenses (2) 5,928 5,336 Provision for credit losses 346 353 ------------------------ CORE INCOME BEFORE TAXES 3,854 2,874 Income taxes 1,402 1,077 ------------------------ CORE INCOME 2,452 1,797 Restructuring-related items, after-tax (11) (22) ------------------------ NET INCOME $ 2,441 $1,775 - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Citicorp's Global Corporate Bank serves corporations, financial institutions, governments, investors and other participants in capital markets throughout the world and consists of The Global Relationship Bank (GRB) and Emerging Markets Corporate Banking (EM Corporate). GRB focuses on providing banking, capital markets and transaction processing services to large multinational companies in 22 developed countries. EM Corporate provides a wide array of banking products and services to multinational and large and emerging local corporations in 78 emerging market countries. Global Corporate Bank core income in 2000 was $2.452 billion, up $655 million or 36% from 1999. In 2000, EM Corporate core income was $1.610 billion, up $448 million or 39% from 1999, while GRB core income was $842 million, up $207 million or 33% from 1999. EM Corporate's core income growth was driven by broad-based growth in revenues, tight expense control management and improved credit. Core income growth at GRB reflected double-digit revenue growth partially offset by increases in expenses and the provision for credit losses. Net income of $2.441 billion in 2000 and $1.775 billion in 1999 included restructuring-related charges of $11 million ($18 million pretax) in 2000 and $22 million ($35 million pretax) in 1999. See Note 13 of Notes to Consolidated Financial Statements. THE GLOBAL RELATIONSHIP BANK
IN MILLIONS OF DOLLARS 2000 1999 (1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $5,046 $4,216 Adjusted operating expenses (2) 3,569 3,206 Provision for credit losses 161 6 ------------------------ CORE INCOME BEFORE TAXES 1,316 1,004 Income taxes 474 369 ------------------------ CORE INCOME 842 635 Restructuring-related items, after-tax - (12) ------------------------ NET INCOME $ 842 $ 623 - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Core income from The Global Relationship Bank was $842 million in 2000, up $207 million or 33% from 1999, primarily reflecting double-digit revenue growth partially offset by increases in expenses and the provision for credit losses. During the second quarter of 2000, GRB strengthened its position in the U.S. leasing market through the purchase of Copelco. Net income of $623 million in 1999 included restructuring-related items of $12 million ($18 million pretax). Revenues, net of interest expense, in 2000 of $5.046 billion increased $830 million or 20% from 1999. The increase was driven by growth in transaction services, equity derivatives and structured products along with the acquisition of Copelco. The 2000 comparison was negatively impacted by lower trading results, due to treasury activities partially offset by improvements in warrants and foreign exchange. Adjusted operating expenses were $3.569 billion in 2000, up $363 million or 11% from 1999. The increase in expenses from 1999 to 2000 was primarily the result of higher incentive compensation and the acquisition of Copelco partially offset by the absence of year 2000 and European Economic Monetary Union expenses. 25 The provision for credit losses was $161 million in 2000 compared to $6 million in 1999. The increase was due to 2000 losses on exposures to North American health care borrowers; recoveries on real estate loans in 1999; and losses at Copelco, which was acquired in the second quarter of 2000. Exposures to healthcare were limited in 1999 and were significantly reduced during 2000. Copelco is an equipment lease financing business that incurred an acceptable level of credit losses in the normal course of its business. Cash-basis loans at December 31, 2000 and 1999 were $539 million and $304 million, respectively, while the Other Real Estate Owned portfolio totaled $115 million and $156 million, respectively. In all periods, cash-basis loans represent less than 0.2% of total outstanding loans and unfunded commitments. Approximately half of the increase in cash-basis loans in 2000 was due to the acquisition of Copelco, with the balance attributable to borrowers in North America. The improvement in Other Real Estate Owned in 2000 was primarily related to the North America real estate portfolio. EMERGING MARKETS CORPORATE BANKING
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $5,082 $4,347 Adjusted operating expenses (2) 2,359 2,130 Provision for credit losses 185 347 ------------------------ CORE INCOME BEFORE TAXES 2,538 1,870 Income taxes 928 708 ------------------------ CORE INCOME 1,610 1,162 Restructuring-related items, after-tax (11) (10) ------------------------ NET INCOME $1,599 $1,152 - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. Emerging Markets Corporate Banking core income totaled $1.610 billion in 2000, up $448 million or 39% from 1999, reflecting broad based revenue growth, tight expense control management and improved credit in Asia. The improvement in core income was driven by growth across all regions with Asia up $212 million to $588 million, CEEMEA up $138 million to $393 million and Latin America up $34 million to $566 million. In June 2000, EM Corporate completed the acquisition of a majority interest in Bank Handlowy, Poland's largest corporate bank. Net income of $1.599 billion and $1.152 billion in 2000 and 1999, respectively, included restructuring-related items of $11 million ($18 million pretax) and $10 million ($17 million pretax), respectively. Revenues, net of interest expense, of $5.082 billion in 2000 grew $735 million or 17% compared with 1999. Revenue growth in 2000 was led by CEEMEA, up 36% from 1999, due to the acquisition of Bank Handlowy along with growth in trading-related revenues and transaction services. Asia revenues were up 10% in 2000 as growth in transaction services and higher securities transactions were partially offset by a decline in trading-related revenues. Latin America revenues were up 6% in 2000 reflecting growth in transaction services, capital markets and asset based finance, partially offset by lower trading-related revenues. Revenues in the EM Corporate business that were attributable to business from multinational companies managed jointly with GRB grew 10% in 2000 and 17% in 1999. These revenues accounted for approximately 23% and 25% of total EM Corporate revenues in 2000 and 1999, respectively. Adjusted operating expenses in 2000 were well controlled, increasing $229 million or 11% to $2.359 billion (up 5% excluding the impact of the acquisition of Bank Handlowy). Expense growth was primarily due to investment spending to gain market share in selected emerging market countries and other volume related increases. The provision for credit losses of $185 million in 2000 was down $162 million compared with 1999. Net credit losses in 2000 were down $185 million or 46% compared to 1999, primarily reflecting improvements in Asia, mainly China, Indonesia, Australia and Thailand, and in CEEMEA. Cash-basis loans at December 31, 2000 and 1999 were $1.147 billion and $1.044 billion, respectively. The increase in 2000 was primarily due to the acquisition of Bank Handlowy along with increases in Latin America, partially offset by improvements in Asia. 26 COMMERCIAL PORTFOLIO REVIEW Commercial loans are identified as impaired and placed on a nonaccrual basis when it is determined that the payment of interest or principal is doubtful of collection or when interest or principal is past due for 90 days or more, except when the loan is well secured and in the process of collection. Impaired commercial loans are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans are written down to the lower of cost or collateral value. The following table summarizes commercial cash-basis loans and net credit losses.
IN MILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- CASH-BASIS LOANS AT YEAR-END The Global Relationship Bank (1) $ 539 $ 304 Emerging Markets Corporate Banking 1,147 1,044 Associates (2) 402 223 Investment Activities (3) 2 14 ------------------------ TOTAL CASH-BASIS LOANS $2,090 $1,585 - ------------------------------------------------------------------------------------------- NET CREDIT LOSSES The Global Relationship Bank (1) $161 $ 6 Emerging Markets Corporate Banking 221 406 Associates (2) 382 142 Investment Activities (3) 7 - ------------------------ TOTAL NET CREDIT LOSSES $771 $554 - -------------------------------------------------------------------========================
(1) In 2000, includes $107 million in cash-basis loans and $32 million in net credit losses related to Copelco. (2) Associates results are reported in the Associates segment and exclude amounts related to manufactured housing, as such loan origination operations were discontinued in early 2000. Excluded cash-basis loans and net credit losses relating to manufactured housing were $55 million and $36 million, respectively, in 1999. (3) Investment Activities results are reported in the Investment Activities segment. Total commercial cash-basis loans were $2.090 billion and $1.585 billion at December 31, 2000 and 1999, respectively. Cash-basis loans in GRB increased $235 million to $539 million at December 31, 2000 with approximately half of the increase due to the acquisition of Copelco and the balance attributable to borrowers in North America. Associates' cash-basis loans of $402 million increased $179 million primarily in the transportation portfolio. EM Corporate cash-basis loans were $1.147 billion at December 31, 2000, up 10% from a year ago primarily due to the acquisition of Bank Handlowy along with increases in Latin America, partially offset by improvements in Asia. Total commercial net credit losses of $771 million in 2000 increased $217 million compared to 1999 primarily reflecting increases in Associates and GRB partially offset by a decline in EM Corporate. The increase in Associates net credit losses was primarily due to deterioration in the transportation portfolio, while the GRB increase reflected 2000 losses on exposures to North American health care borrowers; recoveries on real estate loans in 1999; and the inclusion of losses for Copelco, which was acquired in the second quarter of 2000. Exposures to health care were limited in 1999 and were significantly reduced during 2000. EM Corporate net credit losses in 2000 were down $185 million, primarily reflecting improvements in Asia, mainly China, Indonesia, Australia and Thailand, and in CEEMEA. For a further discussion of trends by business, see the business discussions on pages 25 - 26. Citicorp's allowance for credit losses of $8.961 billion is available to absorb all probable credit losses inherent in the portfolio. For analytical purposes only, the portion of Citicorp's allowance for credit losses attributed to the commercial portfolio was $3.988 billion at December 31, 2000 compared to $3.695 billion at December 31, 1999. The increase in the allowance in 2000 primarily reflects an increase related to the Associates' transportation portfolio and the impact of acquisitions.
IN BILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- Commercial allowance for credit losses (1) $3.988 $3.695 As a percentage of total commercial loans 2.90% 3.04% - ----------------------------------------------------------------------=====================
(1) Includes $621 million and $447 million at December 31, 2000 and 1999, respectively, related to Associates. 27 GLOBAL CORPORATE BANK OUTLOOK The statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. The businesses of Global Corporate Bank are significantly affected by the levels of activity in the global capital markets which, in turn, are influenced by macro-economic and political policies and developments, among other factors, in the 100 countries in which the businesses operate. Global economic and market events can have both positive and negative effects on the revenue performance of the businesses and can negatively affect credit performance. In particular, levels of trading-related revenue, securities transactions, and gains from asset sales may fluctuate in the future as a result of market and asset-specific factors. In 1998, the global capital markets experienced severe economic turmoil. Currency crises sparked economic turmoil that began in Asia, spread to Russia and in early 1999 to Latin America. In response, the businesses undertook initiatives at that time to reduce the risk profile. Losses on commercial lending activities and the level of cash-basis loans can vary widely with respect to timing and amount, particularly within any narrowly defined business or loan type. Citicorp continues to monitor the impact of the slowing U.S. economy on its portfolio. Problem credits will continue to be identified early and appropriate remedial actions will be taken. Overall, the EM Corporate portfolio remains diversified across a number of geographies and industry groups. During 2000, most emerging market economies showed improvements, particularly in Asia. While most countries that suffered from the economic turmoil of 1998 and early 1999 have stabilized, they remain dependent on U.S. and world economic growth as well as liquidity. Citicorp continues to monitor countries closely and, where appropriate, adjusts exposures, tunes early warning systems and strengthens risk management oversight. GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $2,000 $1,579 Adjusted operating expenses (2) 1,460 1,155 Provision for credit losses 23 12 ------------------------ CORE INCOME BEFORE TAXES 517 412 Income taxes 194 153 ------------------------ CORE INCOME 323 259 Restructuring-related items, after-tax (9) 2 ------------------------ NET INCOME $ 314 $ 261 - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. The Global Investment Management and Private Banking group is comprised of Citibank Asset Management and The Citigroup Private Bank. These businesses offer a broad range of asset management products and services from global investment centers around the world, including mutual funds, closed-end funds, managed accounts, pension administration and personalized wealth management services to institutional, high net worth and retail clients. Global Investment Management and Private Banking core income in 2000 of $323 million, up $64 million or 25% from 1999, reflected continued customer revenue momentum within The Citigroup Private Bank along with the impact of the acquisitions of Siembra, Garante and Colfondos in Citibank Asset Management. Net income of $314 million in 2000 and $261 million in 1999 included a restructuring-related charge of $9 million ($14 million pretax) and a restructuring-related credit of $2 million ($4 million pretax), respectively. 28 CITIBANK ASSET MANAGEMENT
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $593 $367 Total operating expenses (2) 589 385 ------------------------ CORE INCOME (LOSS) BEFORE TAXES 4 (18) Income taxes (benefits) 5 (8) ------------------------ LOSS (1) (10) Restructuring-related items, after-tax (4) 1 ------------------------ NET LOSS $ (5) $ (9) - -------------------------------------------------------------------======================== ASSETS UNDER MANAGEMENT (IN BILLIONS OF DOLLARS) (3) $157 $151 - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. (3) Includes $30 billion and $31 billion in 2000 and 1999, respectively for Citigroup Private Bank clients. Also includes $5 billion in Emerging Markets Pension Administration assets under management in 2000. Citibank Asset Management offers institutional, high net worth, and retail clients a broad range of investment alternatives from global investment centers around the world and also includes the pension administration businesses of Global Retirement Services. Products and services offered include mutual funds, closed-end funds, separately managed accounts and pension administration. The loss before restructuring-related items of $1 million in 2000 was down $9 million from 1999, primarily reflecting the impact of the acquisitions of Siembra, Garante and Colfondos in the Global Retirement Services business partially offset by increased expenses due to additional investments in research, quantitative and technology expertise. Net losses of $5 million in 2000 and $9 million in 1999 included a restructuring-related charge of $4 million ($6 million pretax) in 2000 and a restructuring-related credit of $1 million ($2 million pretax) in 1999. Assets under management grew 4% in 2000 to $157 billion, as growth in money market accounts, up $3 billion or 10%, and the addition of $5 billion from Global Retirement Services more than offset the decline in long-term mutual fund assets caused primarily by the transfer of a large fund to another Citicorp business. Revenues, net of interest expense, increased $226 million or 62% to $593 million in 2000 primarily reflecting the impact of acquisitions. Adjusted operating expenses of $589 million in 2000 were up $204 million or 53% from 1999. The increase primarily reflected the acquisitions and continued investments in research, quantitative and technology expertise. THE CITIGROUP PRIVATE BANK
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------ TOTAL REVENUES, NET OF INTEREST EXPENSE $1,407 $1,212 Adjusted operating expenses (2) 871 770 Provision for credit losses 23 12 ------------------------ CORE INCOME BEFORE TAXES 513 430 Income taxes 189 161 ------------------------ CORE INCOME 324 269 Restructuring-related items, after-tax (5) 1 ------------------------ NET INCOME $ 319 $ 270 - -------------------------------------------------------------------======================== Average assets (IN BILLIONS OF DOLLARS) $25 $20 Return on assets 1.28% 1.35% - -------------------------------------------------------------------======================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets 1.30% 1.35% - -------------------------------------------------------------------======================== CLIENT BUSINESS VOLUMES UNDER MANAGEMENT (IN BILLIONS OF DOLLARS) $153 $140 - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items. The Citigroup Private Bank provides personalized wealth management services for high net worth clients around the world. The Citigroup Private Bank reported core income in 2000 of $324 million, up $55 million or 20% from 1999, primarily reflecting continued customer revenue momentum, partially offset by increased front-end expenses. Net income of $319 million in 2000 and 29 $270 million in 1999 included a restructuring-related charge of $5 million ($8 million pretax) and a restructuring-related credit of $1 million ($2 million pretax), respectively. Client business volumes under management, which include custody accounts, client assets under fee-based management, deposits and loans, were $153 billion at the end of the year, up 9% from $140 billion in 1999, reflecting strong growth in the U.S., Asia Pacific and CEEMEA. Business volumes grew in all product lines. Revenues, net of interest expense, in 2000 were $1.407 billion, up $195 million or 16% from 1999. Net interest and recurring fee-based revenues increased $131 million or 16%, transaction revenues increased $59 million or 26%, while other revenue increased $5 million or 3% compared to 1999. The 2000 increase in revenues reflected growth in the international region, up $130 million or 17%, as well as continued favorable trends in the U.S., up $65 million or 15% compared to 1999. Adjusted operating expenses of $871 million in 2000 were up $101 million or 13% from 1999, primarily reflecting higher levels of bankers and product specialists hired to improve front-end sales and service capabilities. The provision for credit losses for 2000 was $23 million, compared with $12 million in 1999. The increase in the 2000 provision primarily related to a loan in Europe. Net credit losses in 2000 remained at a nominal level of 0.09% of average loans outstanding. Loans 90 days or more past due at year-end were $61 million or 0.23% of total loans outstanding, compared with 0.54% at the end of 1999. Average assets of $25 billion in 2000 rose $5 billion or 25% from $20 billion in 1999, primarily due to higher loans. GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING OUTLOOK The statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. The businesses of Global Investment Management and Private Banking are affected by the economic outlook and market levels. The market for investment management and private banking services is extremely attractive because the "wealth" segment has been growing faster than the overall market. While competition for this attractive and dynamic market segment is increasing, the global market is highly fragmented. This presents Global Investment Management and Private Banking with an extremely attractive business opportunity because it is one of the few providers that can claim to offer a full range of services on a global basis. ASSOCIATES
IN MILLIONS OF DOLLARS 2000(1) 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $9,728 $8,489 Effect of securitization activity 555 438 Housing Finance charge 47 -- ------------------------ ADJUSTED REVENUES, NET OF INTEREST EXPENSE 10,330 8,927 ------------------------ Adjusted operating expenses (2) 5,057 4,324 Adjusted provision for credit losses (3) 3,128 2,361 ------------------------ CORE INCOME BEFORE TAXES 2,145 2,242 Income taxes 764 840 ------------------------ CORE INCOME 1,381 1,402 Restructuring-related items and merger-related costs, after-tax (460) (22) Housing Finance charge, after-tax (71) -- ------------------------ NET INCOME $ 850 $1,380 - -------------------------------------------------------------------======================== Average assets (IN BILLIONS OF DOLLARS) (4) $90 $84 Return on assets 0.94% 1.64% - -------------------------------------------------------------------======================== EXCLUDING RESTRUCTURING-RELATED ITEMS Return on assets (5) 1.53% 1.67% - -------------------------------------------------------------------========================
(1) Includes after-tax adjustments to conform accounting policies to those of Citicorp of $163 million and $110 million, respectively. See Note 2 of Notes to Consolidated Financial Statements. (2) Excludes restructuring-related items and Housing Finance charge. (3) Adjusted for the effect of securitization and Housing Finance charge. (4) Adjusted for the effect of securitization, managed average assets were $103 billion and $91 billion in 2000 and 1999, respectively. (5) Adjusted for the effect of securitization, the return on managed assets, excluding restructuring-related items and Housing Finance charge was 1.34% in 2000 and 1.54% in 1999. 30 Associates - which provides finance, leasing, insurance and related services to consumers and businesses in the United States and internationally - reported core income of $1.381 billion in 2000, down $21 million or 1.5% from 1999. Net income of $850 million in 2000 and $1.380 billion in 1999 included restructuring-related items and merger-related costs of $460 million ($630 million pretax) and $22 million ($35 million pretax), respectively, and in 2000, $71 million ($112 million pretax) related to the discontinuation of Associates Housing Finance loan origination operations. The restructuring charge of $474 million recorded in 2000 related to exit costs as a result of Citigroup's acquisition of Associates. The charge included amounts for the reconfiguration of certain branch operations, the exit from non-strategic businesses and from activities as mandated by Federal bank regulations, and the consolidation and integration of Corporate and middle and back office functions. Also recorded in 2000 were $156 million of merger-related costs, which included the direct and incremental costs of administratively closing Citigroup's acquisition of Associates. The implementation of these restructuring initiatives will cause some related premises and equipment assets to become redundant. As a result, the remaining depreciable lives of these assets were shortened, and accelerated depreciation charges of $62 million will be recognized in subsequent periods. See Note 13 of Notes to Consolidated Financial Statements for additional discussion of restructuring-related items. In January 2000, Associates announced its intention to discontinue the loan origination operations of its Associates Housing Finance (AHF) unit. Prior to the announcement, AHF originated and serviced loans for manufactured homes. As a result of this announcement, Associates took a charge of approximately $112 million in the first quarter of 2000. This charge covers exit costs of approximately $25 million, including severance, noncancellable contractual obligations and related costs, a securitization retained interest write-down of approximately $47 million, and a provision for increased losses on the disposition of repossessions of approximately $40 million. Associates closed substantially all of its sales centers in the second quarter of 2000. Associates will service the liquidation of the existing receivables through its centralized service facility. Associates will limit its origination activities to support its contractual arrangements and loss mitigation initiatives. As shown in the following table, Associates managed assets, end-of-period managed receivables and average managed loans increased 22%, 15% and 15%, respectively, during 2000. The increase in managed receivables was a result of internal growth and acquisitions primarily in the real estate, personal lending and retail sales finance, and credit card product lines. The average net interest margin on receivables increased to 9.65% in 2000 from 9.52% in 1999, reflecting higher yields due to increased interest rates and changes in the aggregate portfolio composition toward high yielding automobile, credit card and personal loans.
IN BILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- MANAGED BASIS(1) End of period assets $110 $ 90 Average loans 84 73 Average net interest margin % 9.65% 9.52% End of period managed receivables $ 90 $ 78 Net credit losses (as a % of average managed loans) 3.30% 2.97% 90+ day delinquencies (as a % of average managed loans) 2.24% 2.20% - -----------------------------------------------------------------------====================
(1) Excludes manufactured housing and the receivables of Arcadia (an auto finance company purchased in April 2000) which were securitized prior to Associates' purchase of the company. Adjusted revenues, net of interest expense increased $1.403 billion or 16% in 2000 primarily resulting from an increase in average loans outstanding during 2000. Adjusted operating expense of $5.057 billion in 2000 increased $733 million or 17% reflecting acquisitions, as well as new business volumes. The adjusted provision for credit losses increased $767 million or 32% during 2000 primarily reflecting receivables growth and industry weakness in the transportation and manufactured housing businesses and a $210 million transportation loss provision relating to the truck loan and leasing portfolio. The net credit loss ratio of 3.30% in 2000 increased from 2.97% in 1999. Loans delinquent 90 days or more as a percentage of average managed loans increased to 2.24% in 2000 from 2.20% in 1999. 31 ASSOCIATES OUTLOOK During 2000, Associates experienced continued revenue growth internally and through acquisitions both domestically and in Japan. In 2001, Associates expects to have growth particularly in its international markets and credit card portfolio due to expansion in its college and emerging credit markets. The commercial business expects reduced earnings due to increased fuel prices, excess capacity for used vehicles and other economic factors having a large negative effect on the performance of its transportation portfolio. This paragraph contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. INVESTMENT ACTIVITIES
IN MILLIONS OF DOLLARS 2000 1999 (1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE $2,275 $864 Total operating expenses 103 66 Provision for credit losses 7 - ------------------------ INCOME BEFORE TAXES 2,165 798 Income taxes 790 276 ------------------------ NET INCOME $1,375 $522 - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. Investment Activities primarily consists of Citicorp's venture capital activities, securities transactions related to certain corporate investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature. Revenues, net of interest expense in 2000 of $2.275 billion increased $1.4 billion or 163% from 1999, primarily reflecting increases in venture capital results and gains on the exchange of certain Latin American bonds. Partially offsetting the 2000 revenue increases were certain writedowns in the refinancing portfolio. Investment Activities results may fluctuate in the future as a result of market and asset-specific factors. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. CORPORATE/OTHER
IN MILLIONS OF DOLLARS 2000 1999(1) - ------------------------------------------------------------------------------------------- TOTAL REVENUES, NET OF INTEREST EXPENSE ($268) $153 Adjusted operating expenses (2) 608 626 ------------------------ LOSS BEFORE TAX BENEFITS (876) (473) Income tax benefits (334) (182) ------------------------ LOSS (542) (291) Restructuring-related items and merger-related costs, after-tax (36) (20) ------------------------ NET LOSS ($578) ($311) - -------------------------------------------------------------------========================
(1) Reclassified to conform to the 2000 presentation. (2) Excludes restructuring-related items and merger-related costs. Corporate/Other includes net corporate treasury results, corporate staff and other corporate expenses, certain intersegment eliminations, and the remainder of Internet-related development activities (e-Citi) not allocated to the individual businesses. Revenues in 2000 included higher treasury costs as well as the impact of intersegment eliminations. Expenses in 2000 include a $108 million pretax expense for the contribution of appreciated venture capital securities to the Citigroup Foundation, which had minimal impact on Citicorp's earnings after related tax benefits and investment gains, which are reflected in Investment Activities. Expenses in 2000 also include increases in certain unallocated corporate costs offset by decreases in performance-based option expense, technology costs and intersegment eliminations. Expenses in 1999 included $108 million associated with the performance-based stock options granted in 1998 and prior years. The 2000 after-tax restructuring-related items and merger-related costs of $36 million consisted of $19 million relating to accelerated depreciation charges, $15 million in net restructuring charges to streamline corporate functions, and $2 million in merger-related costs 32 due to the Associates acquisition. The 1999 after-tax restructuring-related items of $20 million primarily included accelerated depreciation charges. FORWARD-LOOKING STATEMENTS Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Many of these statements appear under the heading "Global Consumer Outlook," "Global Corporate Bank Outlook," "Global Investment Management and Private Banking Outlook," and "Associates Outlook." The Company's actual results may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," and "could." These forward-looking statements involve risks and uncertainties including, but not limited to, global economic and political conditions, levels of activity in the global capital marketplace, and the maturing of recent credit portfolio additions; changes in general economic conditions including the slowing U.S. economy, the performance of global financial markets, prevailing inflation and interest rates, increased fuel prices, and excess capacity for used vehicles; results of various Investment Activities; the effects of consumer privacy provisions included in the Gramm-Leach-Bliley Act, of more extensive privacy protections which states are permitted to adopt through legislation or regulation, and of possible legislation or regulations that might further regulate banking and financial services or might limit finance charges or other fees or charges earned in such activities; the resolution of legal proceedings and related matters; and the Company's success in managing the costs associated with the expansion of existing distribution channels and developing new ones, and in realizing increased revenues from such distribution channels, including cross-selling initiatives and electronic commerce-based efforts. MANAGING GLOBAL RISK Citicorp manages its global risk exposures using the Citigroup Risk Management framework which recognizes the wide range and diversity of global business activities by balancing strong corporate oversight with defined independent risk management functions at the business level. The risk management functions at the corporate-level are responsible for establishing Citigroup risk management standards and ensuring their ongoing appropriateness, appointing business-specific risk managers, approving business-specific risk management policies and limits, and reviewing, on an ongoing basis, major risk exposures and concentrations across the organization. The business-specific risk managers are responsible for establishing and implementing risk management policies and practices within their business, while ensuring ongoing consistency with Citigroup standards. The business-specific risk managers have dual accountability - to the Citigroup Senior Risk Officer and to the head of their business unit. The Citigroup Senior Risk Officer is responsible for reviewing material corporate-wide risks, and determining appropriate exposure levels and limits. These risks are regularly reviewed with the business risk managers, the Citigroup Management Committee, and as necessary, with committees of the Board of Directors. The following sections summarize the processes for managing credit and market risks within Citicorp's major businesses, and reflect the successful ongoing integration of businesses and risk management practices. THE CREDIT RISK MANAGEMENT PROCESS The credit risk management process at Citicorp relies on corporate-wide standards to ensure consistency and integrity, with business-specific policies and practices to ensure applicability and ownership. Within the Global Corporate Bank (GCB), the credit process is grounded in a series of fundamental policies, including: o Business accountability for credit risks taken; o Single center of control for each credit relationship; o Approval authority standards; o Approval requirements from the business and from independent credit risk management; o Uniform risk measurement standards, including risk ratings; o Portfolio management tools, including obligor and other limits. 33 These policies apply universally across the Global Corporate Bank, as well as The Citigroup Private Bank. GCB businesses that require tailored credit processes, due to unique or unusual risk characteristics in their activities, may do so under a separately approved Credit Program. A Credit Program must be sponsored by a business, and must be approved by independent credit risk management. In all cases, the GCB Policies must be adhered to, or specific exceptions must be granted by independent credit risk management. Within Global Consumer (GC), business-specific credit risk policies and procedures are derived from the following risk management framework: o Each business must develop a plan, including risk/return tradeoffs, as well as risk acceptance criteria and policies appropriate to their activities; o Senior Business Managers are responsible for managing risk/return tradeoffs in their business; o Senior Business Managers, in conjunction with Senior Credit Officers, implement business-specific risk management policies and practices. o Approval policies for a product or business are tailored to audit ratings, profitability and credit risk management performance. o Independent credit risk management is responsible for establishing the GC Policy, approving business-specific policies and procedures, monitoring business risk management performance, providing ongoing assessment of portfolio credit risks, and approving new products and new risks. THE MARKET RISK MANAGEMENT PROCESS Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that some entity, in some location and in some currency, may be unable to meet a financial commitment to a customer, creditor, or investor when due. Liquidity Risk is discussed in greater detail in the Liquidity and Capital Resources section. Market risk at Citicorp - like credit risk - is managed through corporate-wide standards and business-specific policies and procedures. Each business is required to establish a market risk limit framework, including standardized risk measures, limits and controls, and independent reporting and monitoring functions. In all cases, the businesses are ultimately responsible for the market risks that they take, and for remaining within their defined limit frameworks. Independent market risk management establishes policies and procedures, approves limits, and monitors exposures against limits. Price risk is the risk to earnings that arises from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in Non-Trading Portfolios, as well as in Trading Portfolios. NON-TRADING PORTFOLIOS Price risk in non-trading portfolios is measured predominantly through Earnings-at-Risk. This measurement technique is supplemented with additional tools, including stress testing and cost-to-close analysis. Business units manage the potential earnings effect of interest rate movements by managing the asset and liability mix, either directly or through the use of derivative financial products. These include interest rate swaps and other derivative instruments which are either designated and effective as hedges or designated and effective in modifying the interest rate characteristics of specified assets or liabilities. The utilization of derivatives is managed in response to changing market conditions as well as to changes in the characteristics and mix of the related assets and liabilities. Additional information about non-trading derivatives is located in Note 18 of Notes to Consolidated Financial Statements. Citicorp does not utilize instruments with leverage features in connection with its non-trading risk management activities. Earnings-at-Risk is the primary method for measuring price risk in Citicorp's non-trading portfolios. Earnings-at-Risk measures the pretax earnings impact of a specified upward and downward shift in the yield curve for the appropriate currency. The Earnings-at-Risk is calculated separately for each currency and reflects the repricing gaps in the position as well as option positions, both explicit and embedded. U.S. dollar exposures are calculated by multiplying the gap between interest sensitive items, including assets, liabilities, derivative instruments and other off-balance sheet instruments, by 100 basis points. Non-U.S. dollar exposures are calculated utilizing the statistical equivalent of a 100 basis point change in interest rates and assumes no correlation between exposures in different currencies. Citicorp's primary non-trading price risk exposure is to movements in U.S. dollar interest rates. Citicorp also has Earnings-at-Risk in various other currencies; however, there are no significant risk concentrations in any individual non-U.S. dollar currency. 34 The following table illustrates the impact to Citicorp pretax earnings from a 100 basis point increase or decrease in the U.S. dollar yield curve. As of December 31, 2000, pretax earnings would have a potential negative impact of $433 million from an interest rate increase and a potential positive impact of $460 million over the next 12 months from an interest rate decrease. The potential impact on pretax earnings for periods beyond the first 12 months is an increase of $217 million from an increase in interest rates and a decrease of $320 million from a decline in interest rates. The change in Earnings-at-Risk from the prior year reflects the growth in Citicorp's fixed funding as well as the reduction in the use of derivatives in managing our risk portfolio. The statistical equivalent of a 100 basis points increase in non-U.S. dollar interest rates would have a potential negative impact on Citicorp's pretax earnings of approximately $198 million for 2001 and $105 million for the years thereafter. The statistical equivalent of a 100 basis points decrease in non-U.S. dollar interest rates would have a potential positive impact on Citicorp's pretax earnings of approximately $201 million for 2001 and $121 million for the years thereafter. The lower sensitivity to rising rates in the non-U.S. dollar Earnings-at-Risk from the prior year primarily reflects the lower interest rate volatility seen across the Asia Pacific region. Citicorp Earnings-at-Risk (impact on pretax earnings) (1)
DECEMBER 31, 2000 December 31, 1999 IN MILLIONS OF DOLLARS U.S. DOLLAR NON-U.S. DOLLAR(2) U.S. Dollar Non-U.S. Dollar(2) - -------------------------------------------------------------------------------------------------------- INCREASE DECREASE INCREASE DECREASE INCREASE DECREASE INCREASE DECREASE -------------------------------------------------------------------------------- Twelve months and less ($433) $ 460 ($198) $ 201 ($556) $ 584 ($273) $ 274 Thereafter 217 (320) (105) 121 (198) 125 (347) 352 -------------------------------------------------------------------------------- TOTAL $(216) $ 140 ($303) $ 322 ($754) $ 709 ($620) $ 626 - ------------------------================================================================================
(1) Certain information has been restated from that presented in the prior year to reflect reorganizations and a change in assumptions (specifically revising the measurement of Earnings-at-Risk from a two standard deviation change in interest rates to a 100 basis point change). These changes were made to reflect a more consistent view for managing price risk throughout the organization. (2) Primarily results from Earnings-at-Risk in the Euro, Canadian dollar, Singapore dollar and Hong Kong dollar. TRADING PORTFOLIOS Price risk in trading portfolios is measured through a complementary set of tools, including Factor Sensitivities, and Value-at-Risk. Each trading portfolio has its own market risk limit framework, encompassing these measures and other controls, including permitted product lists and a new, complex product approval process, established by the business, and approved by independent market risk management. Factor Sensitivities are defined as the change in the value of a position for a defined change in a market risk factor (e.g., the change in the value of a Treasury bill for a 1 basis point change in interest rates). It is the responsibility of independent market risk management to ensure that factor sensitivities are calculated, monitored and, in some cases, limited, for all relevant risks taken in a trading portfolio. Value-at-Risk estimates the potential decline in the value of a position or a portfolio, under normal market conditions, over a one-day holding period, at a 99% confidence level. The Value-at-Risk method incorporates the Factor Sensitivities of the trading portfolio with the volatilities and correlations of those factors. New and/or complex products in trading portfolios are required to be reviewed and approved by the GCB Capital Markets Approval Committee (CMAC). The CMAC is responsible for ensuring that all relevant risks are identified and understood, and can be measured, managed and reported in accordance with applicable GCB policies and practices. The CMAC is made up of senior representatives from market and credit risk management, legal, accounting, operations and other support areas, as required. The level of price risk exposure at any given point in time depends on the market environment and expectations of future price and market movements, and will vary from period to period. For Citicorp's major trading centers, the aggregate pretax Value-at-Risk in the trading portfolios was $29 million at December 31, 2000. Daily exposures at Citicorp averaged $24 million in 2000 and ranged from $16 million to $36 million. 35 The following table summarizes Value-at-Risk in the trading portfolios as of December 31, 2000 and 1999, along with the averages.
------------------------------------------------ DEC. 31, 2000 Dec. 31, 1999 IN MILLIONS OF DOLLARS 2000 AVERAGE 1999 Average - ------------------------------------------------------------------------------------------- Interest rate $18 $17 $15 $13 Foreign exchange 9 9 17 9 Equity 20 14 11 9 All other (primarily commodity) 9 5 2 1 Covariance adjustment (27) (21) (21) (14) ------------------------------------------------ TOTAL $29 $24 $24 $18 - -------------------------------------------================================================
The table below provides the range of Value-at-Risk in the trading portfolios that was experienced during 2000 and 1999.
2000 1999 ------------------------------------------------ IN MILLIONS OF DOLLARS LOW HIGH Low High - ------------------------------------------------------------------------------------------- Interest rate $13 $29 $9 $18 Foreign exchange 5 18 5 17 Equity 9 31 5 16 All other (primarily commodity) 1 18 1 3 - -------------------------------------------------------------------------------------------
MANAGEMENT OF CROSS-BORDER RISK Cross-border risk is the risk that Citicorp will be unable to obtain payment from customers on their contractual obligations as a result of actions taken by foreign governments such as exchange controls, debt moratoria and restrictions on the remittance of funds. Citicorp manages cross-border risk as part of the Citigroup Risk Management framework described on page 33. The table below presents total cross-border outstandings and commitments on a regulatory basis in accordance with FFIEC guidelines for countries with outstandings greater than 0.75% of Citicorp assets at December 31, 2000, 1999 and 1998. Total cross-border outstandings include cross-border claims on third parties as well as investments in and funding of local franchises. Cross-border claims on third parties (trade and short-, medium- and long-term claims) include cross-border loans, securities, deposits at interest with banks, investments in affiliates, and other monetary assets, as well as net revaluation gains on foreign exchange and derivative products. Adjustments have been made to assign externally guaranteed outstandings to the country of the guarantor and outstandings for which tangible, liquid collateral is held outside of the obligor's country to the country in which the collateral is held. For securities received as collateral, outstandings are assigned to the domicile of the issuer of the securities. Investments in and funding of local franchises represents the excess of local country assets over local country liabilities, as defined by the FFIEC. Local country assets are claims on local residents recorded by branches and majority-owned subsidiaries of Citicorp domiciled in the country, adjusted for externally guaranteed outstandings and certain collateral. Local country liabilities are obligations of branches and majority-owned subsidiaries of Citicorp domiciled in the country for which no cross-border guarantee is issued by Citicorp offices outside the country. During 2000, the FFIEC revised their cross-border reporting guidelines to allow credit derivative contracts containing cross-border provisions to be treated as effective guarantees. Purchased credit derivative contracts where Citicorp is the beneficiary shift the underlying exposure to the guarantor country. Written credit derivative contracts where Citicorp provides an effective guarantee are included as cross-border commitments in the country of the underlying credit exposure. Total cross-border outstandings and commitments at December 31, 1999 and 1998 have not been restated to reflect this revised FFIEC policy. 36
----------------------------------------------------------------------------- CROSS-BORDER CLAIMS ON THIRD PARTIES -------------------------------------------- TOTAL INVESTMENTS CROSS-BORDER TRADING AND IN AND FUNDING OUT- IN BILLIONS OF DOLLARS, SHORT-TERM OF LOCAL STAND- AT YEAR-END BANKS PUBLIC PRIVATE TOTAL CLAIMS(1) FRANCHISES INGS - ------------------------------------------------------------------------------------------------------- Brazil $ 0.9 $ 0.5 $ 2.9 $ 4.3 $ 2.4 $ 3.6 $ 7.9 Italy 2.0 3.6 0.8 6.4 5.0 1.0 7.4 Canada 1.5 - 1.2 2.7 1.4 4.4 7.1 Germany 3.2 0.3 1.7 5.2 3.6 1.4 6.6 France 3.4 0.2 1.8 5.4 3.7 -- 5.4 Netherlands 1.3 0.4 2.8 4.5 3.7 -- 4.5 United Kingdom 1.4 0.1 2.7 4.2 3.4 -- 4.2 Mexico 0.1 1.2 1.8 3.1 1.7 0.3 3.4 Switzerland 0.9 -- 1.9 2.8 2.4 -- 2.8 - ---------------------------============================================================================ 2000 1999 1998 ---------------------------------------------------------------------------- TOTAL TOTAL CROSS- CROSS- BORDER BORDER OUT- OUT- IN BILLIONS OF DOLLARS, COMMIT- STAND- COMMIT- STAND- COMMIT- AT YEAR-END MENTS(2) INGS MENTS(2) INGS MENTS(2) - ------------------------------------------------------------------------------------------------------ Brazil $ 0.2 $ 3.7 $ 0.1 $ 3.6 $ 0.1 Italy 5.7 3.3 0.4 3.6 0.3 Canada 4.9 5.1 2.1 3.9 1.6 Germany 6.8 8.3 3.7 7.4 1.4 France 8.3 4.3 2.2 4.6 1.1 Netherlands 1.8 3.2 2.9 2.8 0.8 United Kingdom 14.9 4.5 15.5 4.4 8.9 Mexico 1.7 3.8 0.1 3.4 0.2 Switzerland 2.5 3.1 1.4 3.5 1.6 - -----------------------------=========================================================================
(1) Trading and short-term claims (included in total cross-border claims on third parties) include cross-border debt and equity securities held in the trading account, resale agreements, trade finance receivables, net revaluation gains on foreign exchange and derivative contracts, and other claims with a maturity of less than one year. (2) Commitments (not included in total cross-border outstandings) include legally binding cross-border letters of credit and other commitments and contingencies. LIQUIDITY AND CAPITAL RESOURCES Management of liquidity at Citicorp is the responsibility of the Corporate Treasurer. The Country Corporate Officer and the Country Treasurer ensure that all funding obligations in each country are met when due. The Country Treasurer is appointed by the Corporate Treasurer. The in-country forum for liquidity issues is the Asset/Liability Management Committee (ALCO), which includes senior executives within each country. The ALCO reviews the current and prospective funding requirements for all businesses and legal entities within the country, as well as the capital position and balance sheet. All businesses within the country are represented on the committee with the focal point being the Country Treasurer. Each Country Treasurer must prepare a liquidity plan at least annually that is approved by the Country Corporate Officer, the Regional Treasurer, and the Corporate Treasurer. The liquidity profile is monitored on an on-going basis and reported monthly. Limits are established on the extent to which businesses in a country can take liquidity risk. The size of the limit depends on the depth of the market, experience level of local management, the stability of the liabilities, and liquidity of the assets. Regional Treasurers generally have responsibility for monitoring liquidity risk across a number of countries within a defined geography. They are also available for consultation and special approvals, especially in unusual or volatile market conditions. Citicorp's assets and liabilities are diversified across many currencies, geographic areas, and businesses. Particular attention is paid to those businesses, which for tax, sovereign risk, or regulatory reasons cannot be freely and readily funded in the international markets. A diversity of funding sources, currencies, and maturities is used to gain a broad access to the investor base. Citicorp's deposits, which represent 55% of total funding at December 31, 2000 and 1999, are broadly diversified by both geography and customer segments. Stockholder's equity, which grew $12.4 billion during the year to $47.9 billion at year-end 2000, continues to be an important component of the overall funding structure. In addition, long-term debt is issued by Citicorp and its subsidiaries. Total Citicorp long-term debt outstanding at year-end 2000 was $80.3 billion, compared with $67.8 billion at year-end 1999. Asset securitization programs remain an important source of liquidity. Loans securitized during 2000 included $9.1 billion of U.S. credit cards and $12.0 billion of U.S. consumer mortgages. As credit card securitization transactions amortize, newly originated receivables are recorded on Citicorp's balance sheet and become available for asset securitization. In 2000, the scheduled amortization of certain credit card securitization transactions made available $7.4 billion of new receivables. In addition, at least $13.1 billion of credit card securitization transactions are scheduled to amortize during 2001. 37 See Note 23 of Notes to Consolidated Financial Statements for limitations on dividends paid to Citicorp by its subsidiary depository institutions. Citicorp is subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System (FRS). These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as well as certain off-balance sheet exposures such as unused loan commitments, letters of credit, and derivative and foreign exchange contracts. The risk-based capital guidelines are supplemented by a leverage ratio requirement. CITICORP RATIOS
AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- Tier 1 capital 8.41% 7.32% Total capital (Tier 1 and Tier 2) 12.29 10.69 Leverage (1) 7.54 6.51 Common stockholder's equity 8.68 7.52 - -------------------------------------------------------------------------------------------
(1) Tier 1 capital divided by adjusted average assets. Citicorp maintained a strong capital position during 2000. Total capital (Tier 1 and Tier 2) amounted to $58.0 billion at December 31, 2000, representing 12.29% of net risk-adjusted assets. This compares with $42.5 billion and 10.69% at December 31, 1999. Tier 1 capital of $39.7 billion at year-end 2000 represented 8.41% of net risk-adjusted assets, compared with $29.1 billion and 7.32% at year-end 1999. The Tier 1 capital ratio at year-end 2000 was above Citicorp's target range of 8.00% to 8.30%. See Note 15 of Notes to Consolidated Financial Statements. ASSOCIATES FIRST CAPITAL CORPORATION (ASSOCIATES) Associates maintains a combination of unutilized bilateral and syndicated credit facilities to support its short-term borrowings. These facilities, which have maturities ranging from 2001 through 2005, provide a means of managing liquidity and ensure that funds are always available to satisfy maturing short-term obligations. At December 31, 2000, these facilities provided coverage of approximately 75% of Associates' commercial paper borrowings and utilized uncommitted lines of credit. In connection with Citigroup's November 30, 2000 acquisition of Associates in which Associates became a wholly-owned subsidiary of Citicorp, Citicorp guaranteed various debt obligations of Associates, including those arising under these facilities. Under these facilities, Citicorp is required to maintain a certain level of consolidated stockholder's equity. At December 31, 2000, this requirement was exceeded by $32.6 billion. CITIFINANCIAL CREDIT COMPANY (CCC) CCC, an indirect subsidiary of Citicorp, has five-year revolving credit facilities in the amount of $3.4 billion that expire in 2002. Citicorp guarantees various debt obligations of CCC, including those arising under these facilities. Under these facilities, Citicorp is required to maintain a certain level of consolidated stockholder's equity (as defined in the agreement). At December 31, 2000, this requirement was exceeded by approximately $32.6 billion. At December 31, 2000, there were no borrowings outstanding under these facilities. 38 COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- TIER 1 CAPITAL Common stockholder's equity $47,865 $35,475 Mandatorily redeemable securities of subsidiary trusts 975 975 Minority interest 334 133 Net unrealized (gains) losses on securities available for sale (1) 14 (236) Less: intangible assets (2) (9,442) (7,249) Net unrealized losses on available-for-sale equity securities, (15) - net of tax (1) 50% investment in certain subsidiaries (3) (29) (21) ------------------------ TOTAL TIER 1 CAPITAL $39,702 $29,077 - ------------------------------------------------------------------------------------------- TIER 2 CAPITAL Allowance for credit losses (4) $ 5,938 $ 5,017 Qualifying debt (5) 12,399 8,128 Unrealized marketable equity securities gains (1) - 277 Less: 50% investment in certain subsidiaries (3) (29) (21) ------------------------ TOTAL TIER 2 CAPITAL $18,308 $13,401 ------------------------ TOTAL CAPITAL (TIER 1 AND TIER 2) $58,010 $42,478 - -------------------------------------------------------------------======================== NET RISK-ADJUSTED ASSETS(6) $471,936 $397,413 - -------------------------------------------------------------------========================
(1) Tier 1 capital excludes unrealized gains and losses on debt securities available for sale in accordance with regulatory risk-based capital guidelines. The federal bank regulatory agencies permit institutions to include in Tier 2 capital up to 45% of pretax net unrealized holding gains on available for sale equity securities with readily determinable fair values. Institutions are required to deduct from Tier 1 capital net unrealized holding losses on available-for-sale equity securities with readily determinable fair values, net of tax. (2) Includes goodwill and certain other identifiable intangible assets. (3) Represents investment in certain overseas insurance activities and unconsolidated banking and finance subsidiaries. (4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is deducted from risk-adjusted assets. (5) Includes qualifying senior and subordinated debt in an amount not exceeding 50% of Tier 1 capital, and subordinated capital notes subject to certain limitations. Tier 2 capital at December 31, 2000 includes $6.3 billion of subordinated debt issued to Citigroup (Parent Company) and $1.4 billion at December 31, 1999. (6) Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $20.4 billion for interest rate, commodity and equity derivative contracts and foreign exchange contracts, as of December 31, 2000, compared with $15.9 billion as of December 31, 1999. Net risk-adjusted assets also includes the effect of other off-balance sheet exposures such as unused loan commitments and letters of credit and reflects deductions for intangible assets and any excess allowance for credit losses. Common stockholder's equity increased a net $12.4 billion during the year to $47.9 billion at December 31, 2000, representing 8.68% of assets, compared to 7.52% at year-end 1999. The net increase in common stockholder's equity during 2000 reflected net income of $8.1 billion and capital contributions from Citigroup (parent company) of $10.0 billion partially offset by cash dividends declared of $5.3 billion, and other net decreases of $0.4 billion. The increase in the common stockholder's equity ratio during the year reflected the above items, partially offset by an increase in assets. The mandatorily redeemable securities of subsidiary trusts (trust securities) outstanding at December 31, 2000 of $975 million qualify as Tier 1 capital and are included in long-term debt on the balance sheet. Interest expense on the trust securities amounted to $76 million in 2000 and $76 million in 1999. Citicorp's subsidiary depository institutions are subject to the risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are generally similar to the FRB's guidelines. At December 31, 2000, all of Citicorp's subsidiary depository institutions were "well capitalized" under the federal bank regulatory agencies' definitions. CITIBANK, N.A. RATIOS
AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- Tier 1 capital 8.46% 8.25% Total capital (Tier 1 and Tier 2) 12.64 12.31 Leverage 6.66 6.53 Common stockholder's equity 7.12 6.58 - ----------------------------------------------------------------------=====================
Citibank's net income for 2000 amounted to $4.9 billion. During 2000, Citibank paid dividends of $590 million to Citicorp (parent company). 39 During 2000, Citibank issued an additional $1.7 billion of subordinated notes to Citicorp (parent company) that qualify for inclusion in Citibank's Tier 2 Capital. Total subordinated notes issued to Citicorp (parent company) that were outstanding at December 31, 2000 and included in Citibank's Tier 2 Capital amounted to $8.5 billion. On January 18, 2001, the FRB issued new proposed rules that would govern the regulatory treatment of merchant banking investments and certain similar equity investments, including investments made by venture capital subsidiaries, in nonfinancial companies held by bank holding companies. The new proposal generally would impose a capital charge that would increase in steps as the banking organization's level of concentration in equity investments increased. An 8 percent Tier 1 capital deduction would apply on covered investments that in the aggregate represent up to 15 percent of an organization's Tier 1 capital. For covered investments that aggregate more than 25 percent of the organization's Tier 1 capital, a top marginal charge of 25 percent would be set. The Company is monitoring the status and progress of the proposed rule, which, at the present time, is not expected to have a significant impact on Citicorp. On January 16, 2001, the Basel Committee on Banking Supervision (Committee) released the second consultative package on the new Basel Capital Accord (new Accord). The proposal modifies and substantially expands a proposal issued for comment by the Committee in June 1999 and describes the methods by which banks can determine their minimum regulatory capital requirements. The new Accord, which will apply to all "significant" banks, as well as to holding companies that are parents of banking groups, is intended to be finalized by year-end 2001, with implementation of the new framework beginning in 2004. The Company is monitoring the status and progress of the proposed rule. Additionally, from time to time, the FRB and the FFIEC propose amendments to, and issue interpretations of, risk-based capital guidelines and reporting instructions. Such proposals or interpretations could, if implemented in the future, affect reported capital ratios and net risk-adjusted assets. This paragraph and the preceding two paragraphs contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 33. 40 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" above. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Consolidated Financial Statements on page F-1 hereto. There is also incorporated herein by reference in response to this Item the Company's Consolidated Financial Statements and the notes thereto and the material presented at Note 27 of such Consolidated Financial Statements under the heading "Selected Quarterly Financial Data (Unaudited)". ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instruction I of Form 10-K, the information required by Item 10 is omitted. ITEM 11. EXECUTIVE COMPENSATION Pursuant to General Instruction I of Form 10-K, the information required by Item 11 is omitted. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pursuant to General Instruction I of Form 10-K, the information required by Item 12 is omitted. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to General Instruction I of Form 10-K, the information required by Item 13 is omitted. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as part of the report: (1) Financial Statements: See Index to Consolidated Financial Statements on page F-1 hereof. (2) Financial Statement Schedules: See Index to Consolidated Financial Statements on page F-1 hereof. (b) Exhibits: See Exhibit Index. (c) Reports on Form 8-K (filed subsequent to September 30, 2000): On October 18, 2000, the Company filed a Current Report on Form 8-K, dated October 10, 2000 (which was amended by a Form 8-K/A filed October 20, 2000), filing as exhibits under Item 7 thereof (i) Citicorp and Associates First Capital Corporation Unaudited Pro Forma Condensed Combined Statement of Financial Position as of June 30, 2000, (ii) Financial Statements of Associates First Capital Corporation and Subsidiaries for the year ended December 31, 1999, (iii) Consent of Ernst & Young LLP and 41 (iv) Excerpts from the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000 of Associates First Capital Corporation. On October 19, 2000, the Company filed a Current Report on Form 8-K, dated October 17, 2000, reporting under Item 5 thereof the summarized results of operations of Citicorp and its subsidiaries for the three-month and nine-month periods ended September 30, 2000 and September 30, 1999. On November 16, 2000, the Company filed a Current Report on Form 8-K, dated October 10, 2000, filing as exhibits under Item 7 thereof (i) Citicorp and Associates First Capital Corporation Unaudited Pro Forma Condensed Combined Statement of Financial Position as of September 30, 2000 and (ii) Excerpts from the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000 of Associates First Capital Corporation. On December 4, 2000, the Company filed a Current Report on Form 8-K, dated November 30, 2000, reporting under Item 5 thereof that on November 30, 2000, Citicorp's ultimate parent, Citigroup Inc., and Associates First Capital Corporation ("Associates") announced the completion of Citigroup's acquisition of Associates and that subsequent to the acquisition, the Company had become the parent of Associates and had issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America (a subsidiary of Associates). 42 EXHIBIT INDEX ------------- EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------------- ---------------------- 3.01 Citicorp's Certification of Incorporation (incorporated by reference to Exhibit 3(i) to Citicorp's Post-Effective Amendment No. 1 to Registration Statement on Form S-3, File No. 333-21143, filed on October 8, 1998). 3.02 Citicorp's By-Laws (incorporated by reference to Exhibit 3.02 to Citicorp's Annual Report on Form 10-K for the fiscal year ended December 31, 1999). 12.01 * Calculation of Ratio of Income to Fixed Charges. 12.02 * Calculation of Ratio of Income to Fixed Charges Including Preferred Stock Dividends. 21.01 Subsidiaries of the Registrant. Pursuant to General Instruction I of Form 10-K, the list of subsidiaries of the Company is omitted. 23.01 * Consent of KPMG LLP. 99.01 * Residual Value Obligation Certificate. The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such instrument to the SEC upon request. * Filed herewith. 43 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CITICORP (Registrant) By: /s/ Roger W. Trupin --------------------- Name: Roger W. Trupin Title: Vice President and Controller Dated: March 21, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 21, 2001 by the following persons on behalf of the Registrant in the capacities indicated. SIGNATURE CAPACITY --------- -------- /s/ Victor J. Menezes Chairman of the Board ------------------------------ (Principal Executive Officer) Victor J. Menezes and a Director /s/ Alan S. MacDonald Director ------------------------------ Alan S. MacDonald /s/ Marjorie Magner Director ------------------------------ Marjorie Magner /s/ William R. Rhodes Director ------------------------------ William R. Rhodes /s/ H. Onno Ruding Director ------------------------------ H. Onno Ruding /s/ Petros K. Sabatacakis Director ------------------------------ Petros K. Sabatacakis /s/ Robert B. Willumstad Director ------------------------------ Robert B. Willumstad /s/ Todd S. Thomson Chief Financial Officer ------------------------------ (Principal Financial Officer) Todd S. Thomson /s/ Roger W. Trupin Vice President and Controller ------------------------------ (Principal Accounting Officer) Roger W. Trupin 44 CITICORP AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- INDEPENDENT AUDITORS' REPORT F-2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income for the years ended December 31, 2000, 1999, and 1998 F-3 Consolidated Balance Sheets as of December 31, 2000 and 1999 F-4 Consolidated Statements of Changes in Stockholder's Equity for the years ended December 31, 2000, 1999, and 1998 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999, and 1998 F-6 Consolidated Balance Sheets of Citibank, N.A. and Subsidiaries as of December 31, 2000 and 1999 F-7 Notes to Consolidated Financial Statements F-8 - F-42 FINANCIAL DATA SUPPLEMENT F-43 - F-48 F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors Citicorp: We have audited the accompanying consolidated balance sheets of Citicorp and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholder's equity and cash flows for each of the years in the three-year period ended December 31, 2000, and the related consolidated balance sheets of Citibank, N.A. and subsidiaries as of December 31, 2000 and 1999. These consolidated financial statements are the responsibility of Citicorp's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citicorp and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, and the financial position of Citibank, N.A. and subsidiaries as of December 31, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America. /S/ KPMG LLP - ------------ KPMG LLP New York, New York January 16, 2001 F-2 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME Citicorp and Subsidiaries YEAR ENDED DECEMBER 31, -------------------------------- IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- INTEREST REVENUE Loans, including fees $37,226 $32,773 $30,761 Deposits with banks 1,251 1,002 1,070 Federal funds sold and securities purchased under resale 406 402 738 agreements Securities, including dividends 3,426 3,876 3,086 Trading account assets 988 692 1,059 Loans held for sale 912 586 556 -------------------------------- 44,209 39,331 37,270 -------------------------------- INTEREST EXPENSE Deposits 13,323 10,811 11,560 Trading account liabilities 56 88 269 Purchased funds and other borrowings 3,987 3,312 3,318 Long-term debt 4,679 4,395 3,721 -------------------------------- 22,045 18,606 18,868 -------------------------------- NET INTEREST REVENUE 22,164 20,725 18,402 PROVISION FOR CREDIT LOSSES 5,339 4,760 4,261 -------------------------------- NET INTEREST REVENUE AFTER PROVISION FOR CREDIT LOSSES 16,825 15,965 14,141 -------------------------------- FEES, COMMISSIONS, AND OTHER REVENUE Fees and commissions 11,147 9,116 7,408 Foreign exchange 1,404 1,569 1,628 Trading account 1,663 888 265 Securities transactions 835 316 525 Other revenue 5,245 4,019 2,747 -------------------------------- 20,294 15,908 12,573 -------------------------------- OPERATING EXPENSE Salaries 8,654 7,664 7,038 Employee benefits 1,636 1,639 1,683 -------------------------------- Total employee 10,290 9,303 8,721 Net premises and equipment 3,246 3,081 2,645 Restructuring-related items and merger-related costs 738 189 1,011 Other expense 9,969 8,804 7,605 -------------------------------- 24,243 21,377 19,982 -------------------------------- INCOME BEFORE TAXES 12,876 10,496 6,732 INCOME TAXES 4,766 3,925 2,493 -------------------------------- NET INCOME $ 8,110 $ 6,571 $ 4,239 - -----------------------------------------------------------================================
See Notes to Consolidated Financial Statements. F-3
CONSOLIDATED BALANCE SHEETS Citicorp and Subsidiaries DECEMBER 31, --------------------- IN MILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $11,658 $11,877 Deposits at interest with banks 16,160 12,260 Securities, at fair value Available for sale and short-term and other (including $1,158 pledged to creditors at December 31, 2000) 52,458 51,328 Venture capital 5,204 4,160 Trading account assets (including $1,671 pledged to creditors at 39,311 30,936 December 31, 2000) Loans held for sale 13,327 4,604 Federal funds sold and securities purchased under resale agreements 4,704 6,048 Loans, net Consumer 228,879 194,569 Commercial 137,709 121,579 --------------------- Loans, net of unearned income 366,588 316,148 Allowance for credit losses (8,961) (8,853) --------------------- Total loans, net 357,627 307,295 Premises and equipment, net 5,904 5,562 Interest and fees receivable 5,438 4,488 Other assets 39,816 32,888 --------------------- TOTAL $551,607 $471,446 - ----------------------------------------------------------------------===================== LIABILITIES Non-interest-bearing deposits in U.S. offices $ 21,702 $ 19,506 Interest-bearing deposits in U.S. offices 61,544 49,930 Non-interest-bearing deposits in offices outside the U.S. 13,905 12,132 Interest-bearing deposits in offices outside the U.S. 205,564 179,627 --------------------- Total deposits 302,715 261,195 Trading account liabilities 27,778 26,825 Purchased funds and other borrowings 60,834 52,349 Accrued taxes and other expense 10,434 8,973 Other liabilities 21,646 18,797 Long-term debt 80,335 67,832 STOCKHOLDER'S EQUITY Common stock: ($ 0.01 par value) issued shares: 1,000 in each period - - Surplus 21,148 11,098 Retained earnings 27,486 24,630 Accumulated other changes in equity from nonowner sources (769) (253) --------------------- TOTAL STOCKHOLDER'S EQUITY 47,865 35,475 --------------------- TOTAL $551,607 $471,446 - ----------------------------------------------------------------------=====================
See Notes to Consolidated Financial Statements. F-4 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Citicorp and Subsidiaries YEAR ENDED DECEMBER 31, --------------------------- IN MILLIONS OF DOLLARS 2000 1999 1998 - --------------------------------------------------------------------------------------------- PREFERRED STOCK (WITHOUT PAR VALUE) Balance at beginning of year $ - $ - $1,903 Conversion of outstanding preferred stock into Citigroup - - (863) preferred stock Redemption of perpetual preferred stock (1) - - (1,040) --------------------------- BALANCE AT END OF YEAR $ - $ - $ - - -----------------------------------------------------------------============================ COMMON STOCK ($0.01 PAR VALUE) Balance at beginning of year--Shares: 1,000 in 2000 and in 1999, and 506,298,235 in 1998 $ - $ - $506 Exchange of 506,298,235 shares for shares of Citigroup Common - - (506) Stock --------------------------- BALANCE AT END OF YEAR--SHARES: 1,000 IN 2000, $ - $ - $ - 1999 AND IN 1998 (2) $ - $ - $ - - -----------------------------------------------------------------============================ SURPLUS Balance at beginning of year $11,098 $10,602 $11,185 Capital contribution from Citigroup 10,002 326 2,512 Employee benefit plans and related tax benefits 48 170 40 Adjustment for retirement of treasury shares, conversion of preferred stock, and exchange of common stock - - (3,128) Issuance of stock under dividend reinvestment and common stock - - 7 purchase plan Other activity - - (14) ------------------------- BALANCE AT END OF YEAR $21,148 $11,098 $10,602 - -----------------------------------------------------------------============================ RETAINED EARNINGS Balance at beginning of year $24,630 $22,849 $19,628 Net income 8,110 6,571 4,239 Dividends declared -- common (5,254) (4,790) (940) Dividends declared -- preferred - - (78) ------------------------- BALANCE AT END OF YEAR $27,486 $24,630 $22,849 - -----------------------------------------------------------------============================ ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES Balance at beginning of year ($253) ($484) $ 114 Net change in unrealized gains and losses on securities (250) 267 (583) available for sale, net of tax Foreign currency translations adjustment, net of tax (266) (36) (15) ------------------------- BALANCE AT END OF YEAR ($769) ($253) ($484) - -----------------------------------------------------------------============================ COMMON STOCK IN TREASURY, AT COST Balance at beginning of year -- Shares: 52,355,947 in 1998 $ - $ - ($4,412) Retirement of 53,570,309 shares of common stock in treasury in - - 4,497 1998 Repurchase of 3,952,019 in 1998 - - (483) Other transactions, including issuances under employee benefit - - 398 plans - Shares: (2,737,657) in 1998 BALANCE AT END OF YEAR $ - $ - $ - - -----------------------------------------------------------------============================ TOTAL STOCKHOLDER'S EQUITY Balance at beginning of year $35,475 $32,967 $28,924 Changes during the year, net 12,390 2,508 4,043 ------------------------- BALANCE AT END OF YEAR $47,865 $35,475 $32,967 - -----------------------------------------------------------------============================ SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES Net income $8,110 $6,571 $4,239 Other changes in equity from nonowner sources, net of tax (516) 231 (598) ------------------------- TOTAL CHANGES IN EQUITY FROM NONOWNER SOURCES $7,594 $6,802 $3,641 - -----------------------------------------------------------------============================
- -------------------------------------------------------------------------------- (1) Includes redemptions of Preferred Stock, Second Series of $220 million, Third Series of $83 million, Series 8A of $62 million, Series 16 of $325 million and Series 17 of $350 million in 1998. - -------------------------------------------------------------------------------- (2) During 1998 Citicorp issued to Citigroup 1,000 shares of common stock, $0.01 par value. - -------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS Citicorp and Subsidiaries YEAR ENDED DECEMBER 31, -------------------------------- IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 8,110 $ 6,571 $ 4,239 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Provision for credit losses 5,339 4,760 4,261 Depreciation and amortization of premises and equipment 1,358 1,195 1,064 Amortization of goodwill and acquisition premium costs 673 531 350 Provision (benefit) for deferred taxes 787 226 (120) Restructuring-related items and merger-related costs 738 189 1,011 Venture capital activity (1,044) (863) (698) Net gain on sale of securities (835) (316) (525) Changes in accruals and other, net (4,112) 392 (8,621) Net (increase) decrease in loans held for sale (8,723) 1,221 (2,036) Net (increase) decrease in trading account assets (8,375) 2,495 6,925 Net increase (decrease) in trading account liabilities 953 (3,110) (1,051) -------------------------------- TOTAL ADJUSTMENTS (13,241) 6,720 560 -------------------------------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (5,131) 13,291 4,799 -------------------------------- - ------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Net (increase) decrease in deposits at interest with banks (3,900) (567) 1,390 Securities -- available for sale Purchases (69,254) (61,121) (61,349) Proceeds from sales 40,876 26,170 24,651 Maturities 28,224 29,145 29,381 Net decrease in federal funds sold and securities 1,344 840 3,345 purchased under resale agreements Net increase in loans (81,332) (124,213) (178,734) Proceeds from sales of loans 32,611 95,192 150,022 Business acquisitions (4,445) (6,321) (6,582) Capital expenditures on premises and equipment (1,608) (1,292) (1,738) Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other repossessed 638 2,833 718 assets -------------------------------- NET CASH USED IN INVESTING ACTIVITIES (56,846) (39,334) (38,896) - ------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 41,520 34,296 27,032 Net decrease in federal funds purchased and securities (813) (2,445) (823) sold under repurchase agreements Net increase in commercial paper and funds borrowed 7,305 748 202 Proceeds from issuance of long-term debt 26,331 13,802 20,954 Repayment of long-term debt (16,621) (13,370) (12,000) Dividends paid (1,254) (4,790) (1,026) Contribution from Citigroup parent company 5,820 326 1,864 Redemption of preferred stock - - (1,040) Proceeds from issuance of common stock - - 243 Treasury stock repurchases - - (483) -------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 62,288 28,567 34,923 - ------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS (530) (241) 9 -------------------------------- Net (decrease) increase in cash and due from banks (219) 2,283 835 Cash and due from banks at beginning of year 11,877 9,594 8,759 -------------------------------- CASH AND DUE FROM BANKS AT END OF YEAR $11,658 $11,877 $ 9,594 - -----------------------------------------------------------================================ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $20,054 $17,304 $17,667 Income taxes 4,123 3,192 2,534 NON-CASH INVESTING ACTIVITIES -- TRANSFERS TO REPOSSESSED 820 678 688 ASSETS NON-CASH FINANCING ACTIVITIES Dividends 4,000 - - Contribution from Citigroup parent company 4,182 - 648 - -----------------------------------------------------------================================
See Notes to Consolidated Financial Statements. F-6
CONSOLIDATED BALANCE SHEETS Citibank, N.A. and Subsidiaries DECEMBER 31, --------------------- IN MILLIONS OF DOLLARS 2000 1999 - ------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 9,321 $ 10,648 Deposits at interest with banks 17,968 12,961 Securities, at fair value Available for sale (including $1,111 pledged to creditors at 38,762 37,071 December 31, 2000) Venture capital 3,293 3,423 Trading account assets (including $1,671 pledged to creditors at 37,616 28,321 December 31, 2000) Loans held for sale 2,010 1,279 Federal funds sold and securities purchased under resale agreements 4,408 7,255 Loans, net of unearned income 245,381 207,935 Allowance for credit losses (4,590) (4,647) --------------------- Loans, net 240,791 203,288 Premises and equipment, net 4,063 3,808 Interest and fees receivable 4,369 3,345 Other assets 19,505 16,500 --------------------- TOTAL $382,106 $327,899 - ------------------------------------------------------------------------------------------- LIABILITIES Non-interest-bearing deposits in U.S. offices $ 17,703 $ 15,501 Interest-bearing deposits in U.S. offices 41,223 32,469 Non-interest-bearing deposits in offices outside the U.S. 13,758 12,185 Interest-bearing deposits in offices outside the U.S. 199,680 174,677 --------------------- Total deposits 272,364 234,832 Trading account liabilities 26,803 26,196 Purchased funds and other borrowings 20,197 19,112 Accrued taxes and other expense 6,395 5,273 Other liabilities 11,797 9,172 Long-term debt and subordinated notes 17,339 11,752 STOCKHOLDER'S EQUITY Capital stock ($20.00 par value) outstanding shares: 37,534,553 in 751 751 each period Surplus 11,354 9,836 Retained earnings 15,903 11,565 Accumulated other changes in equity from nonowner sources (1) (797) (590) --------------------- TOTAL STOCKHOLDER'S EQUITY 27,211 21,562 --------------------- TOTAL $382,106 $327,899 - -------------------------------------------------------------------------------------------
(1)Amounts at December 31, 2000 and 1999 include the after-tax amounts for net unrealized gains on securities available for sale of $70 million and $116 million, respectively, and foreign currency translation of ($867) million and ($706) million, respectively. - ------------------------------------------------------------------------------ See Notes to Consolidated Financial Statements. F-7 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Citicorp and its subsidiaries (the Company). Twenty-to-fifty-percent-owned affiliates, other than investments of designated venture capital subsidiaries, are accounted for under the equity method, and the pro rata share of their income (loss) is included in other revenue. Income from investments in less than twenty-percent-owned companies is recognized when dividends are received. Gains and losses on disposition of branches, subsidiaries, affiliates, and other investments and charges for management's estimate of impairment in value that is other than temporary, such that recovery of the carrying amount is deemed unlikely, are included in other revenue. Goodwill and other intangible assets are amortized over their estimated useful lives, subject to periodic review for impairment that is other than temporary. The effects of translating operations with a functional currency other than the U.S. dollar are included in stockholder's equity along with related hedge and tax effects. The effects of translating operations with the U.S. dollar as the functional currency, including those in highly inflationary environments, are included in other revenue along with related hedge effects. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents are defined as those amounts included in cash and due from banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities. SECURITIES AND TRADING ACCOUNT ACTIVITIES Marketable equity securities and debt securities available for sale are carried at fair value, with unrealized gains and losses reported in a separate component of stockholder's equity net of applicable income taxes. Declines in fair value that are determined to be other than temporary are charged to earnings. Realized gains and losses on sales of securities are included in earnings on a specific identified cost basis. Citicorp's venture capital subsidiaries include subsidiaries registered as Small Business Investment Companies and those other subsidiaries that engage exclusively in venture capital activities. Venture capital investments are carried at fair value, with changes in fair value recognized in other revenue. The fair values of publicly-traded securities held by these subsidiaries are generally based upon quoted market prices. In certain situations, including thinly-traded securities, large-block holdings, restricted shares or other special situations, the quoted market price is adjusted to produce an estimate of the attainable fair value for the securities. For securities that are not publicly traded, estimates of fair value are made based upon review of the investee's financial results, condition, and prospects, together with comparisons to similar companies for which quoted market prices are available. Trading account assets include securities and money market instruments held in anticipation of short-term market movements and for resale to customers, and are valued at market. Gains and losses, both realized and unrealized, are included in trading account revenue. Obligations to deliver securities sold but not yet purchased are also valued at market and included in trading account liabilities. Trading account activities also include derivative and foreign exchange products. Derivative trading positions are carried at fair value, with realized and unrealized gains and losses included in trading account revenue. Foreign exchange trading positions are valued at prevailing market rates on a present value basis, and the resulting gains and losses are included in foreign exchange revenue. The determination of market or fair value considers various factors, including: closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options, warrants and derivatives; price activity for equivalent or synthetic instruments; counterparty credit quality; the potential impact on market prices or fair value of liquidating the Company's positions in an orderly manner over a reasonable period of time under current market conditions; and derivatives transaction maintenance costs during that period. Revaluation gains (losses) on derivative and foreign exchange contracts are reported gross in trading account assets (liabilities), reduced by the effects of qualifying netting agreements with counterparties. F-8 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS REPURCHASE AND RESALE AGREEMENTS Citicorp's policy is to take possession of securities purchased under agreements to resell. The market value of securities to be repurchased and resold is monitored, and additional collateral is obtained where appropriate to protect against credit exposure. RISK MANAGEMENT ACTIVITIES Citicorp manages its exposures to market rate movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products including interest rate swaps, futures, forwards, and purchased option positions such as interest rate caps, floors, and collars. These end-user derivative contracts include qualifying hedges and qualifying positions that modify the interest rate characteristics of specified financial instruments. Derivative instruments not qualifying as end-user positions are treated as trading positions and carried at fair value. To qualify as a hedge, the swap, futures, forward, or purchased option position must be designated as a hedge and effective in reducing the market risk of an existing asset, liability, firm commitment, or identified anticipated transaction which is probable to occur. To qualify as a position modifying the interest rate characteristics of an instrument, there must be a documented and approved objective to synthetically alter the market risk characteristics of an existing asset, liability, firm commitment or identified anticipated transaction which is probable to occur, and the swap, forward or purchased option position must be designated as such a position and effective in accomplishing the underlying objective. The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but are subject to various limits and controls. The underlying assets, liability, firm commitment or anticipated transaction may be an individual item or a portfolio of similar items. The effectiveness of these contracts is evaluated on an initial and ongoing basis using quantitative measures of correlation. If a contract is found to be ineffective, it no longer qualifies as an end-user position and any excess gains and losses attributable to such ineffectiveness as well as subsequent changes in fair value are recognized in earnings. End-user contracts are primarily employed in association with on-balance sheet instruments accounted for at amortized cost, including loans, deposits, and long-term debt, and with credit card and other securitizations. These qualifying end-user contracts are accounted for consistent with the risk management strategy as follows. Amounts payable and receivable on interest rate swaps and options are accrued according to the contractual terms and included currently in the related revenue and expense category as an element of the yield on the associated instrument (including the amortization of option premiums). Amounts paid or received over the life of futures contracts are deferred until the contract is closed; accumulated deferred amounts on futures contracts and amounts paid or received at settlement of forward contracts are accounted for as elements of the carrying value of the associated instrument, affecting the resulting yield. End-user contracts related to instruments that are carried at fair value are also carried at fair value, with amounts payable and receivable accounted for as an element of the yield on the associated instrument. When related to securities available for sale, fair value adjustments are reported in stockholder's equity, net of tax. If an end-user derivative contract is terminated, any resulting gain or loss is deferred and amortized over the original term of the agreement provided that the effectiveness criteria have been met. If the underlying designated items are no longer held, or if an anticipated transaction is no longer likely to occur, any previously unrecognized gain or loss on the derivative contract is recognized in earnings and the contract is accounted for at fair value with subsequent changes recognized in earnings. Foreign exchange contracts which qualify under applicable accounting guidelines as hedges of foreign currency exposures, including net capital investments outside the U.S., are revalued at the spot rate with any forward premium or discount recognized over the life of the contract in interest revenue or interest expense. Gains and losses on foreign exchange contracts which qualify as a hedge of a firm commitment are deferred and recognized as part of the measurement of the related transaction, unless deferral of a loss would lead to recognizing losses on the transaction in later periods. In 2001 Citicorp adopted Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities". This new standard significantly changes the accounting treatment of derivatives and foreign exchange contracts used for non-trading purposes. See Future Application of Accounting Standards - Derivatives and hedge accounting section on page F-13 for further explanation. F-9 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS LOANS The consumer loan category represents loans managed by Citicorp's Global Consumer business, the Citigroup Private Bank, and Associates. Consumer loans are generally written off not later than a predetermined number of days past due primarily on a contractual basis, or earlier in the event of bankruptcy. The number of days is set at an appropriate level by loan product and by country. The policy for suspending accruals of interest on consumer loans varies depending on the terms, security and loan loss experience characteristics of each product, and in consideration of write-off criteria in place. The commercial loan category represents loans managed by Citicorp's Global Corporate Bank and Associates. Commercial loans are identified as impaired and placed on a cash (nonaccrual) basis when it is determined that the payment of interest or principal is doubtful of collection, or when interest or principal is past due for 90 days or more, except when the loan is well secured and in the process of collection. Any interest accrued is reversed and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectibility of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. Impaired commercial loans are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans where repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment are written down to the lower of cost or collateral value. Cash-basis loans are returned to an accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms. Loans include Citicorp's share of aggregate rentals on lease financing transactions and residual values net of related unearned income. Lease financing transactions substantially represent direct financing leases and also include leveraged leases. Unearned income is amortized under a method, which substantially results in an approximate level rate of return when related to the unrecovered lease investment. Gains and losses from sales of residual values of leased equipment are included in other revenue. Citicorp classifies credit card and other receivables and consumer mortgage loans originated for sale as loans held for sale, which are accounted for at the lower of aggregate cost or fair value with net credit losses charged to other revenue. SECURITIZATIONS Securitizations include sales of credit card receivables, mortgages and home equity loans. Revenue on securitized credit card receivables is recorded monthly as earned over the term of each securitization transaction, which may range up to 12 years. The revolving nature of the receivables sold and the monthly recognition of revenue result in a pattern of recognition that is similar to the pattern that would be experienced if the receivables had not been sold. Net revenue on securitized credit card receivables is collected over the life of each sale transaction. The net revenue is based upon the sum of finance charges and fees received from cardholders and interchange revenue earned on cardholder transactions, less the sum of the yield paid to investors, credit losses, transaction costs, and a contractual servicing fee, which is also retained by certain Citicorp subsidiaries as servicers. The Company retains a seller's interest in the credit card receivables transferred to the trust, which is not in securitized form. Accordingly, the seller's interest is carried on a historical cost basis and classified as consumer loans. Retained interests in securitized mortgage loans are classified as investments. Servicing rights retained in the securitization of mortgage and home equity loans are measured by allocating the carrying value of the loans between the assets sold and the interest retained, based on the relative fair value at the date of the securitization. The fair market values are determined using either financial models, quoted market prices or sales of similar assets. Gain or loss on sale is recognized at the time of the securitizations. Mortgage servicing assets are amortized over the expected life of the loan and are evaluated periodically for impairment. ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses represents management's estimate of probable losses inherent in the portfolio. This evaluation includes an assessment of the ability of borrowers with foreign currency obligations to obtain the foreign exchange necessary for orderly debt servicing. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable credit losses inherent in the portfolio. Additions to the allowance are made by means of the provision for credit losses. Credit losses are deducted from the allowance, and subsequent recoveries are added. Securities received in exchange for loan F-10 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS claims in debt restructurings are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the allowance, and are subsequently accounted for as securities available for sale. Larger-balance, non-homogenous exposures representing significant individual credit exposures are evaluated based upon the borrower's overall financial condition, resources, and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the realizable value of any collateral. The allowance for loan losses attributed to these loans is established via a process which begins with estimates of probable loss inherent in the portfolio based upon various statistical analyses. These analyses consider historical and projected default rates and loss severities; internal risk ratings; geographic, industry, and other environmental factors; and model imprecision. Management also considers overall portfolio indicators including trends in internally risk-rated exposures, classified exposures, cash-basis loans, and historical and forecasted write-offs; a review of industry, geographic, and portfolio concentrations, including current developments within those segments; and the current business strategy and credit process including credit limit setting and compliance, credit approvals, loan underwriting criteria, and loan workout procedures. Within the allowance for credit losses, a valuation allowance is maintained for larger-balance, non-homogenous loans that have been individually determined to be impaired. This estimate considers all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan's contractual effective rate, the secondary market value of the loan, the fair value of collateral, and environmental factors. Each portfolio of smaller balance, homogenous loans, including consumer mortgage, installment, revolving credit and most other consumer loans, is collectively evaluated for impairment The allowance for loan losses attributed to these loans is established via a process which begins with estimates of probable losses inherent in the portfolio, based upon various statistical analyses. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses which reflect current trends and conditions. Management also considers overall portfolio indicators including historical credit losses, delinquent, non-performing and classified loans, and trends in volumes and terms of loans; an evaluation of overall credit quality and the credit process, including lending policies and procedures; consideration of economic, geographical, product, and other environmental factors; and model imprecision. REPOSSESSED ASSETS Upon repossession, loans are adjusted if necessary to the estimated fair value of the underlying collateral and transferred to Repossessed Assets, which is reported in other assets net of a valuation allowance for selling costs and net declines in value as appropriate. EMPLOYEE BENEFITS Employee benefits expense includes prior and current service costs of pension and other postretirement benefit plans, which are accrued on a current basis, contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards, and costs of other employee benefits. There are no charges to earnings upon the grant or exercise of fixed stock options or the subscription for or purchase of stock under stock purchase agreements. Citigroup common stock may be awarded to employees of its subsidiaries under various plans. Compensation expense related to performance-based stock options granted in prior periods was recorded over the period to the vesting dates. INCOME TAXES Deferred taxes are recorded for the future tax consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates, including an appropriate provision for taxes on undistributed income of subsidiaries and affiliates. Deferred tax assets are recognized subject to management's judgment that realization is more likely than not. FUTURE APPLICATION OF ACCOUNTING STANDARDS DERIVATIVES AND HEDGE ACCOUNTING. On January 1, 2001 Citicorp adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS 133), when the rules became effective for calendar year companies. The new rules will change the accounting treatment of derivative contracts (including foreign exchange contracts) that are employed to manage risk outside of Citicorp's trading activities, as well as certain derivative-like instruments embedded in other contracts. The F-11 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS rules require that all derivatives be recorded on the balance sheet at their fair value. The treatment of changes in the fair value of derivatives depends on the character of the transaction. For fair value hedges, in which derivatives hedge the fair value of assets and liabilities, changes in the fair value of derivatives will be reflected in current earnings, together with changes in the fair value of the related hedged item. Citicorp's fair value hedges will primarily include hedges of fixed rate long-term debt, loans and available-for-sale securities. As a result, Citicorp expects that the net amount reflected in current earnings under the new rules will be substantially similar to the amounts under existing accounting practice. For cash flow hedges, in which derivatives hedge the variability of cash flows related to floating rate assets, liabilities or forecasted transactions, the accounting treatment will depend on the effectiveness of the hedge. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives' fair value will not be included in current earnings but will be reported as other changes in stockholders' equity from nonowner sources. These changes in fair value will be included in earnings of future periods when earnings are also affected by the variability of the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values will be immediately included in current earnings. Citicorp's cash flow hedges will primarily include hedges of floating rate credit card receivables and loans and foreign currency denominated funding. As a result, while the earnings impact of cash flow hedges may be similar to existing accounting practice, the amounts included in other changes in stockholders' equity from nonowner sources may vary depending on market conditions. For net investment hedges, in which derivatives hedge the foreign currency exposure of a net investment in a foreign operation, the accounting treatment will similarly depend on the effectiveness of the hedge. The effective portion of the change in fair value of the derivative, including any forward premium or discount, is reflected in other changes in stockholders' equity from nonowner sources as part of the foreign currency translation adjustment. The ineffective portion will be reflected in current period earnings. Citicorp uses such derivative contracts as part of its strategy for hedging its net foreign investments. The impact on earnings and other changes in stockholders' equity from nonowner sources is not expected to be materially different from the current accounting practice. Non-trading derivatives that do not qualify as hedges under the new rules will be carried at fair value with changes in value included in current earnings. In order to adopt these new rules, the initial revaluation of these derivatives along with the initial revaluations of other items discussed in the preceding paragraphs, are required to be recorded as cumulative effects of a change in accounting principle, after tax, either in net income if the hedging relationship could have been considered a fair value type hedge prior to adoption or in other changes in stockholders' equity from nonowner sources, if the hedging relationship could have been considered a cash flow type hedge prior to adoption. The initial transition adjustments required to adopt SFAS 133 are not significant. Citicorp will likely change certain risk management strategies outside of its trading activities, and it also anticipates a significant increase in the complexity of the accounting and recordkeeping requirements for these hedging activities, but overall it does not foresee a material on-going impact on its financial position or results of operations from implementing the new rules. The FASB continues to deliberate potential changes to the new rules, the effects of which cannot be presently anticipated. TRANSFERS AND SERVICING OF FINANCIAL ASSETS. In September 2000, FASB issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125" (SFAS 140). Provisions of SFAS 140 primarily relating to transfers of financial assets and securitizations that differ from provisions of SFAS 125 are effective for transfers taking place after March 31, 2001. SFAS 140 also provides revised guidance for an entity to be considered a qualifying special purpose entity (QSPE). It is not expected that there will be a material effect on the financial statements relating to a change in consolidation status for existing QSPEs under SFAS 140. INTEREST INCOME AND IMPAIRMENT ON CERTAIN ASSET-BACKED SECURITIES. In November 2000, the Emerging Issues Task Force (EITF) of the FASB finalized guidance on EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." EITF 99-20, which is effective for the quarter beginning April 1, 2001, provides new guidance regarding income recognition and identification and determination of impairment on certain asset-backed securities. The Company is evaluating the potential impact of implementing the new accounting standard. F-12 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. BUSINESS COMBINATIONS ACQUISITION OF ASSOCIATES On November 30, 2000, Citigroup Inc., completed its acquisition of Associates First Capital Corporation (Associates). The acquisition was consummated through a merger of a subsidiary of Citigroup with and into Associates (with Associates as the surviving corporation) pursuant to which each share of Associates common stock became a right to receive .7334 of a share of Citigroup Inc. common stock (534.5 million shares). Subsequent to the acquisition, Associates was contributed to and became a wholly-owned subsidiary of Citicorp and Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America, a subsidiary of Associates (ACONA). Associates' and ACONA's debt securities and commercial paper will no longer be separately rated. The consolidated financial statements give retroactive effect to the contribution as a combination of entities under common control in a transaction accounted for in a manner similar to a pooling of interests, with all periods presented as if Citicorp and Associates had always been combined. Certain reclassifications and adjustments have been recorded to conform the accounting policies and presentations of Citicorp and Associates. The following table sets forth the results of operations for the separate companies and the combined amounts for periods prior to the contribution.
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, - ------------------------------------------------------------------------------------------- IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- NET INTEREST REVENUE Citicorp $11,336 $14,542 $13,302 Associates 4,556 5,912 5,056 Reclassifications (1) 337 329 119 Conforming adjustments (2) 9 (58) (75) ------------------------------------ CITICORP $16,238 $20,725 $18,402 - ------------------------------------------------------------------------------------------- NET INCOME Citicorp $ 5,581 $ 5,195 $3,096 Associates 1,151 1,490 1,224 Conforming adjustments (2) (155) (114) (81) ------------------------------------ CITICORP $ 6,577 $ 6,571 $ 4,239 - -------------------------------------------------------------------------------------------
(1) Reclassifications have been made to conform the Company's post-merger presentation. (2) Conforming adjustments include the effects of conforming Associates' policies to the policies applied by Citicorp primarily for recognizing charge-offs on finance receivables, capitalizing insurance policy deferred acquisition costs, and recognizing revenue on leases and finance receivables and the related tax effects. - -------------------------------------------------------------------------------- CONTRIBUTION OF CITIFINANCIAL CREDIT COMPANY On August 4, 1999, CitiFinancial Credit Company (formerly Commercial Credit Company) (CCC), an indirect wholly-owned subsidiary of Citigroup Inc. (Citigroup), was contributed to and became a subsidiary of Citicorp Banking Corporation, a wholly-owned subsidiary of Citicorp. The consolidated financial statements, as well as the Parent Company Only financial statements disclosed in Note 23, give retroactive effect to the contribution as a combination of entities under common control in a transaction accounted for in a manner similar to a pooling of interests. This method of accounting requires the restatement of all periods presented as if Citicorp and CCC had always been combined. ACQUISITION OF AVCO FINANCIAL SERVICES On January 6, 1999, Associates purchased the assets and assumed the liabilities of Avco Financial Services, Inc. (Avco) for $3.9 billion. Associates assumed from Avco approximately $7.5 billion in debt and, after giving effect to the sale of certain of the non-strategic operations, acquired $6.0 billion in finance receivables, $2.1 billion in goodwill and $690 million in other intangible assets. MERGER WITH TRAVELERS On October 8, 1998, Citicorp merged with and into a newly formed, wholly owned subsidiary of Travelers Group Inc. (Travelers) (the Merger). Following the Merger, Travelers changed its name to Citigroup. The Merger was accounted for under the pooling of interests method. Additionally, as of October 8, 1998, the shares of Citicorp common stock held in treasury were retired. The effect F-13 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS of these transactions was an elimination of Citicorp common stock and Citicorp preferred stock, with an offsetting adjustment to surplus, resulting in no change in the amount of Citicorp's total stockholder's equity. ACQUISITION OF UNIVERSAL CARD SERVICES On April 2, 1998, Citicorp completed its acquisition of Universal Card Services from AT&T for $3.5 billion in cash. This purchase added $15 billion in customer receivables and 13.5 million accounts. In addition, Citicorp entered into a ten-year cobranding and joint marketing agreement with AT&T. 3. BUSINESS SEGMENT INFORMATION Citicorp's businesses provide a broad range of financial services to consumer and corporate customers around the world. Citicorp's activities are conducted through Global Consumer, Global Corporate Bank, Global Investment Management and Private Banking, Associates, and Investment Activities. Global Consumer delivers a wide array of banking, lending, and investment services, including the issuance of credit and charge cards. The businesses included in Global Corporate Bank serve corporations, financial institutions, governments, and other participants in 100 countries and territories. The Global Investment Management and Private Banking group offers a broad range of asset management products and services from global investment centers around the world, including mutual funds, closed-end funds, and managed accounts to institutional, high net-worth, and retail clients. Associates provides finance, leasing, insurance, and related services to individual consumers and businesses in the United Sates and internationally. The Investment Activities segment includes the Company's venture capital activities, the realized investment gains and losses related to certain corporate investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature. Corporate/Other includes net corporate treasury results, corporate staff and other corporate expenses, certain intersegment eliminations, and the remainder of Internet-related development activities (e-Citi) not allocated to the individual businesses. The following table presents certain information regarding these industry segments:
IN MILLIONS OF DOLLARS, EXCEPT TOTAL REVENUES, IDENTIFIABLE NET OF INTEREST EXPENSE (1) INCOME TAXES - ---------------------------------------------------------------------------------------------------- IN BILLIONS 2000 1999(3) 1998(3) 2000 1999(3) 1998(3) - ---------------------------------------------------------------------------------------------------- Global Consumer . $18,595 $16,985 $14,583 $2,193 $1,801 $1,053 Global Corporate Bank .......... 10,128 8,563 7,627 1,395 1,064 639 Global Investment Management and Private Banking 2,000 1,579 1,502 189 153 130 Associates ...... 9,728 8,489 6,297 553 827 673 Investment Activities ..... 2,275 864 1,029 790 276 331 Corporate/Other . (268) 153 (63) (354) (196) (333) - ---------------------------------------------------------------------------------------------------- Total ........... $42,458 $36,633 $30,975 $4,766 $3,925 $2,493 - ---------------------------------------------------------------------------------------------------- IN MILLIONS OF DOLLARS, EXCEPT IDENTIFIABLE IDENTIFIABLE NET INCOME (LOSS)(2)(4) ASSETS AT YEAR-END - --------------------------------------------------------------------------------------------------- IN BILLIONS 2000 1999(3) 1998(3) 2000 1999(3) 1998(3) - --------------------------------------------------------------------------------------------------- Global Consumer . $3,708 $2,944 $1,646 $196 $167 $155 Global Corporate Bank .......... 2,441 1,775 1,078 209 176 165 Global Investment Management and Private Banking 314 261 206 30 25 19 Associates ...... 850 1,380 1,143 97 84 76 Investment Activities ..... 1,375 522 657 10 11 8 Corporate/Other . (578) (311) (491) 10 8 9 - --------------------------------------------------------------------------------------------------- Total ........... $8,110 $6,571 $4,239 $552 $471 $432 - ---------------------------------------------------------------------------------------------------
(1) Includes total revenues, net of interest expense, in the United States of $22.9 billion, $20.2 billion, and $17.5 billion in 2000, 1999, and 1998, respectively. Total revenues, net of interest expense attributable to individual foreign countries, are not material to the total. (2) For the 2000 period, Global Consumer, Global Corporate Bank, Global Investment Management and Private Banking, Associates, and Corporate/Other results reflect after-tax restructuring charges and merger-related costs of $14 million, $11 million, $9 million, $531 million, and $36 million, respectively. For the 1999 period, Global Consumer, Global Corporate Bank, Global Investment Management and Private Banking, Associates, and Corporate/Other results reflect after-tax restructuring charges (credits) of $56 million, $22 million, ($2) million, $22 million, and $20 million, respectively. For the 1998 period, Global Consumer, Global Corporate Bank, Global Investment Management and Private Banking, and Corporate/Other results reflect after-tax restructuring charges and merger-related costs of $391 million, $137 million, $52 million, and $69 million, respectively. (3) Reclassified to conform to the 2000 presentation. (4) Includes provision for credit losses in the Global Consumer results of $2,350 million, $2,472 million, and $2,362 million, in the Global Corporate Bank results of $346 million, $353 million, and $397 million, in the Global Investment Management and Private Banking results of $23 million, $12 million, and $5 million, in the Associates results of $2,613 million, $1,923 million, and $1,510 million for 2000, 1999 and 1998, respectively. Includes provision for credit losses (benefits) in the Investment Activities results of $7 million and ($10) million in 2000 and 1998, respectively, and in the Corporate/Other results of ($3) million in 1998. F-14 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. SECURITIES
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- Securities available for sale, at fair value $51,531 $50,772 Short-term and other 927 556 --------------------- Available for sale and short-term and other $52,458 $51,328 ===================== Venture capital, at fair value $5,204 $4,160 - -------------------------------------------------------------------------------------------
2000 1999 --------------------------------------------------------------------------------------- GROSS GROSS GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR IN MILLIONS OF DOLLARS AT COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE YEAR-END - ----------------------------------------------------------------------------------------------------------------------- SECURITIES AVAILABLE FOR SALE U.S. Treasury and Federal $7,926 $62 $38 $7,950 $9,701 $ 23 $236 $9,488 agency State and municipal 5,383 273 134 5,522 4,201 185 172 4,214 Foreign government 24,463 111 128 24,446 23,931 463 309 24,085 U.S. corporate 5,603 170 266 5,507 4,859 80 242 4,697 Other debt securities 3,489 24 22 3,491 3,459 39 25 3,473 Equity securities (1) 4,638 300 323 4,615 4,199 840 224 4,815 --------------------------------------------------------------------------------------- $51,502 $940 $911 $51,531 $50,350 $1,630 $1,208 $50,772 ======================================================================================= Securities available for sale include: Mortgage-backed securities $6,498 $43 $173 $6,368 $6,930 $7 $229 $6,708 - -----------------------------------------------------------------------------------------------------------------------
(1)Includes non-marketable equity securities carried at cost, which are reported in both the amortized cost and fair value columns. - -------------------------------------------------------------------------------- The accompanying table shows components of interest and dividends on securities, realized gains and losses from sales of securities available for sale, and net gains on investments held by venture capital subsidiaries.
IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- Taxable interest $3,032 $3,545 $2,812 Interest exempt from U.S. federal income tax 234 158 148 Dividends 160 173 126 - ------------------------------------------------------------------------------------------- Gross realized securities gains $1,177 $576 $793 Gross realized securities losses 342 260 268 - ------------------------------------------------------------------------------------------- Net realized and unrealized venture capital gains $1,850 $816 $487 which included: Gross unrealized gains 1,752 999 709 Gross unrealized losses 618 587 412 - -------------------------------------------------------------------------------------------
F-15 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the amortized cost, fair value, and average yield on amortized cost of debt securities available for sale by contractual maturity dates as of December 31, 2000:
AMORTIZED FAIR IN MILLIONS OF DOLLARS COST VALUE YIELD - ------------------------------------------------------------------------------------------- U.S. TREASURY AND FEDERAL AGENCY Due within 1 year $2,178 $2,176 6.47% After 1 but within 5 years 530 535 5.66 After 5 but within 10 years 535 545 6.54 After 10 years (1) 4,683 4,694 6.38 TOTAL $7,926 $7,950 6.37 - ---------------------------------------------------------------============================ STATE AND MUNICIPAL Due within 1 year $ 23 $ 23 4.35% After 1 but within 5 years 433 435 6.00 After 5 but within 10 years 687 662 6.11 After 10 years (1) 4,240 4,402 5.87 TOTAL $5,383 $5,522 5.91 - ---------------------------------------------------------------============================ ALL OTHER (2) Due within 1 year $11,044 $ 11,133 7.50% After 1 but within 5 years 13,183 12,960 6.11 After 5 but within 10 years 6,328 6,328 10.70 After 10 years (1) 3,000 3,023 7.17 TOTAL $33,555 $33,444 7.53 - ---------------------------------------------------------------============================
(1) Securities with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights. (2) Includes foreign government, U.S. corporate, and other debt securities. Yields reflect the impact of local interest rates prevailing in countries outside the United States. - -------------------------------------------------------------------------------- 5. TRADING ACCOUNT ASSETS AND LIABILITIES
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- TRADING ACCOUNT ASSETS U.S. Treasury and Federal agency securities $ 721 $ 131 Foreign government, corporate and other securities 15,043 10,023 Derivative and foreign exchange contracts (1) 23,547 20,782 ------------------------ $39,311 $30,936 - -------------------------------------------------------------------======================== TRADING ACCOUNT LIABILITIES Securities sold, not yet purchased $3,915 $3,787 Derivative and foreign exchange contracts (1) 23,863 23,038 ------------------------ $27,778 $26,825 - -------------------------------------------------------------------========================
(1) Net of master netting agreements and securitization. - -------------------------------------------------------------------------------- The average fair value of trading account assets during 2000 was $37.8 billion, including $23.4 billion relating to derivative and foreign exchange contracts, compared with $34.2 billion and $24.9 billion, respectively, during 1999. The average fair value of trading account liabilities during 2000 was $27.2 billion, including $23.6 billion relating to derivative and foreign exchange contracts, compared with $27.3 billion and $25.3 billion, respectively, during 1999. F-16 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. LOANS
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- CONSUMER IN U.S. OFFICES Mortgage and real estate (1) (2) $ 73,166 $ 59,376 Installment, revolving credit, and other 78,017 63,374 ------------------------ 151,183 122,750 ------------------------ IN OFFICES OUTSIDE THE U.S. Mortgage and real estate (1) (3) 24,988 24,808 Installment, revolving credit, and other 55,515 50,293 Lease financing 427 475 ------------------------ 80,930 75,576 ------------------------ Total Consumer 232,113 198,326 Unearned income (3,234) (3,757) ------------------------ CONSUMER LOANS, NET OF UNEARNED INCOME $228,879 $194,569 - -------------------------------------------------------------------======================== COMMERCIAL IN U.S. OFFICES Commercial and industrial (4) $ 39,188 $ 34,151 Lease financing 14,864 10,281 Mortgage and real estate (1) 1,017 2,690 ------------------------ 55,069 47,122 ------------------------ IN OFFICES OUTSIDE THE U.S. Commercial and industrial (4) 69,111 61,992 Mortgage and real estate (1) 1,720 1,728 Loans to financial institutions 9,630 7,692 Lease financing 3,689 2,459 Governments and official institutions 1,952 3,250 ------------------------ 86,102 77,121 ------------------------ Total Commercial 141,171 124,243 Unearned income (3,462) (2,664) ------------------------ COMMERCIAL LOANS, NET OF UNEARNED INCOME $137,709 $121,579 - -------------------------------------------------------------------========================
(1) Loans secured primarily by real estate. (2) Includes $3.7 billion in 2000 and $3.4 billion in 1999 of commercial real estate loans related to community banking and private banking activities. (3) Includes $2.7 billion in 2000 and $2.9 billion in 1999 of loans secured by commercial real estate. (4) Includes loans not otherwise separately categorized. - -------------------------------------------------------------------------------- Impaired loans are those on which Citicorp believes it is not probable that it will be able to collect all amounts due according to the contractual terms of the loan, excluding smaller-balance homogeneous loans that are evaluated collectively for impairment, and are carried on a cash basis. Valuation allowances for these loans are estimated considering all available evidence including, as appropriate, the present value of the expected cash flows discounted at the loan's contractual effective rate, the secondary market value of the loan, the fair value of collateral, and environmental factors. The following table presents information about impaired loans. F-17 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- Impaired commercial loans $1,803 $1,510 Other impaired loans (1) 100 185 ------------------------ Total impaired loans (2) $1,903 $1,695 - -------------------------------------------------------------------======================== Impaired loans with valuation allowances $1,539 $1,381 Total valuation allowances (3) 467 411 - -------------------------------------------------------------------======================== During the year (4): Average balance of impaired loans $1,813 $1,789 Interest income recognized on impaired loans 96 75 - -------------------------------------------------------------------========================
(1) Primarily commercial real estate loans related to community and private banking activities. (2) At year-end 2000, approximately 23% of these loans were measured for impairment using the fair value of the collateral, with the remaining 77% measured using the present value of the expected future cash flows, discounted at the loan's effective interest rate, compared with approximately 32% and 68%, respectively, at year-end 1999. (3) Included in the allowance for credit losses. (4) For the year ended December 31, 1998, the average balance of impaired loans was $1.6 billion and interest income recognized on impaired loans was $72 million. - -------------------------------------------------------------------------------- The following table presents total loan portfolios managed, the portion of those portfolios securitized, and delinquencies (loans which are 90 days or more past due) at December 31, 2000, and credit losses, net of recoveries, for the year ended December 31, 2000.
CREDIT CARD MANAGED LOANS RECEIVABLES MORTGAGE LOANS (1) - ------------------------------------------------------------------------------------------- IN BILLIONS OF DOLLARS Principal amounts, at year-end Total managed $105.8 $28.1 Securitized amounts (57.0) (2.1) ------------------------------------ On-balance sheet $ 48.8 $26.0 - -------------------------------------------------------==================================== IN MILLIONS OF DOLLARS - ------------------------------------------------------------------------------------------- Delinquencies, at year-end Total managed $1,719 $759 Securitized amounts (925) (81) ------------------------------------ On-balance sheet $ 794 $678 - -------------------------------------------------------==================================== Credit losses, net of recoveries, for the year ended December 31, Total managed $4,148 $422 Securitized amounts (2,250) (12) ------------------------------------ On-balance sheet $1,898 $410 - -------------------------------------------------------====================================
(1) Includes mortgage and home equity loans. - -------------------------------------------------------------------------------- F-18 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. ALLOWANCE FOR CREDIT LOSSES
IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES AT BEGINNING OF YEAR $8,853 $8,596 $8,087 Additions Consumer provision for credit losses 4,345 4,169 3,753 Commercial provision for credit losses 994 591 508 -------------------------------- TOTAL PROVISION FOR CREDIT LOSSES 5,339 4,760 4,261 -------------------------------- Deductions Consumer credit losses 5,352 4,862 4,292 Consumer credit recoveries (929) (769) (714) -------------------------------- NET CONSUMER CREDIT LOSSES 4,423 4,093 3,578 -------------------------------- Commercial credit losses 906 746 671 Commercial credit recoveries (135) (156) (191) -------------------------------- NET COMMERCIAL CREDIT LOSSES 771 590 480 -------------------------------- Other -- net (1) (37) 180 306 -------------------------------- ALLOWANCE FOR CREDIT LOSSES AT END OF YEAR $8,961 $8,853 $8,596 - -----------------------------------------------------------================================
(1) In 2000 and 1999, primarily includes the addition of allowance for credit losses related to acquisitions and foreign currency translation effects. In 1998, also reflects the addition of $320 million of credit loss reserves related to the acquisition of the Universal Card portfolio. - -------------------------------------------------------------------------------- 8. SECURITIZATION ACTIVITY Citicorp and its subsidiaries securitize primarily credit card receivables and mortgage and home equity loans. After securitizations of credit card receivables, the Company continues to maintain credit card customer account relationships and provides servicing for receivables transferred to the trust. The Company also provides credit enhancement to the trust using cash collateral accounts and put options. As specified in certain of the sale agreements, the net revenue collected each month is accumulated up to a predetermined maximum amount, and is available over the remaining term of that transaction to make payments of yield, fees, and transaction costs in the event that net cash flows from the receivables are not sufficient. When the predetermined amount is reached net revenue is passed directly to the Citicorp subsidiary that sold the receivables. The Company provides a wide range of mortgage and home equity products to a diverse customer base. In connection with these loans, the servicing rights entitle the Company to a future stream of cash flows based on the outstanding principal balances of the loans and the contractual servicing fee. Failure to service the loans in accordance with contractual requirements may lead to a termination of the servicing rights and the loss of future servicing fees. In non-recourse servicing, the principal credit risk to the servicer is the cost of temporary advances of funds. In recourse servicing, the servicer agrees to share credit risk with the owner of the mortgage loans such as FNMA or FHLMC or with a private investor, insurer or guarantor. Losses on recourse servicing occur primarily when foreclosure sale proceeds of the property underlying a defaulted mortgage or home equity loan are less than the outstanding principal balance and accrued interest of such mortgage loan and the cost of holding and disposing of the underlying property. The following table summarizes certain cash flows received from and paid to securitization trusts during the year ended December 31, 2000:
IN BILLIONS OF DOLLARS CREDIT CARDS MORTGAGES (1) - ------------------------------------------------------------------------------------------- Proceeds from new securitizations $ 9.1 $12.0 Proceeds from collections reinvested in new 127.2 0.2 receivables Servicing fees received 1.0 0.3 Cash flows received on retained interests 0.3 0.3 - -------------------------------------------------------------------------------------------
(1) Includes mortgage, home equity and manufactured housing loans. - -------------------------------------------------------------------------------- F-19 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Key assumptions used for mortgages and home equity loans during the year ended December 31, 2000 in measuring the fair value of retained interests at the date of sale or securitization, presented by product groups, follow:
- ------------------------------------------------------------------------------------------- Discount rate 11.50% TO 12.90%; 12.25% Constant payment rate 7.4% TO 7.6%; 28.0% Anticipated net credit losses 0.04%; 7.64% - ------------------------------------------------------------------=========================
For the year ended December 31, 2000, the Company recognized $45 million of gains on securitizations of mortgage and home equity loans. As disclosed below, SFAS 140 requires that the effect on the fair value of the retained interests of two adverse changes in each key assumption be independently calculated. Because the key assumptions may be correlated, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects disclosed below. At December 31, 2000, for mortgage, home equity and manufactured housing loans, the key assumptions, presented by product groups, and the sensitivity of the fair value of retained interests to two adverse changes in each of the key assumptions were as follows:
IN MILLIONS OF DOLLARS - ------------------------------------------------------------------------------------------- Carrying value of retained interests $2,148 - ------------------------------------------------------------------------------------------- Discount rate 9.70% TO 10.96%; 15.00% +10% ($85.1) +20% (164.0) - ------------------------------------------------------------------------------------------- Constant payment rate 1.1% TO 12.0%; 28.0% +10% ($103.1) +20% (190.2) - ------------------------------------------------------------------------------------------- Anticipated net credit losses 0.07%; 3.20% TO 11.99% +10% ($15.6) +20% (66.9) - ------------------------------------------------------------------=========================
9. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation and amortization. Generally, depreciation and amortization are computed on the straight-line basis over the estimated useful life of the asset or the lease term. Depreciation and amortization expense was $1.358 billion in 2000, $1.195 billion in 1999 and $1.064 billion in 1998. 10. PURCHASED FUNDS AND OTHER BORROWINGS (1)
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- Federal funds purchased and securities sold under repurchase $ 7,191 $ 8,004 agreements Commercial paper 37,656 31,018 Other funds borrowed 15,987 13,327 --------------------- TOTAL $60,834 $52,349 - ----------------------------------------------------------------------===================== (1) Original maturities of less than one year. - --------------------------------------------------------------------------------
F-20 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. LONG-TERM DEBT (1) At December 31, long-term debt was as follows:
WEIGHTED AVERAGE IN MILLIONS OF DOLLARS COUPON MATURITIES 2000 1999 - ------------------------------------------------------------------------------------------- PARENT COMPANY Senior notes 6.39% 2001-2025 $ 4,178 $ 6,065 Subordinated notes 7.38% 2001-2035 13,622 8,760 SUBSIDIARIES (2) Senior notes 6.59% 2001-2037 61,135 51,607 Subordinated notes 7.62% 2001-2028 1,400 1,400 - ------------------------------------------------------------------------------------------- Senior notes 65,313 57,672 Subordinated notes 15,022 10,160 --------------------- TOTAL $80,335 $67,832 - ----------------------------------------------=============================================
(1) Original maturities of one year or more. Maturity distribution is based upon contractual maturities or earlier dates at which debt is repayable at the option of the holder, due to required mandatory sinking fund payments or due to call notices issued. Weighted average interest rates reflect contractual interest rates. (2) Approximately 87% in 2000 and 91% in 1999 of subsidiary long-term debt was guaranteed by Citicorp, and of the debt not guaranteed by Citicorp, approximately 97% in 2000 and 23% in 1999 was secured by the assets of the subsidiary. - -------------------------------------------------------------------------------- Long-term debt is denominated in various currencies with both fixed and floating interest rates. Certain agreements under which long-term debt obligations were issued prohibit Citicorp, under certain conditions, from paying dividends in shares of Citibank capital stock and from creating encumbrances on such shares. Floating rates are determined periodically by formulas based on certain money market rates or, in certain instances, by minimum rates as specified in the governing agreements. A portion of Parent Company and subsidiaries debt represents local currency borrowings where prevailing rates may vary significantly from rates in the United States. Subsidiaries' subordinated notes include $975 million of guaranteed beneficial interests in Citicorp subordinated debt issued by Citicorp Capital I, II, and III, wholly owned trusts whose sole assets are $309 million of 7.933% and $464 million of 8.015%, respectively, of Junior Subordinated Deferrable Interest Debentures of Citicorp both due 2027, and $232 million of 7.10% of Junior Subordinated Deferrable Interest Debentures of Citicorp due 2028. At December 31, 2000, Citicorp had converted, through the use of derivative contracts, $13.9 billion of its $37.1 billion of fixed rate debt into variable rate obligations. In addition, Citicorp utilizes other derivative contracts to manage the foreign exchange impact of certain debt issuances. At year-end 2000, Citicorp's overall weighted average rate for long-term debt was 6.73% on a contractual basis and 7.18% including the effects of derivative contracts. Aggregate annual maturities on long-term debt obligations (based on final maturity dates) are as follows:
IN MILLIONS OF DOLLARS 2001 2002 2003 2004 2005 THEREAFTER - ---------------------------------------------------------------------------------------------------------- Parent Company $ 1,503 $ 1,563 $ 1,838 $ 636 $1,427 $10,833 Subsidiaries 16,455 17,062 9,481 5,689 4,489 9,359 -------------------------------------------------------------------------- $17,958 $18,625 $11,319 $6,325 $5,916 $20,192 - ----------------------------------------------------------------------------------------------------------
12. FEES AND COMMISSIONS Trust, agency, and custodial fees included in fees and commissions were $2.0 billion in 2000, $1.5 billion in 1999, and $1.4 billion in 1998. F-21 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. RESTRUCTURING-RELATED ITEMS
IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- Restructuring charges $576 $166 $1,008 Changes in estimates (64) (157) (38) Accelerated depreciation 68 180 - -------------------------------- TOTAL $580 $189 $970 - -----------------------------------------------------------================================
During 2000, Citicorp recorded restructuring charges of $576 million, primarily consisting of exit costs related to the acquisition of Associates. The new initiatives are expected to be implemented over the next year. The charges included $238 million related to employee severance, $154 million related to exiting leasehold and other contractual obligations, and $184 million of asset impairment charges. The implementation of these restructuring initiatives will cause some related premises and equipment assets to become redundant. As a result, the remaining depreciable lives of these assets were shortened, and accelerated depreciation charges of $69 million will be recognized in subsequent periods. Of the $576 million charge, $474 million in the Associates business includes the reconfiguration of certain branch operations, the exit from non-strategic businesses and from activities as mandated by Federal bank regulations, and the consolidation and integration of Corporate and middle and back office functions. In the Global Consumer business, $51 million includes the reconfiguration of certain branch operations outside the U.S. and the downsizing and consolidation of certain back office functions in the U.S. Approximately $440 million of the $576 million charge related to operations in the United States. The $238 million portion of the charge related to employee severance reflects the costs of eliminating approximately 7,200 positions, including approximately 4,600 in Associates and 700 in the Global Consumer business. Approximately 4,900 of these positions related to the United States. In 2000, a reserve for $23 million was recorded, $20 million of which related to the elimination of 1,600 non-U.S. positions of an acquired entity. The 2000 restructuring reserve utilization included $184 million of asset impairment charges and $71 million of severance and other exit costs (of which $40 million related to employee severance and $5 million related to leasehold and other exit costs have been paid in cash and $26 million is legally obligated), together with translation effects. In 1999, Citicorp recorded restructuring charges of $166 million, including additional severance charges of $49 million as a result of the continuing implementation of 1998 restructuring initiatives, as well as $82 million of exit costs associated with new initiatives in the Global Consumer business primarily related to the reconfiguration of certain branch operations outside the U.S., the downsizing of certain marketing operations, and the exit of a non-strategic business. The 1999 restructuring reserve was fully utilized at June 30, 2000. The 1999 charge included $35 million of integration charges recorded by Associates (the Avco charge) related to its January 6, 1999 acquisition of Avco Financial Services, Inc. (Avco). The charge included $17 million related to employee severance, $5 million related to branch closure, $7 million related to training of employees and $6 million of other integration related expenses. In addition to the Avco charge, as part of the purchase price allocation of the Avco acquisition, Associates recorded a $146 million reserve (the Avco integration cost reserve) at the time of the acquisition. This reserve was established to reflect the costs of exiting certain activities that would not be continued after the acquisition. The costs primarily consisted of severance costs and related expenses, lease termination costs and other contractual liabilities. The Avco reserve was fully utilized at December 31, 1999. In 1998, Citicorp recorded a restructuring charge of $1.008 billion, reflecting exit costs associated with business improvement and integration initiatives. The 1998 restructuring reserve was fully utilized at December 31, 2000. The implementation of the 1999 and 1998 restructuring initiatives also caused certain related premises and equipment assets to become redundant. The remaining depreciable lives of these assets were shortened, and accelerated depreciation charges of $68 million and $180 million (in addition to normal scheduled depreciation on those assets) were recognized over the shortened lives in 2000 and 1999, respectively. F-22 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The status of the 2000, 1999, and 1998 restructuring initiatives is summarized in the following table: RESTRUCTURING RESERVE ACTIVITY
Restructuring Initiatives -------------------------------- IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- Original charges $ 576 $117 $1,008 Additional charges - - 49 -------------------------------- 576 117 1,057 -------------------------------- Acquisitions (1) 2000 23 - - 1999 - 146 - 1998 - - - -------------------------------- 23 146 - -------------------------------- Utilization (2) 2000 (255) (51) (134) 1999 - (212) (738) 1998 - - - -------------------------------- (255) (263) (872) -------------------------------- CHANGES IN ESTIMATES 2000 - - (64) 1999 - - (121) 1998 - - - -------------------------------- - - (185) - ------------------------------------------------------------------------------------------- RESERVE BALANCE AT DECEMBER 31, 2000 $ 344 $ - $ - - -----------------------------------------------------------================================
(1) Represents additions to restructuring liabilities arising from acquisitions. (2) Utilization amounts include translation effects on the restructuring reserve. - -------------------------------------------------------------------------------- Changes in estimates are attributable to facts and circumstances arising subsequent to an original restructuring charge. During 2000 and 1999, changes in estimates resulted in reductions in the reserve for 1998 restructuring initiatives of $64 million and $121 million, respectively, attributable to lower than anticipated costs of implementing certain projects and a reduction in the scope of certain initiatives. Changes in estimates related to 1997 restructuring initiatives, which were fully utilized as of December 31, 1999, were $36 million and $38 million in 1999 and 1998, respectively. Changes in estimates related to the 1997 restructuring initiatives are attributable to lower severance costs due to higher than anticipated levels of attrition and redeployment within the Company, and other unforeseen changes including those resulting from the merger with Travelers. During 2000, the Company also recorded $158 million of merger-related costs which included legal, advisory, and SEC filing fees, as well as other costs of administratively closing the acquisition of Associates. During 1998, the Company recorded $41 million of merger-related costs which included the direct and incremental costs of administratively closing the merger with Travelers. F-23 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. INCOME TAXES
IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- CURRENT: Federal $1,571 $1,528 $1,169 Foreign 2,139 1,984 1,192 State 269 187 252 ------------------------------- 3,979 3,699 2,613 DEFERRED: Federal 559 238 (40) Foreign 178 (113) 51 State 50 101 (131) ------------------------------- 787 226 (120) ------------------------------- PROVISION FOR INCOME TAX (1) 4,766 3,925 2,493 ------------------------------- INCOME TAX EXPENSE (BENEFIT) REPORTED IN STOCKHOLDER'S EQUITY RELATED TO: Foreign currency translation (37) (39) (49) Securities available for sale (190) 163 (333) Employee stock plans (36) (28) (119) -------------------------------- TOTAL INCOME TAXES $4,503 $4,021 $1,992 - -----------------------------------------------------------================================
(1) Includes the effect of securities transactions resulting in a provision of $292 million in 2000, $111 million in 1999 and $184 million in 1998. - -------------------------------------------------------------------------------- The reconciliation of the federal statutory income tax rate to the Company's effective income tax rate applicable to income before taxes for the years ended December 31, was as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------- FEDERAL STATUTORY RATE 35.0% 35.0% 35.0% Limited taxability of investment income (0.5)% (0.6)% (0.7)% State income taxes (net of federal income tax benefit) 1.6% 1.8% 1.2% Other, net 0.4% 1.2% 1.5% -------------------------------- EFFECTIVE INCOME TAX RATE 36.5% 37.4% 37.0% - -----------------------------------------------------------================================ Deferred income taxes at December 31 related to the following: IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- DEFERRED TAX ASSETS: Credit loss deduction $2,973 $2,994 $2,945 Unremitted foreign earnings 1,991 1,851 1,486 Employee benefits 363 441 624 Interest related items 360 371 429 Foreign and state loss carryforwards 293 311 256 Other deferred tax assets 778 884 722 ------------------------------------ GROSS DEFERRED TAX ASSETS 6,758 6,852 6,462 Valuation allowance 220 214 294 ------------------------------------ DEFERRED TAX ASSETS AFTER VALUATION ALLOWANCE 6,538 6,638 6,168 ------------------------------------ DEFERRED TAX LIABILITIES: Investments (898) (705) (660) Leases (1,624) (1,456) (1,390) Other deferred tax liabilities (1,433) (1,596) (1,104) ------------------------------------ GROSS DEFERRED TAX LIABILITIES (3,955) (3,757) (3,154) ------------------------------------ NET DEFERRED TAX ASSETS $2,583 $2,881 $3,014 - -------------------------------------------------------====================================
Foreign pretax earnings approximated $6.9 billion in 2000, $5.0 billion in 1999 and $3.6 billion in 1998. As a U.S. corporation, Citicorp is subject to U.S. taxation currently on all of its foreign pretax earnings earned by a foreign branch. Pretax earnings of a foreign subsidiary or affiliate are taxed when effectively repatriated. In addition, certain of Citicorp's U.S. income is subject to foreign income tax where the payor of such income is domiciled outside the United States. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are indefinitely invested outside the United F-24 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS States. At December 31, 2000, $195 million of accumulated undistributed earnings of non-U.S. subsidiaries was indefinitely invested. At the existing U.S. federal income tax rate, additional taxes of $27 million would have to be provided if such earnings were remitted. The valuation allowance of $220 million at December 31, 2000 is primarily reserved for specific state, local and foreign tax carryforwards or tax law restrictions on benefit recognition in the U.S. federal and the above jurisdictions. Management believes that the realization of the recognized net deferred tax asset of $2.583 billion is more likely than not based on existing carryback ability and expectations as to future taxable income. Beginning in 1998, the Company joined with Citigroup in filing a consolidated federal income tax return. Associates filed as part of a consolidated federal income tax return with Ford prior to its spin off on April 7, 1998. Subsequent to its spin off and prior to its acquisition by the Company, Associates filed its own consolidated federal income tax return. Under a tax sharing agreement with Citigroup, the Company is entitled to a current benefit if it incurs losses which are utilized in Citigroup's consolidated return. Citigroup has reported pretax financial statement income from continuing operations exceeding $17 billion on average over the last three years and has generated federal taxable income exceeding $10 billion, on average, each year during this same period. Income taxes are not provided for on the Company's life insurance subsidiaries' "policyholders' surplus account" because under current U.S. tax rules such taxes will become payable only to the extent such amounts are distributed as a dividend or exceed limits prescribed by federal law. Distributions are not contemplated from this account, which aggregated $50 million (subject to a tax effect of $18 million) at December 31, 2000. 15. REGULATORY CAPITAL
CITICORP Citibank, N.A. ------------------------------------------- IN MILLIONS OF DOLLARS AT YEAR-END Minimum Required(1) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------- Tier 1 capital $39,702 $29,077 $24,624 $20,389 Total capital (2) 58,010 42,478 36,801 30,414 Tier 1 capital ratio 4.00% 8.41% 7.32% 8.46% 8.25% Total capital ratio (2) 8.00 12.29 10.69 12.64 12.31 Leverage ratio (3) 3.00+ 7.54 6.51 6.66 6.53 - ------------------------------------------------===========================================
(1) As set forth in guidelines issued by the U.S. federal bank regulators. (2) Total capital includes Tier 1 and Tier 2. (3) Tier 1 capital divided by adjusted average assets. - -------------------------------------------------------------------------------- Citicorp is subject to risk-based capital and leverage guidelines issued by the Board of Governors of the Federal Reserve System, and its U.S. insured depository institution subsidiaries, including Citibank, N.A., are subject to similar guidelines issued by their respective primary regulators. These guidelines are used to evaluate capital adequacy and include the required minimums shown above. To be "well capitalized" under federal bank regulatory agency definitions, a depository institution must have a Tier 1 ratio of at least 6%, a combined Tier 1 and Tier 2 ratio of at least 10%, and a leverage ratio of at least 5% and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. The regulatory agencies are required by law to take specific prompt actions with respect to institutions that do not meet minimum capital standards. As of December 31, 2000 and 1999, all of Citicorp's U.S. insured subsidiary depository institutions were "well capitalized." F-25 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. CHANGES IN EQUITY FROM NONOWNER SOURCES Changes in each component of "Accumulated Other Changes in Equity from Nonowner Sources" for the three-year period ended December 31, 2000 are as follows:
NET ACCUMULATED UNREALIZED OTHER GAINS CHANGES IN (LOSSES) FOREIGN EQUITY IN MILLIONS OF DOLLARS ON CURRENCY FROM INVESTMENT TRANSLATION NONOWNER SECURITIES ADJUSTMENT SOURCES - ------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1998 $552 ($438) $114 Unrealized losses on investment securities, net of (242) (242) tax of ($149) Less: Reclassification adjustment for gains included (341) (341) in net income, net of tax of ($184) Foreign currency translation adjustment, net of tax (15) (15) of ($49) - ------------------------------------------------------------------------------------------- CURRENT PERIOD CHANGE (583) (15) (598) - ------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1998 (31) (453) (484) Unrealized gains on investment securities, net of tax 472 472 of $274 Less: Reclassification adjustment for gains included (205) (205) in net income, net of tax of ($111) Foreign currency translation adjustment, net of tax (36) (36) of ($39) - ------------------------------------------------------------------------------------------- CURRENT PERIOD CHANGE 267 (36) 231 - ------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1999 236 (489) (253) Unrealized gains on investment securities, net of tax 293 293 of $102 Less: Reclassification adjustment for gains included (543) (543) in net income, net of tax of ($292) Foreign currency translation adjustment, net of tax (266) (266) of ($37) - ------------------------------------------------------------------------------------------- CURRENT PERIOD CHANGE (250) (266) (516) - ------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2000 ($14) ($755) ($769) - -------------------------------------------------------====================================
17. EMPLOYEE BENEFITS Prior to its merger with Travelers, Citicorp had several non-contributory defined benefit pension plans covering substantially all U.S. employees. On December 31, 1998, the qualified U.S. plan was merged with the Travelers qualified U.S. plan. Following the merger of the qualified plans, plan assets of the combined plan may be used to fund the pension benefits of any Citigroup qualified plan participant. During the 1999 first quarter, the U.S. defined benefit plan was amended to convert the benefit formula for certain employees of Citicorp to a cash balance formula effective January 1, 2000. Employees satisfying certain age and service requirements remain covered by the prior final pay formula. Citicorp also has various defined benefit pension and termination indemnity plans covering employees outside the United States and offers postretirement health care and life insurance benefits to all eligible U.S. retired employees satisfying certain age and service requirements as well as to certain employees outside the United States. The following tables summarize the components of net benefit expense recognized in the Consolidated Statements of Income and the funded status and amounts recognized in the Consolidated Balance Sheets for U.S. plans and significant plans outside the United States. NET BENEFIT EXPENSE
Postretirement Pension Plans Benefit Plans (1) ----------------------------------------------------------- U.S. Plans Plans Outside U.S. U.S. Plans ----------------------------------------------------------- IN MILLIONS OF DOLLARS 2000 1999 1998 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------- Benefits earned during the year $146 $161 $161 $73 $74 $57 $11 $15 $17 Interest cost on benefit 304 271 261 91 90 79 41 38 37 obligation Expected return on plan assets (436) (412) (335) (88) (77) (72) (18) (16) (13) Amortization of unrecognized: Net transition (asset) 1 (17) (17) 5 4 3 - - - obligation Prior service cost (6) (2) 18 - - - (4) (2) (2) Net actuarial loss (30) 11 7 (1) 6 3 (2) 1 - Curtailment loss - - (15) - - 2 - (29) - ----------------------------------------------------------- NET (BENEFIT) EXPENSE ($ 21) $ 12 $ 80 $80 $97 $72 $28 ($ 7) $39 - -------------------------------============================================================
(1) For plans outside the U.S., net postretirement benefit expense totaled $13 million in 2000, $13 million in 1999, and $10 million in 1998. - ------------------------------------------------------------------------------ F-26 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PREPAID BENEFIT COST (BENEFIT LIABILITY)
POSTRETIREMENT PENSION PLANS BENEFIT PLANS (3) --------------------------------------------------------- U.S. PLANS (1) PLANS OUTSIDE U.S. PLANS U.S. (2) --------------------------------------------------------- IN MILLIONS OF DOLLARS AT 2000 1999 2000 1999 2000 1999 YEAR-END - ------------------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION Benefit obligation At beginning of year $3,459 $4,242 $1,491 $1,490 $512 $587 Benefits earned during the year 146 161 73 74 11 15 Interest cost on benefit 304 271 91 90 41 38 obligation Plan amendments 1 (215) (7) 10 (3) (18) Actuarial (gain) loss 70 (884) 83 10 46 (75) Benefits paid (143) (113) (64) (65) (40) (36) Acquisitions - - 18 4 - 33 Expenses (5) (3) - - - - Curtailment - - (7) - (2) (32) Settlements - - (8) (5) - - Foreign exchange impact - - (103) (117) - - --------------------------------------------------------- BENEFIT OBLIGATION AT END OF YEAR $3,832 $3,459 $1,567 $1,491 $565 $512 - ----------------------------------========================================================= CHANGE IN PLAN ASSETS Plan assets at fair value at beginning of year $5,357 $4,786 $1,234 $1,110 $211 $186 Actual return on plan assets (12) 645 (10) 181 2 26 Company contributions 61 42 88 85 39 35 Employee contributions - - 5 4 - - Acquisitions - - 3 - - - Settlements - - (4) (5) - - Benefits paid (143) (113) (64) (65) (40) (36) Expenses (5) (3) - - - - Foreign exchange impact - - (84) (76) - - --------------------------------------------------------- PLAN ASSETS AT FAIR VALUE AT END OF YEAR $5,258 $5,357 $1,168 $1,234 $212 $211 - ----------------------------------========================================================= RECONCILIATION OF PREPAID (ACCRUED) BENEFIT COST AND TOTAL AMOUNT RECOGNIZED Funded status of the plan $1,426 $1,898 ($ 399) ($ 257) ($353) ($301) Unrecognized: Net transition (asset) 1 2 26 23 - - obligation Prior service cost (86) (94) 8 17 (24) (26) Net actuarial (gain) loss (854) (1,402) 165 1 (37) (98) --------------------------------------------------------- NET AMOUNT RECOGNIZED $ 487 $ 404 ($ 200) ($ 216) ($414) ($425) - ----------------------------------========================================================= AMOUNTS RECOGNIZED IN THE BALANCE SHEETS CONSIST OF Prepaid benefit cost $ 829 $ 709 $ 123 $ 91 $ - $ - Accrued benefit liability (378) (338) (365) (326) (414) (425) Intangible asset 36 33 42 19 - - --------------------------------------------------------- NET AMOUNT RECOGNIZED $ 487 $ 404 ($ 200) ($ 216) ($414) ($425) - ----------------------------------=========================================================
(1) For unfunded U.S. plans, the aggregate benefit obligation was $401 million and $383 million, and the aggregate accumulated benefit obligation was $341 million and $305 million at December 31, 2000 and 1999, respectively. (2) For plans outside the U.S., the aggregate benefit obligation was $1.175 billion and $558 million, and the fair value of plan assets was $700 million and $174 million at December 31, 2000 and 1999, respectively, for plans whose benefit obligation exceeds plan assets. The aggregate accumulated benefit obligation was $440 million and $320 million, and the fair value of plan assets was $167 million and $45 million at December 31, 2000 and 1999, respectively, for plans whose accumulated benefit obligation exceeds plan assets. (3) For plans outside the U.S., the accumulated postretirement benefit obligation was $88 million and $84 million, and the postretirement benefit liability was $44 million and $53 million at December 31, 2000 and 1999, respectively. - -------------------------------------------------------------------------------- F-27 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The expected long-term rates of return on assets used in determining pension and postretirement expense are shown below.
2000 1999 1998 - ------------------------------------------------------------------------------------------- RATE OF RETURN ON ASSETS U.S. plans 9.5% 9.5% 9.0% Plans outside the U.S. (1) 2.5% TO 2.5% to 4.0% to 12.0% 12.5% 12.0% - ----------------------------------------------------------=================================
(1) Excluding highly inflationary countries. - -------------------------------------------------------------------------------- The principal assumptions used in determining pension and postretirement benefit obligations are shown below.
AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- DISCOUNT RATE U.S. plans 7.5% 7.75% to 8.0% Plans outside the U.S. (1) 2.5% TO 3.0% to 12.0% 12.0% FUTURE COMPENSATION INCREASE RATE U.S. plans 4.0% TO 4.5% to 4.5% 5.0% Plans outside the U.S. (1) 2.5% TO 2.5% to 12.0% 12.0% HEALTH CARE COST INCREASE RATE -- U.S. PLANS Following year 7.0% TO 6.0% to 8.5% 9.0% Decreasing to the year 2001 to 5.0% 5.0% to 5.5% - -----------------------------------------------------------------------====================
(1) Excluding highly inflationary countries. - -------------------------------------------------------------------------------- As an indicator of sensitivity, increasing the assumed health care cost trend rate by 1% in each year would have increased the accumulated postretirement benefit obligation as of December 31, 2000 by $27 million and the aggregate of the benefits earned and interest components of 2000 net postretirement benefit expense by $3 million. Decreasing the assumed health care cost trend rate by 1% in each year would have decreased the accumulated postretirement benefit obligation as of December 31, 2000 by $25 million and the aggregate of the benefits earned and interest components of 2000 net postretirement benefit expense by $3 million. STOCK OPTION PLANS The Company participates in a number of stock option plans sponsored by Citigroup that provide for the granting of stock options in Citigroup common stock to officers and employees. Options are granted at the fair market value of Citigroup common stock at the time of grant for a period of ten years. Generally, options granted since the date of the merger vest over a five-year period. Generally, 50% of the options granted under Citicorp predecessor plans prior to the merger are exercisable beginning on the third anniversary and 50% beginning on the fourth anniversary of the date of grant. Generally, options granted under Associates predecessor plans vest over a three-year period. Certain of the plans also permit an employee exercising an option to be granted new options (reload options) in an amount equal to the number of common shares used to satisfy the exercise price and the withholding taxes due upon exercise. The reload options are granted for the remaining term of the related original option and vest after six months. To further encourage employee stock ownership, the Company's eligible employees participate in the CitiBuilder stock option program. Options granted under the CitiBuilder program vest after five years. These options do not have a reload feature. During 1998, a group of key Citicorp employees was granted 12,680,000 performance-based options at an equivalent Citigroup strike price of $24.13. At December 31, 1998 12,010,000 of these options were unvested. During 1999 12,010,000 of these options vested when Citigroup's stock price reached $40.00 per share. The cost of performance-based options is measured as the difference between the exercise price and market price required for vesting. After-tax expense recognized on these performance-based options was $68 million and $43 million in 1999 and 1998, respectively. RESTRICTED STOCK PLAN The Company participates in a restricted stock program sponsored by Citigroup that provides for the issuance of Citigroup common stock in the form of restricted stock to participating officers and employees. The restricted stock generally vests after a two- or three-year period. Except under limited circumstances, during this period the stock cannot be sold or transferred by the participant, who is required to render service during the restricted period. Certain participants may elect to receive part of their awards in restricted stock F-28 and part in stock options. Unearned compensation expense associated with the restricted stock grants represents the market value of Citigroup common stock at the date of grant and is recognized as a charge to income ratably over the vesting period. Information with respect to restricted stock awards is as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------- Shares awarded 2,360,641 230,503 434,380 Weighted average fair market value per share $35.76 $34.49 $27.62 After-tax compensation cost charged to earnings (IN $26 $16 $19 MILLIONS OF DOLLARS) - -------------------------------------------------------====================================
CITIBUILDER 401(K) Prior to 1999, under the Savings Incentive Plan, eligible Citicorp employees received awards equal to 3% of their covered salary. Employees had the option of receiving their award in cash or deferring some or all of it in various investment funds. Citicorp granted an additional award equal to the amount elected to be deferred by the employee. The after-tax expense associated with the plan amounted to $68 million in 1998. During 1999, the CitiBuilder 401(k) plan replaced the Savings Incentive Plan. Under the CitiBuilder 401(k) plan, eligible employees receive awards up to 3% of their total compensation deferred into the Citigroup common stock fund. The after-tax expense associated with this plan amounted to $29 million in 2000 and $31 million in 1999. STOCK PURCHASE PLAN The offering under the Citigroup 2000 Stock Purchase Plan allowed eligible employees of Citicorp to enter into fixed subscription agreements to purchase shares of Citigroup's common stock at the market value on the date of the agreements. Enrolled employees are permitted to make one purchase prior to the expiration date. Shares of Citigroup's common stock delivered under the 2000 Stock Purchase Plan are to be sourced from authorized and unissued shares or treasury shares. The offering under the 1997 Stock Purchase Plan allowed eligible employees of Citicorp to enter into fixed subscription agreements to purchase shares at the market value on the date of the agreements. Such shares could be purchased from time to time through the expiration date. Shares of Citigroup's common stock delivered under the 1997 Stock Purchase Plan were sourced from treasury shares. Following is the share activity under the 2000 and 1997 fixed-price offerings for the purchase of shares at the equivalent Citigroup price of $52.92 and $22.65 per share, respectively. The 1997 offering expired on June 30, 1999.
2000 1999 1998 - --------------------------------------------------------------------------------------------------- OUTSTANDING SUBSCRIBED SHARES AT BEGINNING OF YEAR - 15,090,212 20,378,760 Subscriptions 16,617,051 - - Shares purchased 1,647 13,765,639 3,447,944 Canceled or terminated 414,526 1,324,573 1,840,604 - --------------------------------------------------------------------------------------------------- OUTSTANDING SUBSCRIBED SHARES AT END OF YEAR 16,200,878 - 15,090,212 - -------------------------------------------------------============================================
PRO FORMA IMPACT OF SFAS NO. 123 The Company applies Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock-based compensation plans under which there is generally no charge to earnings for employee stock option awards (other than performance-based options). Alternatively, Financial Accounting Standards Board (FASB) rules would permit a method under which a compensation cost for all stock awards would be calculated and recognized over the service period (generally equal to the vesting period). This compensation cost would be determined in a manner prescribed by the FASB using option pricing models, intended to estimate the fair value of the awards at the grant date. Under both methods, an offsetting increase to stockholder's equity is recorded equal to the amount of compensation expense charged. F-29 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Had the Company applied SFAS No. 123 in accounting for the Company's stock option plans, compensation expense and net income would have been the pro forma amounts indicated below:
2000 1999 1998 ------------------------------------------------------------------- IN MILLIONS OF DOLLARS AS PRO FORMA As Pro As Pro REPORTED Reported Forma Reported Forma - ----------------------------------------------------------------------------------------------------- Compensation expense related to stock option plans $ - $ 387 $ 108 $ 468 $ 70 $ 318 Net income 8,110 7,860 6,571 6,324 4,239 4,021 - ----------------------------------===================================================================
The pro forma adjustments relate to stock options granted from 1995 through 2000, for which a fair value on the date of grant was determined using a Black-Scholes option pricing model. No effect has been given to options granted prior to 1995. The pro forma information above reflects the compensation expense that would have been recognized under SFAS No. 123 for Citicorp and Associates. The fair values of stock-based awards are based on assumptions that were determined at the grant date. SFAS No. 123 requires that reload options be treated as separate grants from the related original grants. Under the Company's reload program, upon exercise of an option, employees tender previously owned shares to pay the exercise price and surrender shares otherwise to be received for related tax withholding, and receive a reload option covering the same number of shares tendered for such purposes. Reload options vest at the end of a six-month period. Reload options are intended to encourage employees to exercise options at an earlier date and to retain the shares so acquired, in furtherance of the Company's long-standing policy of encouraging increased employee stock ownership. The result of this program is that employees generally will exercise options as soon as they are able and, therefore, these options have shorter expected lives. Shorter option lives result in lower valuations using a Black-Scholes option model. However, such values are expensed more quickly due to the shorter vesting period of reload options. In addition, since reload options are treated as separate grants, the existence of the reload feature results in a greater number of options being valued. Shares received through option exercises under the reload program are subject to restrictions on sale. Discounts (as measured by the estimated cost of protection) have been applied to the fair value of options granted to reflect these sale restrictions. Additional valuation and related assumption information for Citigroup option plans, and Citicorp option plans prior to the date of the Merger are presented below.
Pre-Merger POST-MERGER OPTION PLANS Option Plans - ----------------------------------------------------------------------------- ----------- FOR OPTIONS GRANTED DURING 2000 1999 1998 1998 - ----------------------------------------------------------------------------- ------------ WEIGHTED AVERAGE FAIR VALUE Options $11.04 $10.65 $7.60 $8.59 1998 performance options - - - $6.41 WEIGHTED AVERAGE EXPECTED LIFE Original grants 3 YEARS 3 years 3 years 6 years Reload grants 1 YEAR 1 year 1 year - VALUATION ASSUMPTIONS Expected volatility 42.03% 40.6% 38.8% 25.0% Risk-free interest rate 6.28% 5.48% 4.40% 5.82% Expected annual dividends per share $0.76 $0.47 $0.32 $0.58 Expected annual forfeitures 5% 5% 5% 5% - ----------------------------------------------===============================================
F-30 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. OTHER CONTRACTUAL COMMITMENTS
NOTIONAL PRINCIPAL BALANCE SHEET AMOUNTS CREDIT EXPOSURE(1)(2) ------------------------------------------- IN BILLIONS OF DOLLARS AT YEAR-END 2000 1999(3) 2000 1999 - ------------------------------------------------------------------------------------------- INTEREST RATE PRODUCTS Futures contracts $ 145.1 $ 111.1 $ - $ - Forward contracts 426.8 484.6 - 0.1 Swap agreements 1,958.8 974.0 3.6 3.4 Purchased options 230.6 120.6 1.6 0.5 Written options 232.1 146.4 - - FOREIGN EXCHANGE PRODUCTS Futures contracts 3.9 2.7 - - Forward contracts 1,497.6 1,416.1 10.4 7.4 Cross-currency swaps 206.1 102.8 2.6 3.4 Purchased options 122.3 106.5 0.9 1.0 Written options 128.3 112.1 - - EQUITY PRODUCTS 108.9 79.2 2.6 4.5 COMMODITY PRODUCTS 21.5 20.7 1.6 0.2 CREDIT DERIVATIVE PRODUCTS 68.2 50.1 0.2 0.3 --------------------- $23.5 $20.8 - ----------------------------------------------------------------------=====================
(1) There is no balance sheet credit exposure for futures contracts because they settle daily in cash, and none for written options because they represent obligations (rather than assets) of Citicorp. (2) The balance sheet credit exposure reflects $48.6 billion and $26.8 billion of master netting agreements in effect at December 31, 2000 and December 31, 1999, respectively. Master netting agreements mitigate credit risk by permitting the offset of amounts due from and to individual counterparties in the event of counterparty default. In addition, Citibank has securitized and sold net receivables, and the associated credit risk related to certain derivative and foreign exchange contracts via Markets Assets Trust, which amounted to $2.0 billion and $2.2 billion at December 31, 2000 and December 31, 1999, respectively. (3) Amounts for 1999 were reclassified to conform to the 2000 presentation. - -------------------------------------------------------------------------------- Citicorp enters into derivative and foreign exchange futures, forwards, options, and swaps, which enable customers to transfer, modify, or reduce their interest rate, foreign exchange, and other market risks, and also trades these products for its own account. In addition, Citicorp uses derivatives and other instruments, primarily interest rate products, as an end-user in connection with its risk management activities. Derivatives are used to manage interest rate risk relating to specific groups of on-balance sheet assets and liabilities, including commercial and consumer loans, deposit liabilities, long-term debt, and other interest-sensitive assets and liabilities, as well as credit card securitizations. In addition, foreign exchange contracts are used to hedge non-U.S. dollar denominated debt, net capital exposures and foreign exchange transactions. Through the effective use of derivatives, Citicorp has been able to modify the volatility of its revenue from asset and liability positions. The preceding table presents the aggregate notional principal amounts of Citicorp's outstanding derivative and foreign exchange contracts at December 31, 2000 and 1999, along with the related balance sheet credit exposure. The table includes all contracts with third parties, including both trading and end-user positions. Futures and forward contracts are commitments to buy or sell at a future date a financial instrument, commodity, or currency at a contracted price, and may be settled in cash or through delivery. Swap contracts are commitments to settle in cash at a future date or dates, which may range from a few days to a number of years, based on differentials between specified financial indices, as applied to a notional principal amount. Option contracts give the purchaser, for a fee, the right, but not the obligation, to buy or sell within a limited time a financial instrument or currency at a contracted price that may also be settled in cash, based on differentials between specified indices. Market risk on a derivative or foreign exchange product is the exposure created by potential fluctuations in interest rates, foreign exchange rates, and other values, and is a function of the type of product, the volume of transactions, the tenor and terms of the agreement, and the underlying volatility. Credit risk is the exposure to loss in the event of nonperformance by the other party to the transaction. The recognition in earnings of unrealized gains on these transactions is subject to management's assessment as to collectibility. Liquidity risk is the potential exposure that arises when the size of the derivative position may not be able to be rapidly adjusted in times of high volatility and financial stress at a reasonable cost. F-31 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS END-USER INTEREST RATE, FOREIGN EXCHANGE AND CREDIT DERIVATIVE CONTRACTS
NOTIONAL PRINCIPAL AMOUNTS (1) PERCENTAGE OF 2000 AMOUNT MATURING ----------------------------------------------------------------------- DEC. Dec. Within 1 to 2 to 3 to 4 to After 31, 31, 1 Year 2 Years 3 4 5 5 IN BILLIONS OF DOLLARS 2000 1999 Years Years Years Years - --------------------------------------------------------------------------------------------------------- INTEREST RATE PRODUCTS Futures contracts $ 1.8 $ 7.5 100% - % - % - % - % - % Forward contracts 3.0 3.8 100 - - - - - Swap agreements 82.0 98.9 21 16 14 10 11 28 Option contracts 13.6 7.0 17 24 2 - 50 7 FOREIGN EXCHANGE PRODUCTS Futures and forward contracts 59.1 51.0 99 1 - - - - Cross-currency swaps 10.5 10.5 55 19 20 1 - 5 CREDIT DERIVATIVE PRODUCTS 30.8 29.2 2 6 5 13 13 61 - ----------------------------------=======================================================================
(1) Includes third party and intercompany contracts. - -------------------------------------------------------------------------------- END-USER INTEREST RATE SWAPS AND NET PURCHASED OPTIONS AS OF DECEMBER 31, 2000
REMAINING CONTRACTS OUTSTANDING - NOTIONAL PRINCIPAL AMOUNTS ------------------------------------------------------------ IN BILLIONS OF DOLLARS AT YEAR-END 2000 2001 2002 2003 2004 2005 - ---------------------------------------------------------------------------------------------------------- RECEIVE FIXED SWAPS $45.7 $39.8 $34.5 $26.3 $20.2 $15.4 Weighted-average fixed rate 6.3% 6.3% 6.3% 6.4% 6.5% 6.6% PAY FIXED SWAPS 17.8 14.3 8.8 6.6 5.4 3.0 WEIGHTED-AVERAGE FIXED RATE 5.0% 4.7% 4.2% 4.2% 4.5% 6.7% BASIS SWAPS 18.5 10.3 8.3 7.5 6.8 4.5 PURCHASED CAPS (INCLUDING COLLARS) 1.5 1.5 - - - - WEIGHTED-AVERAGE CAP RATE PURCHASED 8.9% 8.9% - - - - PURCHASED FLOORS 9.8 7.7 6.4 6.4 6.4 0.5 Weighted-average floor rate purchased 5.1% 5.3% 6.1% 6.1% 6.1% 6.1% WRITTEN CAPS RELATED TO OTHER PURCHASED CAPS 2.3 2.1 1.7 1.4 1.4 0.5 (1) WEIGHTED-AVERAGE CAP RATE WRITTEN 9.8% 9.8% 10.6% 10.7% 10.7% 10.8% - ---------------------------------------------------------------------------------------------------------- THREE-MONTH FORWARD LIBOR RATES (2) 6.4% 5.5% 5.9% 6.0% 6.2% 6.4% - ----------------------------------------------============================================================
(1) Includes written options related to purchased options embedded in other financial instruments. (2) Represents the implied forward yield curve for three-month LIBOR as of December 31, 2000, provided for reference. - -------------------------------------------------------------------------------- The tables above provide data on the notional principal amounts and maturities of end-user (non-trading) derivatives, along with additional data on end-user interest rate swaps and net purchased option positions at year-end 2000, with three-month LIBOR forward rates included for reference. The tables are intended to provide an overview of these components of the end-user portfolio, but should be viewed only in the context of Citicorp's related assets and liabilities. Contract maturities are related to the underlying risk management strategy. The majority of derivative positions used in Citicorp's asset and liability management activities are established via intercompany transactions with independently managed Citigroup dealer units, with the dealer acting as a conduit to the marketplace. Citicorp's utilization of these instruments is modified from time to time in response to changing market conditions as well as changes in the characteristics and mix of the related assets and liabilities. In this connection, during 2000, interest rate futures, swaps and options with a notional principal amount of $55.5 billion were closed out which resulted in a net deferred gain of approximately $80 million. Total unamortized net deferred gains, including those from prior year close-outs, were approximately $104 million at December 31, 2000, which will be amortized into earnings over the remaining life of the original contracts (approximately 22% in 2001, 20% in 2002, and 58% in subsequent years), consistent with the risk management strategy. F-32 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. RELATED PARTY BALANCES The Company has related party balances with Citigroup and certain of its subsidiaries and affiliates. These balances, which are short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative trading, charges for operational support and the borrowing and lending of funds and are entered into in the ordinary course of business. 20. CONCENTRATIONS OF CREDIT RISK Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to Citicorp's total credit exposure. Although Citicorp's portfolio of financial instruments is broadly diversified along industry, product, and geographic lines, material transactions are completed with other financial institutions, particularly in the securities trading, derivative, and foreign exchange businesses. Additionally, U.S. credit card receivables represent an area of significant credit exposure. 21. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The table below presents the carrying value and fair value of Citicorp's financial instruments, as defined in accordance with applicable requirements. Accordingly, as required, the disclosures exclude leases, affiliate investments, and pension and benefit obligations. Also as required, the disclosures exclude the effect of taxes, do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, the excess fair value associated with deposits with no fixed maturity, as well as other expenses that would be incurred in a market transaction. In addition, the table excludes the values of nonfinancial assets and liabilities, as well as a wide range of franchise, relationship, and intangible values, which are integral to a full assessment of Citicorp's financial position and the value of its net assets. The data represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used for most investments, for loans where available, and for both trading and end-user derivative and foreign exchange contracts, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans where no quoted market prices are available, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and a premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities such as long-term debt without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows. F-33 Fair values of credit card securitizations reflect the various components of these transactions but principally arise from fixed rates payable to certificate holders. Under the applicable requirements, the estimated fair value of deposits with no fixed maturity in the following table excludes the premium values available in the market for such deposits, and the estimated value is shown in the table as being equal to the carrying value.
2000 1999 --------------------------------------------- ESTIMATED Estimated CARRYING FAIR Carrying Fair IN BILLIONS OF DOLLARS AT YEAR-END VALUE VALUE Value Value - --------------------------------------------------------------------------------------------- ASSETS AND RELATED INSTRUMENTS Securities $ 57.7 $ 57.7 $ 55.5 $ 55.5 Trading account assets 39.3 39.3 30.9 30.9 Loans (1) 337.6 354.0 295.2 308.7 Related derivatives 0.2 0.2 0.2 (0.3) Other financial assets (2) 63.5 63.5 47.7 47.7 Credit card securitizations - 0.3 - 0.8 Related derivatives 0.3 0.4 - (0.2) - --------------------------------------------------------------------------------------------- LIABILITIES AND RELATED INSTRUMENTS Deposits 302.7 302.7 261.2 261.0 Related derivatives - - (0.2) (0.1) Trading account liabilities 27.8 27.8 26.8 26.8 Long-term debt 80.3 80.7 67.8 67.4 Related derivatives (0.1) (0.1) (0.1) 0.5 Other financial liabilities (3) 77.3 77.1 66.5 66.4 Related derivatives - (0.1) - - - ------------------------------------------------=============================================
(1) The carrying value of loans is net of the allowance for credit losses and also excludes $20.0 billion and $12.1 billion of lease finance receivables in 2000 and 1999, respectively. (2) Includes cash and due from banks, deposits at interest with banks, federal funds sold and securities purchased under resale agreements, and customers' acceptance liability for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of loans held for sale, interest and fees receivable, and financial instruments included in other assets on the Consolidated Balance Sheets. (3) Includes acceptances outstanding, for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of purchased funds and other borrowings, financial instruments included in accrued taxes and other expense, and other liabilities on the Consolidated Balance Sheets. - -------------------------------------------------------------------------------- Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value, and as existing assets and liabilities run off and new items are entered into. The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The estimated fair values of Citicorp's loans, in the aggregate, exceeded carrying values (reduced by the allowance for credit losses) by $16.4 billion at year-end 2000 and $13.5 billion in 1999. Within these totals, estimated fair values exceeded carrying values for consumer loans net of the allowance by $12.8 billion, an increase of $2.7 billion from year-end 1999, and for commercial loans net of the allowance by $3.6 billion, which was an increase of $0.2 billion from year-end 1999. The increase in estimated fair values in excess of carrying values of consumer loans is primarily due to the lower interest rate environment. The estimated fair value of credit card securitizations was $0.3 billion more than their carrying value at December 31, 2000, which is $0.5 billion less than December 31, 1999, when the carrying value exceeded the estimated fair value by $0.8 billion. This decrease is due to the effects of a lower interest rate environment on the fixed-rate investor certificates. For all derivative and foreign exchange contracts in the previous tables, the gross difference between the fair value and carrying amount as of December 31, 2000 and 1999 was $0.7 billion and $0.4 billion for contracts whose fair value exceeds carrying value, and $0.5 billion and $1.8 billion at December 31, 2000 and 1999, respectively, for contracts whose carrying value exceeds fair value. F-34 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22. PLEDGED ASSETS, COLLATERAL AND COMMITMENTS PLEDGED ASSETS At December 31, 2000, certain investment securities, trading account assets, and other assets with a carrying value of $50.3 billion were pledged as collateral, of which $47.5 billion may not be sold or repledged by the secured parties, for borrowings to secure public and trust deposits, and for other purposes. COLLATERAL At December 31, 2000, the approximate market value of collateral received by the Company that may be sold or repledged by the Company was $2.7 billion. This collateral was received in connection with resale agreements and derivative transactions. At December 31, 2000, $1.2 billion of the collateral received by the Company had been sold or repledged in connection with repurchase agreements, securities sold, not yet purchased, and derivative transactions. LOAN COMMITMENTS
IN BILLIONS OF DOLLARS AT YEAR-END 2000 1999 - ------------------------------------------------------------------------------------------- Unused commercial commitments to make or purchase loans, to purchase third-party $207.6 $181.6 receivables, and to provide note issuance or revolving underwriting facilities Unused credit card and other consumer revolving commitments 353.5 311.4 - ------------------------------------------------------------------=========================
The majority of unused commitments are contingent upon customers maintaining specific credit standards. Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if exercise is deemed remote, amortized over the commitment period. The table does not include commercial letters of credit issued on behalf of customers and collateralized by the underlying shipment of goods which totaled $6.8 billion and $5.3 billion at December 31, 2000 and 1999, respectively. LOANS SOLD WITH CREDIT ENHANCEMENTS
AMOUNTS IN BILLIONS OF DOLLARS AT --------------- YEAR-END 2000 1999 FORM OF CREDIT ENHANCEMENT - ------------------------------------------------------------------------------------------- Residential mortgages 2000: Recourse obligation $5.1, and put and other loans options as described below. sold with recourse (1) $10.4 $ 9.7 1999: Recourse obligation of $3.4, and put options as described below. GNMA sales/servicing 16.1 19.3 Secondary recourse obligation agreements (2) Includes net revenue over the life of the transaction. Also includes put options as described below for 1999, Securitized credit card 57.0 58.4 and other recourse obligations of $1.0 in receivables 2000 and $2.0 in 1999. - -------------------------------------------------------------------------------------------
(1) Residential mortgages represent 71% of amounts in 2000 and 91% in 1999. (2) Government National Mortgage Association sales/servicing agreements covering securitized residential mortgages. - -------------------------------------------------------------------------------- Citicorp and its subsidiaries are obligated under various credit enhancements related to certain sales of loans or sales of participations in pools of loans, as summarized above. Net revenue on securitized credit card receivables is collected over the life of each sale transaction. The net revenue is based upon the sum of finance charges and fees received from cardholders and interchange revenue earned on cardholder transactions, less the sum of the yield paid to investors, credit losses, transaction costs, and a contractual servicing fee, which is also retained by certain Citicorp subsidiaries as servicers. As specified in certain of the sale agreements, the net revenue collected each month is accumulated, up to a predetermined maximum amount, and is available over the remaining term of that transaction to make payments of yield, fees, and transaction costs in the event that net cash flows from the receivables are not sufficient. When the predetermined amount is reached, net revenue is passed directly to the Citicorp subsidiary that sold the receivables. The amount contained in these accounts is included in other assets and was $66 million at December 31, 2000 and $60 million at December 31, 1999. Net revenue from securitized credit card receivables included in other revenue was $2.4 billion, $2.1 billion, and $1.5 billion for the years ended December 31, 2000, 1999, and 1998, respectively. F-35 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Various put options were written during 2000 and 1999 which require Citicorp to purchase, upon request of the holders, securities issued in certain securitization transactions in order to broaden the investor base and improve execution in connection with the securitizations. These put options at year end 2000 include: a put option, exercisable in October of each year beginning in October 2000, with respect to an aggregate of up to approximately $2 billion principal amount of certificates backed by manufactured housing contract receivables, of which approximately $133 million was exercised in 2000; a put option, exercisable at any time after June 15, 2000, with respect to an aggregate of up to approximately $1 billion principal amount of notes secured by home equity loan receivables only to the extent the securitization trust cannot meet its obligation under a separate put option by the trust which is exercisable at any time after March 15, 2000; and a put option, originally exercisable at any time after September 15, 2000, the exercise of which has been extended to April 12, 2001, with respect to an aggregate of up to approximately $1.25 billion of notes secured by home equity loan receivables only to the extent the notes are not purchased by the securitization trust pursuant to a separate put option issued by the trust and exercisable at any time after June 15, 2000. In each case, if exercised, the Company will be obligated to purchase the certificates or notes at par plus accrued interest. The aggregate amortized amount of these options was approximately $3.4 billion at December 31, 2000. Two option contracts from 1999 that were exercised in 2000 were the following: a put option, exercisable any time after February 17, 2000, with respect to an aggregate of up to $500 million principal amounts of certificates backed by credit card receivables; and a put option, exercisable at any time after June 15, 2000, with respect to an aggregate of up to approximately $1 billion of notes secured by home equity loan receivables only to the extent the notes are not purchased by the securitization trust pursuant to a separate put option issued by the trust and exercisable at any time after March 15, 2000. The Company recorded liabilities totaling approximately $17 million at December 31, 2000 and $23 million at December 31, 1999 in connection with these options. Subsequent to their initial issuance, such options are marked to market with the fluctuation being reflected in the statements of income. STANDBY LETTERS OF CREDIT
2000 1999 ------------------------------------------------------- EXPIRE EXPIRE TOTAL Total IN BILLIONS OF DOLLARS AT YEAR-END WITHIN 1 AFTER 1 AMOUNT Amount YEAR YEAR OUTSTANDING Outstanding - ------------------------------------------------------------------------------------------------------- FINANCIAL Insurance, surety $ 1.9 $ 6.1 $ 8.0 $ 7.0 Options, purchased securities, and escrow 0.3 - 0.3 0.7 Clean payment 3.4 1.1 4.5 3.3 Backstop state, county, and municipal - 0.1 0.1 0.3 securities Other debt related 6.7 3.5 10.2 8.8 PERFORMANCE 4.4 2.0 6.4 5.6 ------------------------------------------------------- TOTAL (1) $16.7 $12.8 $29.5 $25.7 - -------------------------------------------------------------------------------------------------------
(1) Total is net of cash collateral of $2.3 billion in 2000 and $2.8 billion in 1999. Collateral other than cash covered 19% of the total in 2000 and 17% in 1999. - -------------------------------------------------------------------------------- Standby letters of credit, summarized above, are used in various transactions to enhance the credit standing of Citibank customers. They represent irrevocable assurances that Citibank will make payment in the event that the customer fails to fulfill its obligations to third parties. Financial standby letters of credit are obligations to pay a third-party beneficiary when a customer fails to repay an outstanding loan or debt instrument, such as assuring payments by a foreign reinsurer to a U.S. insurer, to act as a substitute for an escrow account, to provide a payment mechanism for a customer's third-party obligations, and to assure payment of specified financial obligations of a customer. Performance standby letters of credit are obligations to pay a third-party beneficiary when a customer fails to perform a nonfinancial contractual obligation, such as to ensure contract performance or irrevocably assure payment by the customer under supply, service and maintenance contracts or construction projects. Fees are recognized ratably over the term of the standby letter of credit. The table does not include securities lending indemnifications issued to customers, which are fully collateralized and totaled $12.5 billion at December 31, 2000 and $23.0 billion at December 31, 1999. LEASE COMMITMENTS Citicorp and its subsidiaries are obligated under a number of non-cancelable leases for premises and equipment. Minimum rental commitments on non-cancelable leases in the aggregate were $4.8 billion, and for each of the five years subsequent to December 31, 2000 were $764 million (2001), $652 million (2002), $557 million (2003), $448 million (2004), and $479 million (2005). The minimum rental commitments do not include minimum sublease rentals under non-cancelable subleases of $132 million. Most of the leases have renewal or purchase options and escalation clauses. Rental expense was $996 million in 2000, excluding $52 million of F-36 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS sublease rental income, $945 million in 1999, excluding $54 million of sublease rental income, and $835 million in 1998, excluding $57 million of sublease rental income. 23. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS ASSOCIATES FIRST CAPITAL CORPORATION (ASSOCIATES) In connection with Citigroup's November 30, 2000 acquisition of Associates in which Associates became a wholly-owned subsidiary of Citicorp, Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America, a subsidiary of Associates (ACONA). Associates' and ACONA's debt securities and commercial paper will no longer be separately rated. Associates maintains a combination of unutilized bilateral and syndicated credit facilities to support its short-term borrowings. These facilities, which have maturities ranging from 2001 through 2005, provide a means of managing liquidity and ensure that funds are always available to satisfy maturing short-term obligations. At December 31, 2000, these facilities provided coverage of approximately 75% of Associates' commercial paper borrowings and utilized uncommitted lines of credit. Citicorp's guarantee of various debt obligations of Associates include those arising under these facilities. Under these facilities, Citicorp is required to maintain a certain level of consolidated stockholder's equity. At December 31, 2000, this requirement was exceeded by $32.6 billion. CITIFINANCIAL CREDIT COMPANY (CCC) On August 4, 1999, CCC, an indirect wholly-owned subsidiary of Citigroup, was contributed to and became a subsidiary of Citicorp Banking Corporation, a wholly-owned subsidiary of Citicorp. Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of CCC. CCC has five-year revolving credit facilities in the amount of $3.4 billion that expire in 2002. Citicorp's guarantee of various debt obligations of CCC include those arising under these facilities. Under these facilities, Citicorp is required to maintain a certain level of consolidated stockholder's equity (as defined in the agreement). At December 31, 2000, this requirement was exceeded by approximately $32.6 billion. At December 31, 2000, there were no borrowings outstanding under these facilities. F-37 CONDENSED CONSOLIDATING INCOME STATEMENTS
Year Ended December 31, 2000 - -------------------------------------------------------------------------------------------------------------- CITICORP PARENT ASSOCIATES IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED - -------------------------------------------------------------------------------------------------------------- REVENUE Dividends from subsidiary banks and bank holding companies $ 1,615 $ -- $ -- $ -- Dividends from other subsidiaries 215 -- -- -- Interest from subsidiaries 1,326 -- -- -- Interest on loans, including fees -- 2,645 10,383 10,468 Other interest revenue -- 174 463 467 Fees, commissions and other revenues 362 430 3,186 2,933 ------------------------------------------------------------------- 3,518 3,249 14,032 13,868 ------------------------------------------------------------------- EXPENSE Interest on other borrowed funds-third party 432 4 1,391 1,474 Interest on other borrowed funds - intercompany -- 755 -- -- Interest and fees paid to subsidiaries 246 -- -- -- Interest on long-term debt-third party 1,240 370 2,542 2,626 Interest on long-term debt-intercompany -- 164 -- 35 Interest on deposits -- 9 -- 28 Provision for credit losses -- 409 2,552 2,613 Other expense 8 870 5,333 5,712 ------------------------------------------------------------------- 1,926 2,581 11,818 12,488 ------------------------------------------------------------------- INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 1,592 668 2,214 1,380 Income tax (benefit) - current (68) 244 841 544 Equity in undistributed income of subsidiaries 6,450 -- -- -- ------------------------------------------------------------------- NET INCOME $ 8,110 $ 424 $ 1,373 $ 836 - -------------------------------------------===================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaties and the elimination of ACONA, included in the Associates Consolidated column. CONDENSED CONSOLIDATING INCOME STATEMENTS
Year Ended December 31, 2000 - -------------------------------------------------------------------------------------------------------------------------- OTHER CITICORP SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - -------------------------------------------------------------------------------------------------------------------------- REVENUE Dividends from subsidiary banks and bank holding companies $ -- ($ 1,615) $ -- Dividends from other subsidiaries -- (215) -- Interest from subsidiaries -- (1,326) -- Interest on loans, including fees 24,113 (10,383) 37,226 Other interest revenue 6,342 (463) 6,983 Fees, commissions and other revenues 16,569 (3,186) 20,294 ------------------------------------------------------------------ 45,698 (15,862) 64,503 ------------------------------------------------------------------ EXPENSE Interest on other borrowed funds-third party 2,133 (1,391) 4,043 Interest on borrowed fund - intercompany (755) -- -- Interest and fees paid to subsidiaries (246) -- -- Interest on long-term debt-third party 443 (2,542) 4,679 Interest on long-term debt - intercompany (199) -- -- Interest on deposits 13,286 -- 13,323 Provision for credit losses 2,317 (2,552) 5,339 Other expense 17,653 (5,333) 24,243 ------------------------------------------------------------------ 34,632 (11,818) 51,627 ------------------------------------------------------------------ INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 11,066 (4,044) 12,876 Income tax (benefit) - current 4,046 (841) 4,766 Equity in undistributed income of subsidiaries -- (6,450) -- ------------------------------------------------------------------ NET INCOME $ 7,020 ($ 9,653) $ 8,110 - -----------------------------------------------------==================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of ACONA, included in the Associates Consolidated column. F-38
Year Ended December 31, 1999 - ------------------------------------------------------------------------------------------------------------ CITICORP PARENT ASSOCIATES IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED - ------------------------------------------------------------------------------------------------------------ REVENUE Dividends from subsidiary banks and bank holding companies $ 4,310 $ - $ - $ - Dividends from other subsidiaries 197 - - - Interest from subsidiaries 887 - - - Interest on loans, including fees - 2,187 9,612 9,850 Other interest revenue - 76 220 243 Fees, commissions and other revenues 268 357 2,235 2,302 -------------------------------------------------------------- 5,662 2,620 12,067 12,395 -------------------------------------------------------------- EXPENSE Interest on other borrowed funds-third party 127 106 974 1,328 Interest on borrowed fund - intercompany -- 342 -- -- Interest and fees paid to subsidiaries 212 -- -- Interest on long-term debt-third party 879 426 2,422 2,542 Interest on long-term debt - intercompany - 10 -- -- Interest on deposits - 5 -- 36 Provision for credit losses - 358 1,793 1,923 Other expense 8 749 4,119 4,359 -------------------------------------------------------------- 1,226 1,996 9,308 10,188 -------------------------------------------------------------- INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 4,436 624 2,759 2,207 Income tax (benefit) - current (5) 227 1,025 827 Equity in undistributed income of subsidiaries 2,130 -- -- -- -------------------------------------------------------------- NET INCOME $ 6,571 $ 397 $ 1,734 $ 1,380 - --------------------------------------------==============================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of ACONA, included in the Associates Consolidated column.
YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------------ OTHER CITICORP SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------ REVENUE Dividends from subsidiary banks and bank holding companies $ - ($ 4,310) $ - Dividends from other subsidiaries - (197) - Interest from subsidiaries (887) - - Interest on loans, including fees 20,736 (9,612) 32,773 Other interest revenue 6,239 (220) 6,558 Fees, commissions and other revenues 12,981 (2,235) 15,908 ------------------------------------------------------------------ 39,069 (16,574) 55,239 ------------------------------------------------------------------ EXPENSE Interest on other borrowed funds-third party 1,839 (974) 3,400 Interest on borrowed fund - intercompany (342) - - Interest and fees paid to subsidiaries (212) - - Interest on long-term debt-third party 548 (2,422) 4,395 Interest on long-term debt - intercompany (10) - - Interest on deposits 10,770 - 10,811 Provision for credit losses 2,479 (1,793) 4,760 Other expense 16,261 (4,119) 21,377 ------------------------------------------------------------------ 31,333 (9,308) 44,743 ------------------------------------------------------------------ INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 7,736 (7,266) 10,496 Income tax (benefit) - current 2,876 (1,025) 3,925 Equity in undistributed income of subsidiaries - (2,130) - ------------------------------------------------------------------ NET INCOME $ 4,860 ($ 8,371) $ 6,571 - -----------------------------------------------------==================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of ACONA, included in the Associates Consolidated column. F-39
Year Ended December 31, 1998 - ---------------------------------------------------------------------------------------------------------------------------------- CITICORP PARENT ASSOCIATES IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------------------- REVENUE Dividends from subsidiary banks and bank holding companies $ 1,475 $ - $ - $ - Dividends from other subsidiaries 478 - - - Interest from subsidiaries 871 - - - Interest on loans, including fees 1,744 7,780 8,216 Other interest revenue - 65 70 81 Fees, commissions and other revenues 116 327 1,377 1,197 ---------------------------------------------------------------------------------- 2,940 2,136 9,227 9,494 ---------------------------------------------------------------------------------- EXPENSE Interest on other borrowed funds 108 253 1,095 1,172 Interest and fees paid to subsidiaries 245 - - - Interest on long-term debt 901 447 1,953 1,976 Interest on deposits - 8 - 49 Provision for credit losses - 370 1,455 1,510 Other expense 52 611 2,781 2,971 ---------------------------------------------------------------------------------- 1,306 1,689 7,284 7,678 ---------------------------------------------------------------------------------- INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 1,634 447 1,943 1,816 Income tax (benefit) - current (69) 161 714 673 Equity in undistributed income of subsidiaries 2,536 - - - ---------------------------------------------------------------------------------- NET INCOME $ 4,239 $ 286 $ 1,229 $ 1,143 - ------------------------------------------------==================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of ACONA, included in the Associates Consolidated column.
YEAR ENDED DECEMBER 31, 1998 - -------------------------------------------------------------------------------------------------------- OTHER CITICORP SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------- REVENUE Dividends from subsidiary banks and bank holding companies $ - ($ 1,475) $ Dividends from other subsidiaries - (478) - Interest from subsidiaries (871) - - Interest on loans, including fees 20,801 (7,780) 30,761 Other interest revenue 6,363 (70) 6,509 Fees, commissions and other revenues 10,933 (1,377) 12,573 -------------------------------------------------------- 37,226 (11,180) 49,843 -------------------------------------------------------- EXPENSE Interest on other borrowed funds 2,054 (1,095) 3,587 Interest and fees paid to subsidiaries (245) - - Interest on long-term debt 397 (1,953) 3,721 Interest on deposits 11,503 - 11,560 Provision for credit losses 2,381 (1,455) 4,261 Other expense 16,348 (2,781) 19,982 -------------------------------------------------------- 32,438 (7,284) 43,111 -------------------------------------------------------- INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 4,788 (3,396) 6,732 Income tax (benefit) - current 1,728 (714) 2,493 Equity in undistributed income of subsidiaries - (2,536) - -------------------------------------------------------- NET INCOME $ 3,060 ($ 5,718) $ 4,239 - -----------------------------------------------========================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of distributed and undistributed income of subsidiaries and the elimination of ACONA, included in the Associates Consolidated column. F-40 Condensed Consolidating Balance Sheets December 31, 2000
- ----------------------------------------------------------------------------------------------------------------------------- CITICORP PARENT ASSOCIATES IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks - third party $ 3 $ 198 $ 1,403 $ 1,641 Cash and due from banks - intercompany 25 34 - - Deposits at interest with banks - third party 76 3 254 254 Deposits at interest with banks - intercompany 1,214 - - - Securities 768 1,685 4,828 5,490 Loans, net of unearned income 1,868 21,089 75,584 77,408 Allowance for credit losses - (448) (2,322) (2,367) --------------------------------------------------------------------------------- Loans, net 1,868 20,641 73,262 75,041 Advances to subsidiaries 29,205 - 7,317 - Investments in subsidiaries 42,855 - - - Other assets 630 3,386 12,272 14,312 --------------------------------------------------------------------------------- Total $76,644 $ 25,947 $ 99,336 $ 96,738 ================================================================================= LIABILITIES AND STOCKHOLDER'S EQUITY Deposits $ - $ 247 $ 1 $ 331 Purchased funds and other borrowings - third party 9,022 54 31,587 31,624 Purchased funds and other borrowings - intercompany - 13,416 - - Long-term debt - third party 18,805 4,950 42,832 43,492 Long-term debt - intercompany - 3,985 - 8,250 Advances from subsidiaries 375 - - - Other liabilities - third party 577 1,609 6,781 7,095 Other liabilities - intercompany - 150 6,515 - Stockholder's equity 47,865 1,536 11,620 5,946 --------------------------------------------------------------------------------- Total $76,644 $ 25,947 $ 99,336 $ 96,738 =================================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of investments in subsidiaries and the elimination of ACONA, included in the Associates Consolidated column.
DECEMBER 31, 2000 - -------------------------------------------------------------------------------------------------------------- OTHER CITICORP SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks - third party $ 9,816 ($ 1,403) $ 11,658 Cash and due from banks - intercompany (59) - - Deposits at interest with banks - third party 15,827 (254) 16,160 Deposits at interest with banks - intercompany (1,214) - - Securities 49,719 (4,828) 57,662 Loans, net of unearned income 266,223 (75,584) 366,588 Allowance for credit losses (6,146) 2,322 (8,961) ------------------------------------------------------------- Loans, net 260,077 (73,262) 357,627 Advances to subsidiaries (29,205) (7,317) - Investments in subsidiaries - (42,855) - Other assets 90,172 (12,272) 108,500 ------------------------------------------------------------- Total $ 395,133 ($142,191) $ 551,607 ============================================================= LIABILITIES AND STOCKHOLDER'S EQUITY Deposits $ 302,137 ($ 1) $ 302,715 Purchased funds and other borrowings - third party 20,134 (31,587) 60,834 Purchased funds and other borrowings - intercompany (13,416) - - Long-term debt - third party 13,088 (42,832) 80,335 Long-term debt - intercompany (12,235) - - Advances from subsidiaries (375) - - Other liabilities - third party 50,577 (6,781) 59,858 Other liabilities - intercompany (150) (6,515) - Stockholder's equity 35,373 (54,475) 47,865 ------------------------------------------------------------- Total $ 395,133 ($142,191) $ 551,607 =============================================================
F-41 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- CITICORP PARENT ASSOCIATES IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks - third party $ 3 $ 318 $ 604 $ 492 Cash and due from banks - intercompany 104 - - - Deposits at interest with banks - third party 16 - 165 165 Deposits at interest with banks - intercompany 1,003 - - - Securities 2,195 1,429 4,120 4,748 Loans, net of unearned income 725 17,573 67,037 70,723 Allowance for credit losses - (433) (2,055) (2,174) ------------------------------------------------------------------------------- Loans, net 725 17,140 64,982 68,549 Advances to subsidiaries 15,007 - - - Investments in subsidiaries 39,339 - - - Other assets 562 1,632 8,875 9,566 ------------------------------------------------------------------------------- Total $ 58,954 $ 20,519 $ 78,746 $ 83,520 =============================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Deposits $ - $ 465 $ 3 $ 482 Purchased funds and other borrowings - third party 6,084 67 17,598 27,253 Purchased funds and other borrowings - intercompany - 9,764 - - Long-term debt - third party 15,830 5,700 39,960 41,404 Long-term debt - intercompany - 1,950 - - Advances from subsidiaries 128 - - - Other liabilities - third party 1,437 1,456 6,273 4,935 Other liabilities - intercompany - 49 1,832 - Stockholder's equity 35,475 1,068 13,080 9,446 ------------------------------------------------------------------------------- Total $ 58,954 $ 20,519 $ 78,746 $ 83,520 ===============================================================================
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company elimination of investments in subsidiaries and the elimination of ACONA, included in the Associates Consolidated column.
DECEMBER 31, 1999 - -------------------------------------------------------------------------------------------------------------- OTHER CITICORP SUBSIDIARIES AND CONSOLIDATING CITICORP IN MILLIONS OF DOLLARS ELIMINATIONS (1) ADJUSTMENTS (2) CONSOLIDATED - ------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks - third party $ 11,064 ($ 604) $ 11,877 Cash and due from banks - intercompany (104) - - Deposits at interest with banks - third party 12,079 (165) 12,260 Deposits at interest with banks - intercompany (1,003) - - Securities 47,116 (4,120) 55,488 Loans, net of unearned income 227,127 (67,037) 316,148 Allowance for credit losses (6,246) 2,055 (8,853) ------------------------------------------------------------- Loans, net 220,881 (64,982) 307,295 Advances to subsidiaries (15,007) - - Investments in subsidiaries - (39,339) - Other assets 72,766 (8,875) 84,526 ------------------------------------------------------------- Total $ 347,792 ($118,085) $ 471,446 ============================================================= LIABILITIES AND STOCKHOLDER'S EQUITY Deposits $ 260,248 ($ 3) $ 261,195 Purchased funds and other borrowings - third party 18,945 (17,598) 52,349 Purchased funds and other borrowings - intercompany (9,764) - - Long-term debt - third party 4,898 (39,960) 67,832 Long-term debt - intercompany (1,950) - - Advances from subsidiaries (128) - - Other liabilities - third party 46,767 (6,273) 54,595 Other liabilities - intercompany (49) (1,832) - Stockholder's equity 28,825 (52,419) 35,475 ------------------------------------------------------------- Total $ 347,792 ($118,085) $ 471,446 - ------------------------------------------------===============================================================
F-42
CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 2000 - ----------------------------------------------------------------------------------------------------------------------------- CITICORP PARENT ASSOCIATES IN MILLIONS OF DOLLARS COMPANY CCC ACONA CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 613 $ (663) $ 5,976 $ 2,371 - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Securities - available for sale Purchases (553) (814) (1,002) (999) Proceeds from sales 1,980 575 783 803 Maturities - 14 261 297 Changes in investments and advances - intercompany (10,216) - (7,317) - Net (increase) decrease in loans (1,143) (3,911) (12,837) (12,846) Proceeds from sales of loans - - 3,695 3,695 Business acquisitions - - (642) (811) Other investing activities (271) 7 (291) (325) ---------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (10,203) (4,129) (17,350) (10,186) - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in deposits - (218) (2) (151) Net change in purchased funds and other borrowings - third party 1,645 (13) 13,468 3,848 Net change in purchased funds, other borrowings and advances - intercompany 229 3,652 - - Proceeds from issuance of long-term debt - third party 4,900 - 13,229 13,533 Repayment of long-term debt - third party (1,829) (750) (11,639) (12,297) Proceeds from issuance of long-term debt - intercompany - 2,035 - 4,250 Dividends paid (1,254) - (3,076) (188) Contributions from parent company 5,820 - 224 - ---------------------------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 9,511 4,706 12,204 8,995 - ----------------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS - - (31) (31) ---------------------------------------------------------------------------------- Net (decrease) increase in cash and due from banks (79) (86) 799 1,149 Cash and due from banks at beginning of year 107 318 604 492 ---------------------------------------------------------------------------------- CASH AND DUE FROM BANKS AT END OF YEAR $ 28 $ 232 $ 1,403 $ 1,641 - ----------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 869 $ 1,219 $ 4,010 $ 4,240 Income taxes 1,618 196 432 255 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets - 141 457 457 NON-CASH FINANCING ACTIVITIES: Dividends 4,000 - - 4,000 Contributions from parent company 4,182 - - - - -----------------------------------------------------------------------------------------------------------------------------
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company eliminations and the elimination of ACONA, included in the Associates consolidated column.
CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 2000 - -------------------------------------------------------------------------------------------------------- Other Citicorp Subsidiaries and Consolidating Citicorp IN MILLIONS OF DOLLARS Eliminations (1) Adjustments (2) Consolidated - -------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ($ 7,452) ($ 5,976) ($ 5,131) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Securities - available for sale Purchases (66,888) 1,002 (69,254) Proceeds from sales 37,518 (783) 40,876 Maturities 27,913 (261) 28,224 Changes in investments and advances -intercompany 10,216 7,317 - Net (increase) decrease in loans (63,432) 12,837 (81,332) Proceeds from sales of loans 28,916 (3,695) 32,611 Business acquisitions (3,634) 642 (4,445) Other investing activities (2,937) 291 (3,526) ----------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (32,328) 17,350 (56,846) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net (decrease) increase in deposits 41,889 2 41,520 Net change in purchased funds and other borrowings - third party 1,012 (13,468) 6,492 Net change in purchased funds, other borrowings and advances - intercompany (3,881) - - Proceeds from issuance of long-term debt - third party 7,898 (13,229) 26,331 Repayment of long-term debt - third party (1,745) 11,639 (16,621) Proceeds from issuance of long-term debt - intercompany (6,285) - - Dividends paid 188 3,076 (1,254) Contribution from Citigroup - (224) 5,820 ----------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 39,076 (12,204) 62,288 - -------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS (499) 31 (530) ----------------------------------------------------------- Net (decrease) increase in cash and due from banks (1,203) (799) (219) Cash and due from banks at beginning of year 10,960 (604) 11,877 CASH AND DUE FROM BANKS AT END OF YEAR $ 9,757 ($ 1,403) $ 11,658 - -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 13,726 ($ 4,010) $ 20,054 Income taxes 2,054 (432) 4,123 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets 222 (457) 820 NON-CASH FINANCING ACTIVITIES Dividends (4,000) - 4,000 Contributions from parent company - - 4,182 - --------------------------------------------------------------------------------------------------------
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company eliminations and the elimination of ACONA, included in the Associates consolidated column. F-43 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Citicorp Parent Associates IN MILLIONS OF DOLLARS Company CCC ACONA Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,379 $ 938 $ 2,950 $ 5,879 - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Securities - available for sale Purchases (1,422) (539) (2,535) (2,504) Proceeds from sales 609 380 1,174 1,091 Maturities - 7 404 405 Changes in investments and advances - intercompany (4,518) - 2,798 - Net (increase) decrease in loans 775 (4,628) (8,662) (9,135) Proceeds from sales of loans - - 5,189 7,286 Business acquisitions - - - - Other investing activities 425 (6) (766) (2,297) ------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (4,131) (4,786) (2,398) (5,154) - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits - 143 (1) (282) Net change in purchased funds and other borrowings - third party 5,776 (2,840) (4,119) (1,279) Net change in purchased funds, other borrowings and advances - intercompany 38 6,780 1,636 - Proceeds from issuance of long-term debt - third party 1,400 - 9,978 9,898 Repayment of long-term debt - third party (1,921) (550) (7,841) (9,016) Proceeds from issuance of long-term debt - intercompany - 1,950 - - Dividends paid (4,790) (1,500) (508) (165) Contributions from parent company 326 121 449 - ------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 829 4,104 (406) (844) - ----------------------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS - - 48 48 ------------------------------------------------------------------------------- Net increase (decrease) in cash and due from banks 77 256 194 (71) Cash and due from banks at beginning of year 30 62 410 563 ------------------------------------------------------------------------------- CASH AND DUE FROM BANKS AT END OF YEAR $ 107 $ 318 $ 604 $ 492 - ----------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL [DISCLOSURE OF CASH FLOW INFORMATION] Cash paid during the year for: Interest $ 826 $ 851 $ 3,386 $ 3,889 Income taxes 1,062 210 714 641 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets - 86 394 394 Contribution of Avco Financial Services, Inc. assets - - 2,061 - Transfer of Avco Financial Services, Inc. domestic assets in exchange for a reduction of Notes Receivable from Related Parties - - 4,267 - - -----------------------------------------------------------------------------------------------------------------------------------
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company eliminations and the elimination of ACONA, included in the Associates consolidated column. CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 - ----------------------------------------------------------------------------------------------------------------- Other Citicorp Subsidiaries and Consolidating Citicorp IN MILLIONS OF DOLLARS Eliminations (1) Adjustments (2) Consolidated - ----------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,095 ($ 2,950) $ 13,291 ------------------------------------------------------------ CASH [FLOWS FROM INVESTING ACTIVITIES] Securities - available for sale Purchases (56,656) 2,535 (61,121) Proceeds from sales 24,090 (1,174) 26,170 Maturities 28,733 (404) 29,145 Changes in investments and advances -intercompany 4,518 2,798 - Net (increase) decrease in loans (111,225) 8,662 (124,213) Proceeds from sales of loans 87,906 (5,189) 95,192 Business acquisitions (6,321) - (6,321) Other investing activities 3,692 766 1,814 ------------------------------------------------------------ NET CASH USED IN INVESTING ACTIVITIES (25,263) 2,398 (39,334) - ----------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits 34,435 1 34,296 Net change in purchased funds and other borrowings - third party (3,354) 4,119 (1,697) Net change in purchased funds, other borrowings and advances - intercompany (6,818) (1,636) - Proceeds from issuance of long-term debt - third party 2,504 (9,978) 13,802 Repayment of long-term debt (1,883) 7,841 (13,370) Proceeds from issuance of long-term debt - intercompany (1,950) - - Dividends paid 1,665 508 (4,790) Contributions from parent company (121) (449) 326 ------------------------------------------------------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 24,478 406 28,567 - ----------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS (289) (48) (241) ------------------------------------------------------------ Net increase (decrease) in cash and due from banks 2,021 (194) 2,283 Cash and due from banks at beginning of year 8,939 (410) 9,594 CASH AND DUE FROM BANKS AT END OF YEAR $ 10,960 ($ 604) $ 11,877 - ----------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 11,738 ($ 3,386) $ 17,304 Income taxes 1,279 (714) 3,192 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets 198 (394) 678 Contribution of Avco Financial Services, Inc. assets - (2,061) - Transfer of Avco Financial Services, Inc. domestic assets in exchange for a reduction of Notes Receivables from Related Parties - (4,267) - - -----------------------------------------------------------------------------------------------------------------
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company eliminations and the elimination of ACONA, included in the Associates consolidated column. F-44 CITICORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998 - ----------------------------------------------------------------------------------------------------------------------------- Citicorp Parent Associates IN MILLIONS OF DOLLARS Company CCC ACONA Consolidated - ----------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 599 $ 657 ($ 328) ($ 1,443) --------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Securities - available for sale Purchases (883) (420) (2,286) (2,212) Proceeds from sales 916 266 1,231 1,081 Maturities 500 3 423 401 Changes in investments and advances - intercompany 486 - (506) - Net (increase) decrease in loans (1,500) (2,754) (9,191) (11,229) Proceeds from sales of loans - - 3,560 3,560 Business acquisitions - - - - Other investing activities 1,150 38 (1,243) (3,038) -------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 669 (2,867) (8,012) (11,437) - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits - 265 - 18 Net change in purchased funds and other borrowings - third party (1,870) (1,500) 576 3,966 Net change in purchased funds, other borrowings, and advances - intercompany 7 3,504 111 - Proceeds from issuance of long-term debt 2,219 300 12,834 13,266 Repayment of long-term debt (1,443) (350) (4,945) (5,049) Dividends paid (1,026) (16) (230) (142) Contributions from parent company 1,864 51 186 - Proceeds from issuance of junior subordinated debentures held by trust 232 - - - Redemption of preferred stock (1,040) - - - Proceeds from issuance of common stock 243 - - 1,267 Treasury stock repurchases (483) - - (17) -------------------------------------------------------------------------------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,297) 2,254 8,532 13,309 - ----------------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS - - (22) (22) -------------------------------------------------------------------------------- Net (decrease) increase in cash and due from banks (29) 44 170 407 Cash and due from banks at beginning of year 59 18 240 156 CASH AND DUE FROM BANKS AT END OF YEAR $ 30 $ 62 $ 410 $ 563 - ----------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 951 $ 667 $ 3,056 $ 3,209 Income taxes 837 124 552 585 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets - 85 338 338 Contribution of contributed entities acquired during 1998 - - 1,017 - NON-CASH FINANCING ACTIVITIES: Contributions from parent company 648 - - - - -----------------------------------------------------------------------------------------------------------------------------
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company eliminations and the elimination of ACONA, included in the Associates consolidated column.
YEAR ENDED DECEMBER 31, 1998 - ----------------------------------------------------------------------------------------------------------------- Other Citicorp Subsidiaries and Consolidating Citicorp IN MILLIONS OF DOLLARS Eliminations (1) Adjustments (2) Consolidated - ----------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 4,986 $ 328 $ 4,799 -------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Securities - available for sale Purchases (57,834) 2,286 (61,349) Proceeds from sales 22,388 (1,231) 24,651 Maturities 28,477 (423) 29,381 Changes in investments and advances - intercompany (486) 506 - Net (increase) decrease in loans (163,251) 9,191 (178,734) Proceeds from sales of loans 146,462 (3,560) 150,022 Business acquisitions (6,582) - (6,582) Other investing activities 5,565 1,243 3,715 -------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (25,261) 8,012 (38,896) - ----------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 26,749 - 27,032 Net change in purchased funds and other borrowings -third party (1,217) (576) (621) Net change in purchased funds, other borrowings and advances - intercompany (3,511) (111) - Proceeds from issuance of long-term debt 5,169 (12,834) 20,954 Repayment of long-term debt (5,158) 4,945 (12,000) Dividends paid 158 230 (1,026) Contributions from parent company (51) (186) 1,864 Proceeds from issuance of junior subordinated debentures held by trust (232) - - Redemption of preferred stock - - (1,040) Proceeds from issuance of common stock (1,267) - 243 Treasury stock repurchases 17 - (483) -------------------------------------------------------------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 20,657 (8,532) 34,923 - ----------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND DUE FROM BANKS 31 22 9 -------------------------------------------------------------- Net (decrease) increase in cash and due from banks 413 (170) 835 Cash and due from banks at beginning of year 8,526 (240) 8,759 CASH AND DUE FROM BANKS AT END OF YEAR $ 8,939 ($ 410) $ 9,594 - ----------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 12,840 ($ 3,056) $ 17,667 Income taxes 988 (552) 2,534 NON-CASH INVESTING ACTIVITIES: Transfers to repossessed assets 265 (338) 688 Contribution of contributed entities acquired during 1998 - (1,017) - NON-CASH FINANCING ACTIVITIES: Contributions from parent company - - 648 - -----------------------------------------------------------------------------------------------------------------
(1) Includes all other subsidiaries of Citicorp and intercompany eliminations. (2) Includes Citicorp Parent Company eliminations and the elimination of ACONA, included in the Associates consolidated column. Citicorp Parent Company is a legal entity separate and distinct from Citibank, N.A. and its other subsidiaries and affiliates. There are various legal limitations on the extent to which Citicorp's banking subsidiaries may extend credit, pay dividends or otherwise supply funds to Citicorp. The approval of the Office of the Comptroller of the Currency is required if total dividends declared by a national bank in any calendar year exceed net profits (as defined) for that year combined with its retained net profits for the preceding two years. In addition, dividends for such a bank may not be paid in excess of the bank's undivided profits. State-chartered bank subsidiaries are subject to dividend limitations imposed by applicable state law. Citicorp's national and state-chartered bank subsidiaries can declare dividends to their respective parent companies in 2001, without regulatory approval, of approximately $7.2 billion, adjusted by the effect of their net income (loss) for 2001 up to the date of any such dividend declaration. In determining whether and to what extent to pay dividends, each bank subsidiary must also consider the effect of dividend payments on applicable risk-based capital and leverage ratio requirements as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Consistent with these considerations, Citicorp estimates that its bank subsidiaries can distribute dividends to Citicorp of approximately $6.4 billion of the available $7.2 billion, adjusted by the effect of their net income (loss) up to the date of any such dividend declaration. Citicorp also receives dividends from its nonbank subsidiaries. These nonbank subsidiaries are generally not subject to regulatory restrictions on their payment of dividends except that the approval of the Office of Thrift Supervision may be required if total dividends declared by a savings association in any calendar year exceed amounts specified by that agency's regulations. 24. CONTINGENCIES In the ordinary course of business, Citicorp and its subsidiaries are defendants or co-defendants in various litigation matters incidental to and typical of the businesses in which they are engaged. In the opinion of the Company's management, the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on the Company and its subsidiaries' results of operations, financial condition, or liquidity. F-45 25. STOCKHOLDER'S EQUITY OF CITIBANK, N.A. CHANGES IN STOCKHOLDER'S EQUITY
IN MILLIONS OF DOLLARS 2000 1999 1998 - ------------------------------------------------------------------------------------------- BALANCE AT BEGINNING OF YEAR $21,562 $19,732 $16,998 Net income 4,923 3,079 1,700 Dividends (590) (1,875) (500) Contributions from parent 1,065 89 1,744 Change in net unrealized gains (losses) on securities (46) 229 (458) available for sale Foreign currency translation (161) (47) 40 Other 458 355 208 ------------------------------------ BALANCE AT END OF YEAR $27,211 $21,562 $19,732 - -------------------------------------------------------------------------------------------
Citibank's net income for 2000 and 1999 of $4.9 billion and $3.1 billion includes after-tax restructuring-related items of $71 million ($113 million pretax) and $89 million ($143 million pretax), respectively. Net income in 1998 of $1.7 billion includes an after-tax restructuring charge of $504 million ($802 million pretax). See Note 13 for further discussions. Authorized capital stock of Citibank was 40 million shares at December 31, 2000, 1999, and 1998. The Parent Company is a legal entity separate and distinct from Citibank, N.A. and its other subsidiaries and affiliates. There are various legal limitations on the extent to which Citicorp's banking subsidiaries may extend credit, pay dividends or otherwise supply funds to Citicorp. The approval of the Office of the Comptroller of the Currency is required if total dividends declared by a national bank in any calendar year exceed net profits (as defined) for that year combined with its retained net profits for the preceding two years. In addition, dividends for such a bank may not be paid in excess of the bank's undivided profits. State-chartered bank subsidiaries are subject to dividend limitations imposed by applicable state law. Citicorp's national and state-chartered bank subsidiaries can declare dividends to their respective parent companies in 2001, without regulatory approval, of approximately $7.2 billion, adjusted by the effect of their net income (loss) for 2001 up to the date of any such dividend declaration. In determining whether and to what extent to pay dividends, each bank subsidiary must also consider the effect of dividend payments on applicable risk-based capital and leverage ratio requirements as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Consistent with these considerations, Citicorp estimates that its bank subsidiaries can distribute dividends to Citicorp of approximately $6.4 billion of the available $7.2 billion, adjusted by the effect of their net income (loss) up to the date of any such dividend declaration. Citicorp also receives dividends from its nonbank subsidiaries. These nonbank subsidiaries are generally not subject to regulatory restrictions on their payment of dividends except that the approval of the Office of Thrift Supervision may be required if total dividends declared by a savings association in any calendar year exceed amounts specified by that agency's regulations. See Note 23 for Citicorp Parent Company Condensed Financal Statements. F-46 26. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
IN MILLIONS OF DOLLARS 2000 1999 - ---------------------------------------------------------------------------------------------------------------- FOURTH THIRD SECOND FIRST Fourth Third Second First ------------------------------------------------------------------------------ Net interest revenue $5,926 $5,561 $5,402 $5,275 $5,326 $5,159 $5,098 $5,142 Fees, commissions, and other revenue 5,014 4,944 4,765 5,571 4,111 4,040 4,003 3,754 ------------------------------------------------------------------------------ TOTAL REVENUES (2) 10,940 10,505 10,167 10,846 9,437 9,199 9,101 8,896 Provision for credit losses (2) 1,507 1,221 1,302 1,309 1,197 1,081 1,242 1,240 Operating expense (1) (2) 6,953 5,863 5,669 5,758 5,517 5,295 5,298 5,267 ------------------------------------------------------------------------------ INCOME BEFORE TAXES 2,480 3,421 3,196 3,779 2,723 2,823 2,561 2,389 Income taxes 947 1,256 1,195 1,368 1,003 1,059 964 899 ------------------------------------------------------------------------------ NET INCOME $1,533 $2,165 $2,001 $2,411 $1,720 $1,764 $1,597 $1,490 - ----------------------------------------------------------------------------------------------------------------
(1) The fourth, third, and second quarters of 2000 include $379 million after-tax ($535 million pretax), $15 million after-tax ($24 million pretax), and $11 million after-tax ($17 million pretax), respectively, of restructuring charges, and in the 2000 fourth and third quarters, include $100 million after-tax ($124 million pretax) and $22 million after-tax ($34 million pretax), respectively, of merger-related costs. The fourth, third, and first quarters of 1999 include $51 million after-tax ($82 million pretax), $31 million after-tax ($49 million pretax), and $22 million after-tax ($35 million pretax), respectively, of restructuring charges. The fourth and second quarters of 2000 include credits for reductions of prior charges of $13 million after-tax ($22 million pretax) and $27 million after-tax ($42 million pretax), respectively. The fourth and third quarters of 1999 include credits for reductions of prior charges of $75 million after-tax ($120 million pretax) and $23 million after-tax ($37 million pretax), respectively. The 2000 fourth, third, second, and first quarters also include $4 million after-tax ($7 million pretax), $8 million after-tax ($12 million pretax), $19 million after-tax ($29 million pretax), and $12 million after-tax ($20 million pretax), respectively, of accelerated depreciation. The 1999 fourth, third, second and first quarters also include $8 million after-tax ($13 million pretax), $25 million after-tax ($41 million pretax), $29 million after-tax ($47 million pretax), and $50 million after-tax ($79 million pretax), respectively, of accelerated depreciation. (2) The first quarter of 2000 includes a $71 million after-tax ($112 million pretax) charge related to the discontinuation of Associates Housing Finance loan originations. The charge includes exit costs of $16 million after-tax ($25 million pretax), a securitization retained interest writedown of $30 million after-tax ($47 million pretax), and a provision for increased losses of $25 million after-tax ($40 million pretax). - -------------------------------------------------------------------------------- F-47
FINANCIAL DATA SUPPLEMENT Citicorp and Subsidiaries AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS (1)(2)(3) INTEREST AVERAGE VOLUME INTEREST REVENUE/EXPENSE ------------------------------------------------------------------------------------------ IN MILLIONS OF DOLLARS 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ LOANS (NET OF UNEARNED income) (4) Consumer loans In U.S. offices $ 134,624 $ 113,773 $ 102,959 $15,797 $13,321 $ 12,480 In offices outside the U.S.(5) 75,200 68,984 57,706 9,708 8,984 7,874 -------------------------------------------------------------------------------- Total consumer loans 209,824 182,757 160,665 25,505 22,305 20,354 -------------------------------------------------------------------------------- Commercial loans In U.S. offices Commercial and industrial 34,334 28,553 23,509 2,779 2,383 2,195 Lease financing 11,792 8,758 8,120 1,045 682 652 Mortgage and real estate 955 3,649 5,432 80 427 484 In offices outside the U.S.(5) 79,852 73,565 65,762 7,821 6,980 7,080 -------------------------------------------------------------------------------- Total commercial loans 126,933 114,525 102,823 11,725 10,472 10,411 -------------------------------------------------------------------------------- Total loans 336,757 297,282 263,488 37,230 32,777 30,765 -------------------------------------------------------------------------------- FEDERAL FUNDS SOLD AND RESALE AGREEMENTS In U.S. offices 2,853 3,329 6,929 174 137 284 In offices outside the U.S.(5) 2,767 3,062 5,415 232 265 454 -------------------------------------------------------------------------------- Total 5,620 6,391 12,344 406 402 738 -------------------------------------------------------------------------------- SECURITIES, AT FAIR VALUE In U.S. offices Taxable 21,992 18,843 14,359 1,036 829 505 Exempt from U.S. income tax 5,040 3,809 3,109 273 206 192 In offices outside the U.S.(5) 29,623 28,262 24,894 2,169 2,907 2,447 -------------------------------------------------------------------------------- Total 56,655 50,914 42,362 3,478 3,942 3,144 -------------------------------------------------------------------------------- TRADING ACCOUNT ASSETS (6) In U.S. offices 4,101 2,583 4,801 247 133 298 In offices outside the U.S.(5) 10,241 6,738 9,614 744 559 764 -------------------------------------------------------------------------------- Total 14,342 9,321 14,415 991 692 1,062 -------------------------------------------------------------------------------- LOANS HELD FOR SALE, IN U.S. 8,665 6,098 5,190 912 586 556 OFFICES DEPOSITS AT INTEREST WITH BANKS (5) 13,225 12,381 14,614 1,251 1,002 1,070 -------------------------------------------------------------------------------- Total interest-earning assets 435,264 382,387 352,413 $44,268 $39,401 $37,335 --------------------------------------------- Non-interest-earning assets (6) 68,205 61,178 55,860 ------------------------------------- TOTAL ASSETS $503,469 $443,565 408,273 - -------------------------------------------========================================================================================= DEPOSITS In U.S. offices Savings deposits (7) $ 36,252 $33,422 $31,315 $ 1,206 $ 928 $ 926 $ Other time deposits 16,878 12,428 11,758 1,007 461 540 In offices outside the U.S. 194,629 167,368 147,340 11,110 9,422 10,094 -------------------------------------------------------------------------------- Total 247,759 213,218 190,413 13,323 10,811 11,560 -------------------------------------------------------------------------------- TRADING ACCOUNT LIABILITIES (6) In U.S. offices 1,863 1,695 3,129 39 57 157 In offices outside the U.S. (5) 1,736 348 1,840 17 31 112 -------------------------------------------------------------------------------- Total 3,599 2,043 4,969 56 88 269 -------------------------------------------------------------------------------- PURCHASED FUNDS AND OTHER BORROWINGS In U.S. offices 49,226 39,218 38,983 2,514 1,741 1,905 In offices outside the U.S. (5) 11,389 11,540 11,102 1,473 1,571 1,413 -------------------------------------------------------------------------------- Total 60,615 50,758 50,085 3,987 3,312 3,318 -------------------------------------------------------------------------------- LONG-TERM DEBT In U.S. offices 60,505 57,998 51,209 4,017 3,591 3,231 In offices outside the U.S. (5) 10,380 9,547 6,708 662 804 490 -------------------------------------------------------------------------------- Total 70,885 67,545 57,917 4,679 4,395 3,721 -------------------------------------------------------------------------------- Total interest-bearing liabilities $382,858 $333,564 303,384 $22,045 $18,606 $18,868 Demand deposits in U.S. offices 9,998 10,761 10,747 ----------------------------------- Other non-interest-bearing liabilities(6) 70,858 64,903 64,181 Total stockholder's equity 39,755 34,337 29,961 TOTAL LIABILITIES AND --------------------------------------- STOCKHOLDER'S EQUITY $503,469 $443,565 $408,273 --------------------------------------- NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS In U.S. offices(8) $224,376 $189,373 $174,496 $11,471 $10,910 $ 10,101 In offices outside the U.S.(8) 210,888 193,014 177,917 10,752 9,885 8,366 TOTAL $435,264 $382,387 $352,413 $22,223 $20,795 $ 18,467
% AVERAGE RATE --------------------------------------- IN MILLIONS OF DOLLARS 2000 1999 1998 - --------------------------------------------------------------------------------- LOANS (NET OF UNEARNED income) (4) Consumer loans In U.S. offices 11.73 11.71 12.12 In offices outside the U.S.(5) 12.91 13.02 13.65 Total consumer loans 12.16 12.20 12.67 Commercial loans In U.S. offices Commercial and industrial 8.09 8.35 9.34 Lease financing 8.86 7.79 8.03 Mortgage and real estate 8.38 11.70 8.91 In offices outside the U.S.(5) 9.79 9.49 10.77 Total commercial loans 9.24 9.14 10.13 Total loans 11.06 11.03 11.68 FEDERAL FUNDS SOLD AND RESALE AGREEMENTS In U.S. offices 6.10 4.12 4.10 In offices outside the U.S.(5) 8.38 8.65 8.38 Total 7.22 6.29 5.98 SECURITIES, AT FAIR VALUE In U.S. offices Taxable 4.71 4.40 3.52 Exempt from U.S. income tax 5.42 5.41 6.18 In offices outside the U.S.(5) 7.32 10.29 9.83 Total 6.14 7.74 7.42 TRADING ACCOUNT ASSETS (6) In U.S. offices 6.02 5.15 6.21 In offices outside the U.S.(5) 7.26 8.30 7.95 Total 6.91 7.42 7.37 LOANS HELD FOR SALE, IN U.S. 10.53 9.61 10.71 OFFICES DEPOSITS AT INTEREST WITH BANKS (5) 9.46 8.09 7.32 Total interest-earning assets 10.17 10.30 10.59 -------------------------------------- Non-interest-earning assets (6) TOTAL ASSETS - ------------------------------------------====================================== DEPOSITS In U.S. offices Savings deposits (7) 3.33 2.78 2.96 Other time deposits 5.97 3.71 4.59 In offices outside the U.S.(5) 5.71 5.63 6.85 Total 5.38 5.07 6.07 TRADING ACCOUNT LIABILITIES (6) In U.S. offices 2.09 3.36 5.02 In offices outside the U.S. (5) 0.98 8.91 6.09 Total 1.56 4.31 5.41 PURCHASED FUNDS AND OTHER BORROWINGS In U.S. offices 5.11 4.44 4.89 In offices outside the U.S. (5) 12.93 13.61 12.73 Total 6.58 6.53 6.62 LONG-TERM DEBT In U.S. offices 6.64 6.19 6.31 In offices outside the U.S. (5) 6.38 8.42 7.30 Total 6.60 6.51 6.42 Total interest-bearing liabilities 5.76 5.58 6.22 Demand deposits in U.S. offices Other non-interest-bearing liabilities(6) Total stockholder's equity TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS In U.S. offices(8) 5.11 5.76 5.79 In offices outside the U.S.(8) 5.10 5.12 4.70 TOTAL 5.11 5.44 5.24
- -------------------------------------------------------------------------------- (1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories. See Note 18 of Notes to Consolidated Financial Statements. (3) Monthly or quarterly averages have been used by certain subsidiaries, where daily averages are unavailable. (4) Includes cash-basis loans. (5) Average rates reflect prevailing local interest rates including inflationary effects and monetary correction in certain countries. (6) The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest-earning assets and other non-interest-bearing liabilities. (7) Savings deposits consist of Insured Money Market Rate accounts, NOW accounts, and other savings deposits. (8) Includes allocations for capital and funding costs based on the location of the asset. - -------------------------------------------------------------------------------- F-48 ANALYSIS OF CHANGES IN NET INTEREST REVENUE
2000 VS. 1999 1999 vs. 1998 - ------------------------------------------------------------------------------------------- INCREASE Increase (DECREASE) (Decrease) DUE TO CHANGE IN: Due to Change In: ------------------- ------------------- IN MILLIONS OF DOLLARS ON A AVERAGE AVERAGE NET Average Average Net TAXABLE EQUIVALENT BASIS (1) VOLUME RATE CHANGE(2) Volume Rate Change(2) - ------------------------------------------------------------------------------------------- LOANS -- CONSUMER In U.S. offices $2,447 $ 29 $2,476 $1,277 ($ 436) $ 841 In offices outside the U.S. (3) 803 (79) 724 1,482 (372) 1,110 --------------------------------------------------------- TOTAL 3,250 (50) 3,200 2,759 (808) 1,951 --------------------------------------------------------- LOANS -- COMMERCIAL In U.S. offices 510 (98) 412 338 (177) 161 In offices outside the U.S. (3) 611 230 841 791 (891) (100) --------------------------------------------------------- TOTAL 1,121 132 1,253 1,129 (1,068) 61 --------------------------------------------------------- TOTAL LOANS 4,371 82 4,453 3,888 (1,876) 2,012 --------------------------------------------------------- FEDERAL FUNDS SOLD AND RESALE AGREEMENTS In U.S. offices (22) 59 37 (148) 1 (147) In offices outside the U.S. (3) (25) (8) (33) (203) 14 (189) --------------------------------------------------------- TOTAL (47) 51 4 (351) 15 (336) --------------------------------------------------------- SECURITIES, AT FAIR VALUE In U.S. offices 209 65 274 227 111 338 In offices outside the U.S. (3) 134 (872) (738) 343 117 460 --------------------------------------------------------- TOTAL 343 (807) (464) 570 228 798 --------------------------------------------------------- TRADING ACCOUNT ASSETS In U.S. offices 88 26 114 (121) (44) (165) In offices outside the U.S. (3) 262 (77) 185 (237) 32 (205) --------------------------------------------------------- TOTAL 350 (51) 299 (358) (12) (370) --------------------------------------------------------- LOANS HELD FOR SALE, in U.S. offices 266 60 326 91 (61) 30 DEPOSITS AT INTEREST WITH BANKS(3) 72 177 249 (174) 106 (68) --------------------------------------------------------- TOTAL INTEREST REVENUE 5,355 (488) 4,867 3,666 (1,600) 2,066 - ------------------------------------------------------------------------------------------- DEPOSITS In U.S. offices 245 579 824 91 (168) (77) In offices outside the U.S.(3) 1,555 133 1,688 1,266 (1,938) (672) --------------------------------------------------------- TOTAL 1,800 712 2,512 1,357 (2,106) (749) --------------------------------------------------------- TRADING ACCOUNT LIABILITIES In U.S. offices 5 (23) (18) (58) (42) (100) In offices outside the U.S.(3) 34 (48) (14) (118) 37 (81) --------------------------------------------------------- TOTAL 39 (71) (32) (176) (5) (181) --------------------------------------------------------- PURCHASED FUNDS AND OTHER BORROWINGS In U.S. offices 486 287 773 11 (175) (164) In offices outside the U.S.(3) (20) (78) (98) 58 100 158 --------------------------------------------------------- TOTAL 466 209 675 69 (75) (6) --------------------------------------------------------- LONG-TERM DEBT In U.S. offices 159 267 426 421 (61) 360 In offices outside the U.S.(3) 66 (208) (142) 231 83 314 --------------------------------------------------------- TOTAL 225 59 284 652 22 674 --------------------------------------------------------- TOTAL INTEREST EXPENSE 2,530 909 3,439 1,902 (2,164) (262) - ------------------------------------------------------------------------------------------- NET INTEREST REVENUE $2,825 ($1,397) $1,428 $1,764 $ 564 $2,328 - ----------------------------------=========================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change. (3) Changes in average rates reflect changes in prevailing local interest rates including inflationary effects and monetary correction in certain countries. F-49 LOANS OUTSTANDING
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------- CONSUMER LOANS In U.S. offices Mortgage and real estate $ 73,166 $ 59,376 $ 51,381 $ 46,465 $ 43,357 Installment, revolving credit, and other 78,017 63,374 60,564 57,340 53,833 ------------------------------------------------------ 151,183 122,750 111,945 103,805 97,190 ------------------------------------------------------ In offices outside the U.S. Mortgage and real estate 24,988 24,808 21,578 19,140 19,729 Installment, revolving credit, and other 55,515 50,293 42,375 34,989 36,034 Lease financing 427 475 484 544 754 ------------------------------------------------------ 80,930 75,576 64,437 54,673 56,517 ------------------------------------------------------ 232,113 198,326 176,382 158,478 153,707 Unearned income (3,234) (3,757) (3,377) (3,432) (3,504) ------------------------------------------------------ CONSUMER LOANS -- NET 228,879 194,569 173,005 155,046 150,203 - ------------------------------------------------------------------------------------------- COMMERCIAL LOANS In U.S. offices Commercial and industrial 39,188 34,151 27,682 23,597 20,762 Lease financing 14,864 10,281 9,477 8,690 7,474 Mortgage and real estate 1,017 2,690 5,821 4,104 4,437 ------------------------------------------------------ 55,069 47,122 42,980 36,391 32,673 ------------------------------------------------------ In offices outside the U.S. Commercial and industrial 69,111 61,992 56,761 48,284 37,581 Mortgage and real estate 1,720 1,728 1,792 1,651 1,815 Loans to financial institutions 9,630 7,692 8,008 6,480 4,837 Lease financing 3,689 2,459 1,760 1,439 1,429 Governments and official institutions 1,952 3,250 2,132 2,376 2,252 ------------------------------------------------------ 86,102 77,121 70,453 60,230 47,914 ------------------------------------------------------ 141,171 124,243 113,433 96,621 80,587 Unearned income (3,462) (2,664) (2,439) (2,186) (2,030) ------------------------------------------------------ COMMERCIAL LOANS -- NET 137,709 121,579 110,994 94,435 78,557 - ------------------------------------------------------------------------------------------- TOTAL LOANS -- NET OF UNEARNED INCOME 366,588 316,148 283,999 249,481 228,760 Allowance for credit losses (8,961) (8,853) (8,596) (8,087) (7,306) ------------------------------------------------------ TOTAL LOANS--NET OF UNEARNED INCOME AND ALLOWANCE FOR CREDIT LOSSES $357,627 $307,295 $275,403 $241,394 $221,454 - -------------------------------------======================================================
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
DUE OVER 1 BUT WITHIN WITHIN 5 OVER IN MILLIONS OF DOLLARS AT YEAR-END 1 YEAR YEARS 5 YEARS TOTAL - ------------------------------------------------------------------------------------------- MATURITIES OF THE GROSS COMMERCIAL LOAN PORTFOLIO In U.S. offices Commercial and industrial loans $14,043 $22,322 $ 2,823 $ 39,188 Lease financing 2,808 9,602 2,454 14,864 Mortgage and real estate 287 530 200 1,017 In offices outside the U.S. 59,474 21,670 4,958 86,102 ------------------------------------------- TOTAL $76,612 $54,124 $10,435 $141,171 - ------------------------------------------------=========================================== SENSITIVITY OF LOANS DUE AFTER ONE YEAR TO CHANGES IN INTEREST RATES (1) Loans at predetermined interest rates $27,062 $ 3,737 Loans at floating or adjustable interest rates 27,062 6,698 ------------------ TOTAL $54,124 $10,435 - ------------------------------------------------===========================================
(1) Based on contractual terms. Repricing characteristics may effectively be modified from time to time using derivative contracts. See Notes 18 and 21 of Notes to Consolidated Financial Statements. F-50 CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------- COMMERCIAL CASH-BASIS LOANS Collateral dependent (at lower of cost or collateral value)(1) $ 510 $ 478 $ 397 $ 441 $ 425 Other 1,580 1,162 1,201 806 642 ------------------------------------------------------ TOTAL $2,090 $1,640 $1,598 $1,247 $1,067 - -------------------------------------====================================================== COMMERCIAL CASH-BASIS LOANS In U.S. offices $ 840 $ 468 $ 452 $ 469 $ 450 In offices outside the U.S. 1,250 1,172 1,146 778 617 ------------------------------------------------------ TOTAL $2,090 $1,640 $1,598 $1,247 $1,067 - -------------------------------------====================================================== COMMERCIAL RENEGOTIATED LOANS In U.S. offices $ 212 $ 311 $ 812 $ 599 $ 684 In offices outside the U.S. 131 122 104 81 97 ------------------------------------------------------ TOTAL $ 343 $ 433 $ 916 $ 680 $ 781 - -------------------------------------====================================================== CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST HAD BEEN SUSPENDED In U.S. offices $1,797 $1,696 $1,751 $1,679 $1,779 In offices outside the U.S. 1,607 1,821 1,664 1,063 1,118 ------------------------------------------------------ TOTAL $3,404 $3,517 $3,415 $2,742 $2,897 - -------------------------------------====================================================== ACCRUING LOANS 90 OR MORE DAYS DELINQUENT (2) In U.S. offices $1,247 $ 874 $ 833 $ 871 $ 867 In offices outside the U.S. 385 452 532 467 422 ------------------------------------------------------ TOTAL $1,632 $1,326 $1,365 $1,338 $1,289 - -------------------------------------======================================================
(1) A cash-basis loan is defined as collateral dependent when repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment, in which case the loans are written down to the lower of cost or collateral value. (2) Substantially all consumer loans, of which $503 million, $379 million, $267 million, $240 million, and $239 million are government-guaranteed student loans at December 31, 2000, 1999, 1998, 1997, and 1996, respectively. OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
IN MILLIONS OF DOLLARS AT YEAR-END 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------- OTHER REAL ESTATE OWNED Consumer (1) $366 $332 $358 $356 $ 520 Commercial (1) 214 225 288 487 641 Corporate/Other - 6 - - - ------------------------------------------------------ TOTAL OTHER REAL ESTATE OWNED $580 $563 $646 $843 $1,161 - -------------------------------------====================================================== OTHER REPOSSESSED ASSETS (2) $192 $139 $103 $74 $67 - -------------------------------------======================================================
(1) Represents repossessed real estate, carried at lower of cost or fair value, less costs to sell. (2) Primarily commercial transportation equipment and manufactured housing, carried at lower of cost or fair value, less costs to sell. FOREGONE INTEREST REVENUE ON LOANS(1)
IN U.S. IN NON-U.S. 2000 IN MILLIONS OF DOLLARS OFFICES OFFICES TOTAL - ------------------------------------------------------------------------------------------- Interest revenue that would have been accrued at original contractual rates(2) $235 $409 $644 Amount recognized as interest revenue(2) 113 134 247 ------------------------------ FOREGONE INTEREST REVENUE $122 $275 $397 - -------------------------------------------------------------==============================
(1) Relates to commercial cash-basis and renegotiated loans and consumer loans on which accrual of interest had been suspended. (2) Interest revenue in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain countries. F-51 DETAILS OF CREDIT LOSS EXPERIENCE
IN MILLIONS OF DOLLARS 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES AT BEGINNING OF YEAR $8,853 $8,596 $8,087 $7,306 $6,830 ------------------------------------------------------ PROVISION FOR CREDIT LOSSES Consumer 4,345 4,169 3,753 3,523 3,213 Commercial 994 591 508 72 108 ------------------------------------------------------ 5,339 4,760 4,261 3,595 3,321 ------------------------------------------------------ GROSS CREDIT LOSSES CONSUMER(1) In U.S. offices 3,413 3,063 3,057 3,011 2,444 In offices outside the U.S. 1,939 1,799 1,235 989 963 COMMERCIAL Mortgage and real estate In U.S. offices 10 59 40 33 50 In offices outside the U.S. 22 11 58 47 32 Governments and official institutions in offices outside the U.S. - - 3 - - Loans to financial institutions in offices outside the U.S. - 11 97 7 12 Commercial and industrial In U.S. offices 563 186 125 70 101 In offices outside the U.S. 311 479 348 112 161 ------------------------------------------------------ 6,258 5,608 4,963 4,269 3,763 ------------------------------------------------------ CREDIT RECOVERIES CONSUMER(1) In U.S. offices 526 413 427 450 373 In offices outside the U.S. 403 356 287 264 233 COMMERCIAL Mortgage and real estate In U.S. offices 9 36 89 50 92 In offices outside the U.S. 1 2 10 7 8 Governments and official institutions in offices outside the U.S. 1 - 10 36 81 Loans to financial institutions in offices outside the U.S. 9 5 16 17 1 Commercial and industrial In U.S. offices 45 19 36 72 54 In offices outside the U.S. 70 94 30 55 44 ------------------------------------------------------ 1,064 925 905 951 886 ------------------------------------------------------ NET CREDIT LOSSES In U.S. offices 3,406 2,840 2,670 2,542 2,076 In offices outside the U.S. 1,788 1,843 1,388 776 801 ------------------------------------------------------ 5,194 4,683 4,058 3,318 2,877 ------------------------------------------------------ Other-net (2) (37) 180 306 504 32 ------------------------------------------------------ ALLOWANCE FOR CREDIT LOSSES AT END OF YEAR $8,961 $8,853 $8,596 $8,087 $7,306 - -------------------------------------====================================================== Net consumer credit losses $4,423 $4,093 $3,578 $3,286 $2,801 As a percentage of average consumer loans 2.11% 2.24% 2.23% 2.19% 1.99% - ------------------------------------------------------------------------------------------- Net commercial credit losses $ 771 $ 590 $ 480 $ 32 $ 76 As a percentage of average commercial loans 0.61% 0.52% 0.47% 0.04% 0.10% - -------------------------------------======================================================
(1) Consumer credit losses and recoveries primarily relate to revolving credit and installment loans. (2) In 2000 and 1999, primarily includes the addition of allowance for credit losses related to acquisitions and foreign currency translation effects. In 1998, reflects the addition of $320 million of credit loss reserves related to the acquisition of the Universal Card portfolio. In 1997, $373 million was restored to the allowance for credit losses that had previously been attributed to credit card securitization transactions where the exposure to credit losses was contractually limited to the cash flows from the securitized receivables, $50 million attributable to standby letters of credit and guarantees was reclassified to other liabilities, and $50 million attributable to derivative and foreign exchange contracts was reclassified as a deduction from trading account assets. F-52 AVERAGE DEPOSIT LIABILITIES IN OFFICES OUTSIDE THE U.S. (1)
2000 1999 1998 - -------------------------------------------------------------------------------------------------------------- IN MILLIONS OF DOLLARS AT AVERAGE % AVERAGE AVERAGE % AVERAGE AVERAGE % AVERAGE YEAR-END BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE - -------------------------------------------------------------------------------------------------------------- Banks(2) $ 32,065 6.78 $ 21,993 7.10 $ 18,559 8.46 Other demand deposits 44,748 3.64 38,867 3.14 33,466 3.49 Other time and savings deposits(2) 130,322 5.61 117,742 5.64 105,357 6.98 -------- -------- -------- Total $207,135 5.36 $178,602 5.28 $157,382 6.41 - ------------------------------------==========================================================================
(1) Interest rates and amounts include the effects of risk management activities, and also reflect the impact of the local interest rates prevailing in certain countries. See Note 18 of Notes to Consolidated Financial Statements. (2) Primarily consists of time certificates of deposit and other time deposits in denominations of $100,000 or more. MATURITY PROFILE OF TIME DEPOSITS ($100,000 OR MORE) IN U.S. OFFICES
UNDER OVER 3 TO OVER 6 TO OVER 12 IN MILLIONS OF DOLLARS AT YEAR-END 2000 3 MONTHS 6 MONTHS 12 MONTHS MONTHS - ------------------------------------------------------------------------------------------- Certificates of deposit $7,566 $1,619 $987 $973 Other time deposits 3,134 261 165 20 - ----------------------------------------------------=======================================
PURCHASED FUNDS AND OTHER BORROWINGS(1)
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE OTHER FUNDS AGREEMENTS COMMERCIAL PAPER BORROWED (2) --------------------------------------------------------- IN MILLIONS OF DOLLARS 2000 1999 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------- Amount outstanding at year-end $7,191 $8,004 $37,656 $31,018 $15,987 $13,327 Average outstanding during the year 7,662 6,734 37,223 31,858 15,730 12,166 Maximum month-end outstanding 12,045 8,465 42,815 36,670 17,951 17,666 - ------------------------------------------------------------------------------------------- WEIGHTED-AVERAGE INTEREST RATE During the year (3) 6.47% 5.72% 4.98% 4.71% 10.41% 11.75% At year-end (4) 6.33 5.57 5.34 5.69 8.40 7.94 - -----------------------------------========================================================
(1) Original maturities of less than one year. (2) Rates reflect the impact of local interest rates prevailing in countries outside the United States. (3) Interest rates include the effects of risk management activities. See Note 18 of Notes to Consolidated Financial Statements. (4) Based on contractual rates at year-end. RATIOS
2000 1999 1998 - ------------------------------------------------------------------------------------------- Net income to average assets 1.61% 1.48% 1.04% Return on average total stockholder's equity 20.40% 19.14% 14.15% Total average equity to average assets 7.90% 7.74% 7.34% - -------------------------------------------------------------------------------------------
F-53 EX-12.01 2 a2042041zex-12_01.txt EXHIBIT 12.01 Exhibit 12.01 CIITCORP CALCULATION OF RATIO OF INCOME TO FIXED CHARGES (In Millions)
YEAR ENDED DECEMBER 31, EXCLUDING INTEREST ON DEPOSITS: 2000 1999 1998 1997 1996 - ------------------------------- ---- ---- ---- ---- ---- FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) .................. 8,722 7,795 7,308 6,776 6,325 INTEREST FACTOR IN RENT EXPENSE ........... 283 235 213 189 176 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES .................... 9,005 8,030 7,521 6,965 6,501 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 FIXED CHARGES ............................. 9,005 8,030 7,521 6,965 6,501 ------ ------ ------ ------ ------ TOTAL INCOME ........................... 21,881 18,526 14,253 14,629 14,235 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS ............ 2.43 2.31 1.90 2.10 2.19 ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: - ------------------------------- FIXED CHARGES: INTEREST EXPENSE .......................... 22,045 18,606 18,868 16,430 15,341 INTEREST FACTOR IN RENT EXPENSE ........... 283 235 213 189 176 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES .................... 22,328 18,841 19,081 16,619 15,517 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 FIXED CHARGES ............................. 22,328 18,841 19,081 16,619 15,517 ------ ------ ------ ------ ------ TOTAL INCOME ........................... 35,204 29,337 25,813 24,283 23,251 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS ............ 1.58 1.56 1.35 1.46 1.50 ====== ====== ====== ====== ======
Note: On November 30, 2000, Citigroup Inc. completed its acquisition of Associates First Capital Corporation (Associates) in a transaction accounted for as a pooling of interests. Subsequent to the acquisition, Associates was contributed to and became a wholly owned subsidiary of Citicorp and Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America (ACONA), a subsidiary of Associates. EX-12.02 3 a2042041zex-12_02.txt EXHIBIT 12.02 Exhibit 12.02 CITICORP CALCULATION OF RATIO OF INCOME TO FIXED CHARGES INCLUDING PREFERRED STOCK DIVIDENDS (In Millions)
YEAR ENDED DECEMBER 31, EXCLUDING INTEREST ON DEPOSITS: 2000 1999 1998 1997 1996 - ------------------------------- ---- ---- ---- ---- ---- FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) .................. 8,722 7,795 7,308 6,776 6,325 INTEREST FACTOR IN RENT EXPENSE ........... 283 235 213 189 176 DIVIDENDS--PREFERRED STOCK ................ -- -- 126 223 261(A) ------ ------ ------ ------ ------ TOTAL FIXED CHARGES .................... 9,005 8,030 7,647 7,188 6,762 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) ....................... 9,005 8,030 7,521 6,965 6,501 ------ ------ ------ ------ ------ TOTAL INCOME ........................... 21,881 18,526 14,253 14,629 14,235 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS ............ 2.43 2.31 1.86 2.04 2.11 ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: - ------------------------------- FIXED CHARGES: INTEREST EXPENSE .......................... 22,045 18,606 18,868 16,430 15,341 INTEREST FACTOR IN RENT EXPENSE ........... 283 235 213 189 176 DIVIDENDS--PREFERRED STOCK ................ -- -- 126 223 261(A) ------ ------ ------ ------ ------ TOTAL FIXED CHARGES .................... 22,328 18,841 19,207 16,842 15,778 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 12,876 10,496 6,732 7,664 7,734 FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) ....................... 22,328 18,841 19,081 16,619 15,517 ------ ------ ------ ------ ------ TOTAL INCOME ........................... 35,204 29,337 25,813 24,283 23,251 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS ............ 1.58 1.56 1.34 1.44 1.47 ====== ====== ====== ====== ======
Note: On November 30, 2000, Citigroup Inc. completed its acquisition of Associates First Capital Corporation (Associates) in a transaction accounted for as a pooling of interests. Subsequent to the acquisition, Associates was contributed to and became a wholly owned subsidiary of Citicorp and Citicorp issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates and Associates Corporation of North America (ACONA), a subsidiary of Associates. (A) On October 8, 1998, Citicorp merged with and into a newly formed, wholly owned subsidiary of Travelers Group Inc. ("TRV") (The "Merger"). Following the Merger, TRV changed its name to Citigroup Inc. Under the terms of the Merger, Citicorp common and preferred stock were exchanged for Citigroup common stock and preferred stock. As such there were no Citicorp preferred dividends in 1999 and 2000. EX-23.01 4 a2042041zex-23_01.txt EXHIBIT 23.01 Exhibit 23.01 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Citicorp: We consent to the incorporation by reference in the Registration Statements of Citicorp on Form S-3: Nos. 33-59791, 33-64574, 333-14917, 333-20803, 333-21143, 333-32065 and 333-83741; and of Citicorp Mortgage Securities, Inc., Citibank, N.A., and other affiliates, on Form S-3: Nos. 33-66222, 333-43167, and 333-72459, and on Form S-11: Nos. 33-6979, 33-6358, 33-36313, and 33-34670, of our report dated January 16, 2001 with respect to the consolidated balance sheets of Citicorp and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholder's equity, and cash flows for each of the years in the three-year period ended December 31, 2000, and the related consolidated balance sheets of Citibank, N.A. and subsidiaries as of December 31, 2000 and 1999, which report is included in the 2000 Citicorp annual report on Form 10-K for the year ended December 31, 2000. /s/ KPMG LLP New York, New York March 20, 2001 EX-99.01 5 a2042041zex-99_01.txt EXHIBIT 99.01 Exhibit 99.01 RESIDUAL VALUE OBLIGATION QUARTERLY CERTIFICATE FOR THE QUARTER ENDED DECEMBER 31, 2000 The information below is being disclosed pursuant to the Residual Value Obligation Agreement dated as of April 3, 2000 between Associates First Capital Corporation and the Chase Manhattan Bank, as Trustee. Terms used and not otherwise defined herein have the meaning assigned to them in the Residual Value Agreement.
Securitization Distribution Dates during quarter October 16, 2000 November 15, 2000 December 15, 2000 Allocation Dates during quarter: October 17, 2000 November 16, 2000 December 18, 2000 Payment Date during quarter: N/A AFCC Amount at beginning of quarter: 459,843,520 AFCC Amount at end of quarter: 477,304,102 - -------------------------------------------------------------------------------------------------------------- ON THE PAYMENT DATE DURING THE QUARTER: Accrued RVO Payment Amount as of the immediately preceding Allocation Date: $ - Interest accrued on Accrued RVO Payment Amount since immediately preceding Allocation Date: $ - Accrued RVO Payment Amount as of such Payment Date: $ - Number of RVO's outstanding as of the applicable record date N/A Payment per RVO: $ - - -------------------------------------------------------------------------------------------------------------- AS OF THE FIRST ALLOCATION DATE DURING THE QUARTER: RESIDUAL CASH FLOW: Residual Cash Flow Allocated for current period: - Cumulative Residual Cash Flow not covered by allocation (to be carried forward): $ (3,099,495) Excess Litigation Reserve allocated: $ - RVO EXPENSES: Residual Cash Flow allocated to RVO Expenses: $ - Cumulative RVO Expenses not covered by allocation (to be carried forward): $ - LITIGATION EXPENSES: Residual Cash Flow allocated to Litigation Expenses: $ - Cumulative Litigation Expenses not covered by allocation (to be carried forward): $ 122,922
AFCC AMOUNT: - ------------ AFCC Amount at end of immediately preceding Allocation Date: $ 459,843,520 plus: AFCC Interest added on immediately preceding Securitization Distribution Date: $ 5,748,044 less: Residual Cash Flow allocated to AFCC Amount: $ - AFCC Amount after allocation: $ 465,591,564 ACCRUED RVO PAYMENT AMOUNT: - --------------------------- Residual Cash Flow allocated to Accrued RVO Payment Amount on such Allocation Date: $ - plus: cumulative Residual Cash Flow allocated to, and cumulative interest accrued on, Accrued RVO Payment Amount since most recent Payment Date on which RVO Payments were made: $ - Accrued RVO Payment Amount on such Allocation Date: $ - - -------------------------------------------------------------------------------------------------------------- AS OF THE SECOND ALLOCATION DATE DURING THE QUARTER: RESIDUAL CASH FLOW: Residual Cash Flow allocated for current period: $ - Cumulative Residual Cash Flow not covered by allocation (to be carried forward): $ (4,451,813) Excess Litigation Reserve allocated: $ - RVO EXPENSES: Residual Cash Flow allocated to RVO Expenses: $ - Cumulative RVO Expenses not covered by allocation (to be carried forward): $ - LITIGATION EXPENSES: Residual Cash Flow allocated to Litigation Expenses: $ - Cumulative Litigation Expenses not covered by allocation (to be carried forward): $ 123,601 AFCC AMOUNT: - ------------ AFCC Amount at end of immediately preceding Allocation Date: $ 465,591,564 plus: AFCC Interest added on immediately preceding Securitization Distribution Date: $ 5,819,895 less: Residual Cash Flow allocated to AFCC Amount: $ - AFCC Amount after allocation: $ 471,411,459
ACCRUED RVO PAYMENT AMOUNT: - --------------------------- Residual Cash Flow allocated to Accrued RVO Payment Amount on such Allocation Date: $ - plus: cumulative Residual Cash Flow allocated to, and cumulative interest accrued on, Accrued RVO Payment Amount since most recent Payment Date on which RVO Payments were made: $ - Accrued RVO Payment Amount on such Allocation Date: $ - - -------------------------------------------------------------------------------------------------------------- AS OF THE THIRD ALLOCATION DATE DURING THE QUARTER: RESIDUAL CASH FLOW: Residual Cash Flow allocated for current period: $ - Cumulative Residual Cash Flow not covered by allocation (to be carried forward): $ (6,508,482) Excess Litigation Reserve allocated: $ - RVO EXPENSES: Residual Cash Flow allocated to RVO Expenses: $ - Cumulative RVO Expenses not covered by allocation (to be carried forward): $ - LITIGATION EXPENSES: Residual Cash Flow allocated to Litigation Expenses: $ - Cumulative Litigation Expenses not covered by allocation (to be carried forward): $ 130,231 AFCC AMOUNT: - ------------ AFCC Amount at end of immediately preceding Allocation Date: $ 471,411,459 plus: AFCC Interest added on immediately preceding Securitization Distribution Date: $ 5,892,643 less: Residual Cash Flow allocated to AFCC Amount: $ - AFCC Amount after allocation: $ 477,304,102 ACCRUED RVO PAYMENT AMOUNT: - --------------------------- Residual Cash Flow allocated to Accrued RVO Payment Amount on such Allocation Date: $ - plus: cumulative Residual Cash Flow allocated to, and cumulative interest accrued on, Accrued RVO Payment Amount since most recent Payment Date on which RVO Payments were made: $ - Accrued RVO Payment Amount on such Allocation Date: $ - - --------------------------------------------------------------------------------------------------------------
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