INVESTMENTS

For additional information regarding Citi’s investment portfolios, including evaluating investments for other-than-temporary impairment (OTTI), see Note 13 to the Consolidated Financial Statements in Citi’s 2017 Annual Report on Form 10-K.

Overview

Citi adopted ASU 2016-01 and ASU 2018-03 as of January 1, 2018. The ASUs require fair value changes on marketable equity securities to be recognized in earnings. The available-for-sale category was eliminated for equity securities. Also, non-marketable equity securities are required to be measured at fair value with changes in fair value recognized in earnings unless (i) the measurement alternative is elected or (ii) the investment represents Federal Reserve Bank and Federal Home Loan Bank stock or certain exchange seats that continue to be carried at cost. See Note 1 to the Consolidated Financial Statements for additional details.

The following tables present Citi’s investments by category:



In millions of dollars	September 30, 2018
In millions of dollars	September 30, 2018
Debt securities available-for-sale (AFS)	$	284,782
Debt securities held-to-maturity (HTM)⁽¹⁾	53,249
Marketable equity securities carried at fair value⁽²⁾	260
Non-marketable equity securities carried at fair value⁽²⁾	1,128
Non-marketable equity securities measured using the measurement alternative⁽³⁾	452
Non-marketable equity securities carried at cost⁽⁴⁾	5,642
Total investments	$	345,513



In millions of dollars	December 31, 2017
In millions of dollars	December 31, 2017
Securities available-for-sale (AFS)	$	290,914
Debt securities held-to-maturity (HTM)⁽¹⁾	53,320
Non-marketable equity securities carried at fair value⁽²⁾	1,206
Non-marketable equity securities carried at cost⁽⁴⁾	6,850
Total investments	$	352,290


(1)	Carried at adjusted amortized cost basis, net of any credit-related impairment.


(2)	Unrealized gains and losses are recognized in earnings.


(3)	Impairment losses and adjustments to the carrying value as a result of observable price changes are recognized in earnings.


(4)	Represents shares issued by the Federal Reserve Bank, Federal Home Loan Banks and certain exchanges of which Citigroup is a member.

The following table presents interest and dividend income on investments:



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions of dollars	2018		2017		2018		2017
Taxable interest	$	2,195	$	1,922	$	6,395	$	5,545
Interest exempt from U.S. federal income tax	130		129		392		412
Dividend income	63		53		209		165
Total interest and dividend income	$	2,388	$	2,104	$	6,996	$	6,122

The following table presents realized gains and losses on the sales of investments, which excludes OTTI losses:



	Three Months Ended September 30,						Nine Months Ended September 30,
In millions of dollars	2018			2017			2018			2017
Gross realized investment gains	$	153		$	293		$	550		$	840
Gross realized investment losses	(84		)	(80		)	(209		)	(214		)
Net realized gains on sale of investments	$	69		$	213		$	341		$	626

Securities Available-for-Sale

The amortized cost and fair value of AFS securities were as follows:



	September 30, 2018								December 31, 2017
In millions of dollars	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Securities AFS
Mortgage-backed securities⁽¹⁾
U.S. government-sponsored agency guaranteed	$	46,675	$	61	$	1,575	$	45,161	$	42,116	$	125	$	500	$	41,741
Prime	—		—		—		—		11		6		—		17
Alt-A	1		—		—		1		26		90		—		116
Non-U.S. residential	1,620		7		1		1,626		2,744		13		6		2,751
Commercial	233		1		3		231		334		—		2		332
Total mortgage-backed securities	$	48,529	$	69	$	1,579	$	47,019	$	45,231	$	234	$	508	$	44,957
U.S. Treasury and federal agency securities
U.S. Treasury	$	108,509	$	28	$	1,949	$	106,588	$	108,344	$	77	$	971	$	107,450
Agency obligations	9,752		—		197		9,555		10,813		7		124		10,696
Total U.S. Treasury and federal agency securities	$	118,261	$	28	$	2,146	$	116,143	$	119,157	$	84	$	1,095	$	118,146
State and municipal⁽²⁾	$	9,662	$	87	$	269	$	9,480	$	8,870	$	140	$	245	$	8,765
Foreign government	94,937		293		769		94,461		100,615		508		590		100,533
Corporate	12,498		21		139		12,380		14,144		51		86		14,109
Asset-backed securities⁽¹⁾	1,265		3		6		1,262		3,906		14		2		3,918
Other debt securities	4,036		1		—		4,037		297		—		—		297
Total debt securities AFS	$	289,188	$	502	$	4,908	$	284,782	$	292,220	$	1,031	$	2,526	$	290,725
Marketable equity securities AFS⁽³⁾	$	—	$	—	$	—	$	—	$	186	$	4	$	1	$	189
Total securities AFS	$	289,188	$	502	$	4,908	$	284,782	$	292,406	$	1,035	$	2,527	$	290,914

(1)

The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, see Note 18 to the Consolidated Financial Statements.

(2)

In the second quarter of 2017, Citi early adopted ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. Upon adoption, a cumulative effect adjustment was recorded to reduce Retained earnings, effective January 1, 2017, for the incremental amortization of purchase premiums and cumulative fair value hedge adjustments on callable state and municipal debt securities. For additional information, see Note 1 to the Consolidated Financial Statements.


(3)	Citi adopted ASU 2016-01 and ASU 2018-03 as of January 1, 2018, resulting in a cumulative effect adjustment from AOCI to Retained earnings for net unrealized gains on marketable equity securities AFS. The available-for-sale category was eliminated for equity securities effective January 1, 2018. See Note 1 to the Consolidated Financial Statements for additional details.

The following table shows the fair value of AFS securities that have been in an unrealized loss position:



	Less than 12 months				12 months or longer				Total
In millions of dollars	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
September 30, 2018
Debt Securities AFS⁽¹⁾
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	21,723	$	574	$	18,828	$	1,001	$	40,551	$	1,575
Non-U.S. residential	256		1		1		—		257		1
Commercial	168		2		51		1		219		3
Total mortgage-backed securities	$	22,147	$	577	$	18,880	$	1,002	$	41,027	$	1,579
U.S. Treasury and federal agency securities
U.S. Treasury	$	27,095	$	279	$	65,789	$	1,670	$	92,884	$	1,949
Agency obligations	1,549		15		8,004		182		9,553		197
Total U.S. Treasury and federal agency securities	$	28,644	$	294	$	73,793	$	1,852	$	102,437	$	2,146
State and municipal	$	1,811	$	48	$	1,260	$	221	$	3,071	$	269
Foreign government	48,491		463		11,598		306		60,089		769
Corporate	6,556		114		798		25		7,354		139
Asset-backed securities	604		6		27		—		631		6
Other debt securities	1,313		—		—		—		1,313		—
Total debt securities AFS	$	109,566	$	1,502	$	106,356	$	3,406	$	215,922	$	4,908
December 31, 2017
Securities AFS
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	30,994	$	438	$	2,206	$	62	$	33,200	$	500
Non-U.S. residential	753		6		—		—		753		6
Commercial	150		1		57		1		207		2
Total mortgage-backed securities	$	31,897	$	445	$	2,263	$	63	$	34,160	$	508
U.S. Treasury and federal agency securities
U.S. Treasury	$	79,050	$	856	$	7,404	$	115	$	86,454	$	971
Agency obligations	8,857		110		1,163		14		10,020		124
Total U.S. Treasury and federal agency securities	$	87,907	$	966	$	8,567	$	129	$	96,474	$	1,095
State and municipal	$	1,009	$	11	$	1,155	$	234	$	2,164	$	245
Foreign government	53,206		356		9,051		234		62,257		590
Corporate	6,737		74		859		12		7,596		86
Asset-backed securities	449		1		25		1		474		2
Other debt securities	—		—		—		—		—		—
Marketable equity securities AFS⁽¹⁾	11		1		—		—		11		1
Total securities AFS	$	181,216	$	1,854	$	21,920	$	673	$	203,136	$	2,527


(1)	Citi adopted ASU 2016-01 and ASU 2018-03 as of January 1, 2018, resulting in a cumulative effect adjustment from AOCI to retained earnings for net unrealized gains on marketable equity securities AFS. The available-for-sale category was eliminated for equity securities effective January 1, 2018. See Note 1 to the Consolidated Financial Statements for additional details.

The following table presents the amortized cost and fair value of AFS debt securities by contractual maturity dates:



	September 30, 2018				December 31, 2017
In millions of dollars	Amortized cost		Fair value		Amortized cost		Fair value
Mortgage-backed securities⁽¹⁾
Due within 1 year	$	434	$	431	$	45	$	45
After 1 but within 5 years	1,201		1,194		1,306		1,304
After 5 but within 10 years	2,159		2,119		1,376		1,369
After 10 years⁽²⁾	44,735		43,275		42,504		42,239
Total	$	48,529	$	47,019	$	45,231	$	44,957
U.S. Treasury and federal agency securities
Due within 1 year	$	34,543	$	34,471	$	4,913	$	4,907
After 1 but within 5 years	81,735		79,739		111,236		110,238
After 5 but within 10 years	1,893		1,842		3,008		3,001
After 10 years⁽²⁾	90		91		—		—
Total	$	118,261	$	116,143	$	119,157	$	118,146
State and municipal
Due within 1 year	$	2,773	$	2,772	$	1,792	$	1,792
After 1 but within 5 years	1,575		1,570		2,579		2,576
After 5 but within 10 years	572		590		514		528
After 10 years⁽²⁾	4,742		4,548		3,985		3,869
Total	$	9,662	$	9,480	$	8,870	$	8,765
Foreign government
Due within 1 year	$	34,686	$	34,649	$	32,130	$	32,100
After 1 but within 5 years	47,933		47,416		53,034		53,165
After 5 but within 10 years	10,371		10,386		12,949		12,680
After 10 years⁽²⁾	1,947		2,010		2,502		2,588
Total	$	94,937	$	94,461	$	100,615	$	100,533
All other⁽³⁾
Due within 1 year	$	6,439	$	6,435	$	3,998	$	3,991
After 1 but within 5 years	9,151		9,068		9,047		9,027
After 5 but within 10 years	1,614		1,603		3,415		3,431
After 10 years⁽²⁾	595		573		1,887		1,875
Total	$	17,799	$	17,679	$	18,347	$	18,324
Total debt securities AFS	$	289,188	$	284,782	$	292,220	$	290,725


(1)	Includes mortgage-backed securities of U.S. government-sponsored agencies.


(2)	Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights.


(3)	Includes corporate, asset-backed and other debt securities.

Debt Securities Held-to-Maturity

The carrying value and fair value of debt securities HTM were as follows:



In millions of dollars	Carrying value		Gross unrealized gains		Gross unrealized losses		Fair value
September 30, 2018
Debt securities held-to-maturity
Mortgage-backed securities⁽¹⁾
U.S. government agency guaranteed	$	25,058	$	3	$	869	$	24,192
Alt-A	—		—		—		—
Non-U.S. residential	1,288		19		—		1,307
Commercial	260		—		—		260
Total mortgage-backed securities	$	26,606	$	22	$	869	$	25,759
State and municipal	$	7,399	$	124	$	185	$	7,338
Foreign government	1,151		—		14		1,137
Asset-backed securities⁽¹⁾	18,093		27		11		18,109
Total debt securities held-to-maturity	$	53,249	$	173	$	1,079	$	52,343
December 31, 2017
Debt securities held-to-maturity
Mortgage-backed securities⁽¹⁾
U.S. government agency guaranteed	$	23,880	$	40	$	157	$	23,763
Alt-A	141		57		—		198
Non-U.S. residential	1,841		65		—		1,906
Commercial	237		—		—		237
Total mortgage-backed securities	$	26,099	$	162	$	157	$	26,104
State and municipal⁽²⁾	$	8,897	$	378	$	73	$	9,202
Foreign government	740		—		18		722
Asset-backed securities⁽¹⁾	17,584		162		22		17,724
Total debt securities held-to-maturity	$	53,320	$	702	$	270	$	53,752

(1)

(2)

In the second quarter of 2017, Citi early adopted ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. Upon adoption, a cumulative effect adjustment was recorded to reduce retained earnings, effective January 1, 2017, for the incremental amortization of purchase premiums and cumulative fair value hedge adjustments on callable state and municipal debt securities. For additional information, see Note 1 to the Consolidated Financial Statements.

The table below shows the fair value of debt securities HTM that have been in an unrecognized loss position:



	Less than 12 months				12 months or longer				Total
In millions of dollars	Fair value		Gross unrecognized losses		Fair value		Gross unrecognized losses		Fair value		Gross unrecognized losses
September 30, 2018
Debt securities held-to-maturity
Mortgage-backed securities	$	13,815	$	392	$	9,815	$	477	$	23,630	$	869
State and municipal	2,283		58		799		127		3,082		185
Foreign government	1,138		14		—		—		1,138		14
Asset-backed securities	3,670		11		2		—		3,672		11
Total debt securities held-to-maturity	$	20,906	$	475	$	10,616	$	604	$	31,522	$	1,079
December 31, 2017
Debt securities held-to-maturity
Mortgage-backed securities	$	8,569	$	50	$	6,353	$	107	$	14,922	$	157
State and municipal	353		5		835		68		1,188		73
Foreign government	723		18		—		—		723		18
Asset-backed securities	71		3		134		19		205		22
Total debt securities held-to-maturity	$	9,716	$	76	$	7,322	$	194	$	17,038	$	270

Note: Excluded from the gross unrecognized losses presented in the table above are $(65) million and $(117) million of net unrealized losses recorded in AOCI as of September 30, 2018 and December 31, 2017, respectively, primarily related to the difference between the amortized cost and carrying value of HTM debt securities that were reclassified from AFS. Substantially all of these net unrecognized losses relate to securities that have been in a loss position for 12 months or longer at September 30, 2018 and December 31, 2017.

The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates:



	September 30, 2018				December 31, 2017
In millions of dollars	Carrying value		Fair value		Carrying value		Fair value
Mortgage-backed securities
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	129		127		720		720
After 5 but within 10 years	101		99		148		149
After 10 years⁽¹⁾	26,376		25,533		25,231		25,235
Total	$	26,606	$	25,759	$	26,099	$	26,104
State and municipal
Due within 1 year	$	31	$	31	$	407	$	425
After 1 but within 5 years	131		133		259		270
After 5 but within 10 years	492		495		512		524
After 10 years⁽¹⁾	6,745		6,679		7,719		7,983
Total	$	7,399	$	7,338	$	8,897	$	9,202
Foreign government
Due within 1 year	$	114	$	114	$	381	$	381
After 1 but within 5 years	1,037		1,023		359		341
After 5 but within 10 years	—		—		—		—
After 10 years⁽¹⁾	—		—		—		—
Total	$	1,151	$	1,137	$	740	$	722
All other⁽²⁾
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	2,244		2,250		1,669		1,680
After 10 years⁽¹⁾	15,849		15,859		15,915		16,044
Total	$	18,093	$	18,109	$	17,584	$	17,724
Total debt securities held-to-maturity	$	53,249	$	52,343	$	53,320	$	53,752


(1)	Investments 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 corporate and asset-backed securities.

Evaluating Investments for Other-Than-Temporary Impairment

Overview

The Company conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. This review applies to all securities that are not measured at fair value through earnings. Effective January 1, 2018, the AFS category was eliminated for equity securities and, therefore, other-than-temporary impairment (OTTI) review is not required for those securities. See Note 1 to the Consolidated Financial Statements for additional details.

An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities. Temporary losses related to HTM debt securities generally are not recorded, as these investments are carried at adjusted amortized cost basis. However, for HTM debt securities with credit-related impairment, the credit loss is recognized in earnings as OTTI, and any difference between the cost basis adjusted for the OTTI and fair value is recognized in AOCI and amortized as an adjustment of yield over the remaining contractual life of the security. For debt securities transferred to HTM from Trading account assets, amortized cost is defined as the fair value of the securities at the date of transfer, plus any accretion income and less any impairment recognized in earnings subsequent to transfer. For debt securities transferred to HTM from AFS, amortized cost is defined as the original purchase cost, adjusted for the cumulative accretion or amortization of any purchase discount or premium, plus or minus any cumulative fair value hedge adjustments, net of accretion or amortization, and less any impairment recognized in earnings.

Regardless of the classification of securities as AFS or HTM, the Company assesses each position with an unrealized loss for OTTI. Factors considered in determining whether a loss is temporary include:


•	the length of time and the extent to which fair value has been below cost;


•	the severity of the impairment;


•	the cause of the impairment and the financial condition and near-term prospects of the issuer;


•	activity in the market of the issuer that may indicate adverse credit conditions; and


•	the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

The Company’s review for impairment generally entails:


•	identification and evaluation of impaired investments;


•	analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period;


•	consideration of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having other-than-temporary impairment and those that would not support other-than-temporary impairment; and


•	documentation of the results of these analyses, as required under business policies.

Debt Securities

The entire difference between amortized cost basis and fair value is recognized in earnings as OTTI for impaired debt securities that the Company has an intent to sell or for which the Company believes it will more-likely-than-not be required to sell prior to recovery of the amortized cost basis. However, for those securities that the Company does not intend to sell and is not likely to be required to sell, only the credit-related impairment is recognized in earnings and any non-credit-related impairment is recorded in AOCI.

For debt securities, credit impairment exists where management does not expect to receive contractual principal and interest cash flows sufficient to recover the entire amortized cost basis of a security.

AFS Equity Securities and Equity Method Investments

For AFS equity securities, prior to January 1, 2018, management considered the various factors described above, including its intent and ability to hold an equity security for a period of time sufficient for recovery to cost or whether it was more-likely-than-not that the Company would have been required to sell the security prior to recovery of its cost basis. Where management lacked that intent or ability, the security’s decline in fair value was deemed to be other-than-temporary and was recorded in earnings. Effective January 1, 2018, the AFS category has been eliminated for equity securities and, therefore, OTTI review is not required for those securities. See Note 1 to the Consolidated Financial Statements for additional details.

Management assesses equity method investments that have fair values that are less than their respective carrying values for OTTI. Fair value is measured as price multiplied by quantity if the investee has publicly listed securities. If the investee is not publicly listed, other methods are used (see Note 20 to the Consolidated Financial Statements).

For impaired equity method investments that Citi plans to sell prior to recovery of value or would likely be required to sell, with no expectation that the fair value will recover prior to the expected sale date, the full impairment is recognized in earnings as OTTI regardless of severity and duration. The measurement of the OTTI does not include partial projected recoveries subsequent to the balance sheet date.

For impaired equity method investments that management does not plan to sell and is not likely to be required to sell prior to recovery of value, the evaluation of whether an impairment is other-than-temporary is based on (i) whether and when an equity method investment will recover in value and (ii) whether the investor has the intent and ability to hold that investment for a period of time sufficient to recover the value. The determination of whether the impairment is considered other-than-temporary considers the following indicators:


•	the cause of the impairment and the financial condition and near-term prospects of the issuer, including any specific events that may influence the operations of the issuer;


•	the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value; and


•	the length of time and extent to which fair value has been less than the carrying value.

The sections below describe the Company’s process for identifying credit-related impairments for security types that have the most significant unrealized losses as of September 30, 2018.

Mortgage-Backed Securities

For U.S. mortgage-backed securities, credit impairment is assessed using a cash flow model that estimates the principal and interest cash flows on the underlying mortgages using the security-specific collateral and transaction structure. The model distributes the estimated cash flows to the various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows on the mortgage-backed securities through the current period and then estimates the remaining cash flows using a number of assumptions, including default rates, prepayment rates, recovery rates (on foreclosed properties) and loss severity rates (on non-agency mortgage-backed securities).

Management develops specific assumptions using market data, internal estimates and estimates published by rating agencies and other third-party sources. Default rates are projected by considering current underlying mortgage loan performance, generally assuming the default of (i) 10% of current loans, (ii) 25% of 30–59 day delinquent loans, (iii) 70% of 60–90 day delinquent loans and (iv) 100% of 91+ day delinquent loans. These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default rate. Other assumptions contemplate the actual collateral attributes, including geographic concentrations, rating actions and current market prices.

Cash flow projections are developed using different stress test scenarios. Management evaluates the results of those stress tests (including the severity of any cash shortfall indicated and the likelihood of the stress scenarios actually occurring based on the underlying pool’s characteristics and performance) to assess whether management expects to recover the amortized cost basis of the security. If cash flow projections indicate that the Company does not expect to recover its amortized cost basis, the Company recognizes the estimated credit loss in earnings.

State and Municipal Securities

The process for identifying credit impairments in Citigroup’s AFS and HTM state and municipal bonds is primarily based on a credit analysis that incorporates third-party credit ratings. Citigroup monitors the bond issuers and any insurers providing default protection in the form of financial guarantee insurance. The average external credit rating, ignoring any insurance, is Aa3/AA-. In the event of an external rating downgrade or other indicator of credit impairment (i.e., based on instrument-specific estimates of cash flows or probability of issuer default), the subject bond is specifically reviewed for adverse changes in the amount or timing of expected contractual principal and interest payments.

For state and municipal bonds with unrealized losses that Citigroup plans to sell, or would be more-likely-than-not required to sell, the full impairment is recognized in earnings.

Recognition and Measurement of OTTI

The following tables present total OTTI recognized in earnings:



OTTI on Investments	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
In millions of dollars	AFS⁽¹⁾		HTM		Total		AFS⁽¹⁾		HTM		Total
Impairment losses related to debt securities that the Company does not intend to sell nor will likely be required to sell:
Total OTTI losses recognized during the period	$	—	$	—	$	—	$	—	$	—	$	—
Less: portion of impairment loss recognized in AOCI (before taxes)	—		—		—		—		—		—
Net impairment losses recognized in earnings for debt securities that the Company does not intend to sell nor will likely be required to sell	$	—	$	—	$	—	$	—	$	—	$	—
Impairment losses recognized in earnings for debt securities that the Company intends to sell, would be more-likely-than-not required to sell or will be subject to an issuer call deemed probable of exercise	70		—		70		109		—		109
Total OTTI losses recognized in earnings	$	70	$	—	$	70	$	109	$	—	$	109


(1)	For the three and nine months ended September 30, 2018, amounts represent AFS debt securities. Effective January 1, 2018, the AFS category was eliminated for equity securities. See Note 1 to the Consolidated Financial Statements for additional details.



OTTI on Investments	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017
In millions of dollars	AFS ⁽¹⁾		HTM		Total		AFS⁽¹⁾		HTM		Total
Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell:
Total OTTI losses recognized during the period	$	2	$	—	$	2	$	2	$	—	$	2
Less: portion of impairment loss recognized in AOCI (before taxes)	—		—		—		—		—		—
Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell	$	2	$	—	$	2	$	2	$	—	$	2
Impairment losses recognized in earnings for securities that the Company intends to sell, would be more-likely-than-not required to sell or will be subject to an issuer call deemed probable of exercise and FX losses	12		1		13		43		2		45
Total impairment losses recognized in earnings	$	14	$	1	$	15	$	45	$	2	$	47


(1)	Includes OTTI on non-marketable equity securities.

The following are three-month rollforwards of the credit-related impairments recognized in earnings for AFS and HTM debt securities held that the Company does not intend to sell nor likely will be required to sell:



	Cumulative OTTI credit losses recognized in earnings on debt securities still held
In millions of dollars	June 30, 2018 balance		Credit impairments recognized in earnings on securities not previously impaired		Credit impairments recognized in earnings on securities that have been previously impaired		Changes due to credit-impaired securities sold, transferred or matured		September 30, 2018 balance
AFS debt securities
Mortgage-backed securities⁽¹⁾	$	1	$	—	$	—	$	—	$	1
State and municipal	—		—		—		—		—
Foreign government securities	—		—		—		—		—
Corporate	4		—		—		—		4
All other debt securities	2		—		—		—		2
Total OTTI credit losses recognized for AFS debt securities	$	7	$	—	$	—	$	—	$	7
HTM debt securities
Mortgage-backed securities	$	—	$	—	$	—	$	—	$	—
State and municipal	—		—		—		—		—
Total OTTI credit losses recognized for HTM debt securities	$	—	$	—	$	—	$	—	$	—


(1)	Primarily consists of Prime securities.



	Cumulative OTTI credit losses recognized in earnings on debt securities still held
In millions of dollars	June 30, 2017 balance		Credit impairments recognized in earnings on securities not previously impaired		Credit impairments recognized in earnings on securities that have been previously impaired		Reductions due to credit-impaired securities sold, transferred or matured		September 30, 2017 balance
AFS debt securities
Mortgage-backed securities	$	—	$	—	$	—	$	—	$	—
State and municipal	4		—		—		—		4
Foreign government securities	—		—		—		—		—
Corporate	4		—		—		—		4
All other debt securities	—		—		2		—		2
Total OTTI credit losses recognized for AFS debt securities	$	8	$	—	$	2	$	—	$	10
HTM debt securities
Mortgage-backed securities⁽¹⁾	$	97	$	—	$	—	$	—	$	97
State and municipal	3		—		—		—		3
Total OTTI credit losses recognized for HTM debt securities	$	100	$	—	$	—	$	—	$	100


(1)	Primarily consists of Alt-A securities.

The following are nine-month rollforwards of the credit-related impairments recognized in earnings for AFS and HTM debt securities held that the Company does not intend to sell nor likely will be required to sell:



	Cumulative OTTI credit losses recognized in earnings on debt securities still held
In millions of dollars	December 31, 2017 balance		Credit impairments recognized in earnings on securities not previously impaired		Credit impairments recognized in earnings on securities that have been previously impaired		Changes due to credit-impaired securities sold, transferred or matured⁽¹⁾			September 30, 2018 balance
AFS debt securities
Mortgage-backed securities⁽²⁾	$	38	$	—	$	—	$	(37	)	$	1
State and municipal	4		—		—		(4		)	—
Foreign government securities	—		—		—		—			—
Corporate	4		—		—		—			4
All other debt securities	2		—		—		—			2
Total OTTI credit losses recognized for AFS debt securities	$	48	$	—	$	—	$	(41	)	$	7
HTM debt securities
Mortgage-backed securities⁽³⁾	$	54	$	—	$	—	$	(54	)	$	—
State and municipal	3		—		—		(3		)	—
Total OTTI credit losses recognized for HTM debt securities	$	57	$	—	$	—	$	(57	)	$	—


(1)	Includes $18 million in cumulative OTTI reclassified from HTM to AFS due to the transfer of the related debt securities from HTM to AFS. Citi adopted ASU 2017-12, Targeted Improvements to Accounting for Hedge Activities, on January 1, 2018 and transferred approximately $4 billion of HTM debt securities into AFS classification as permitted as a one-time transfer under the standard.


(2)	Primarily consists of Prime securities.


(3)	Primarily consists of Alt-A securities.



	Cumulative OTTI credit losses recognized in earnings on debt securities still held
In millions of dollars	December 31, 2016 balance		Credit impairments recognized in earnings on securities not previously impaired		Credit impairments recognized in earnings on securities that have been previously impaired		Reductions due to credit-impaired securities sold, transferred or matured			September 30, 2017 balance
AFS debt securities
Mortgage-backed securities	$	—	$	—	$	—	$	—		$	—
State and municipal	4		—		—		—			4
Foreign government securities	—		—		—		—			—
Corporate	5		—		—		(1		)	4
All other debt securities	22		—		2		(22		)	2
Total OTTI credit losses recognized for AFS debt securities	$	31	$	—	$	2	$	(23	)	$	10
HTM debt securities
Mortgage-backed securities⁽¹⁾	$	101	$	—	$	—	$	(4	)	$	97
State and municipal	3		—		—		—			3
Total OTTI credit losses recognized for HTM debt securities	$	104	$	—	$	—	$	(4	)	$	100


(1)	Primarily consists of Alt-A securities.

Non-Marketable Equity Securities Not Carried at Fair Value

Effective January 1, 2018, non-marketable equity securities are required to be measured at fair value with changes in fair value recognized in earnings unless (i) the measurement alternative is elected or (ii) the investment represents Federal Reserve Bank and Federal Home Loan Bank stock or certain exchange seats that continue to be carried at cost. See Note 1 to the Consolidated Financial Statements for additional details.

The election to measure a non-marketable equity security using the measurement alternative is made on an instrument-by-instrument basis. Under the measurement alternative, an equity security is carried at cost plus or minus changes resulting from observable prices in orderly transactions for the identical or a similar investment of the same issuer. The carrying value of the equity security is adjusted to fair value on the date of an observed transaction. Fair value may differ from the observed transaction price due to a number of factors, including marketability adjustments and differences in rights and obligations when the observed transaction is not for the identical investment held by Citi.

Equity securities under the measurement alternative are also assessed for impairment. On a quarterly basis, management qualitatively assesses whether each equity security under the measurement alternative is impaired. Impairment indicators that are considered include, but are not limited to, the following:


•	a significant deterioration in the earnings performance, credit rating, asset quality or business prospects of the investee;


•	a significant adverse change in the regulatory, economic or technological environment of the investee;


•	a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates;


•	a bona fide offer to purchase, an offer by the investee to sell or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment; and


•	factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies or noncompliance with statutory capital requirements or debt covenants.

When the qualitative assessment indicates that impairment exists, the investment is written down to fair value, with the full difference between the fair value of the investment and its carrying amount recognized in earnings.

Below is the carrying value of non-marketable equity securities measured using the measurement alternative at September 30, 2018, and amounts recognized in earnings for the three and nine months ended September 30, 2018:



In millions of dollars	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Measurement alternative:
Balance as of September 30, 2018	$	452	$	452
Impairment losses⁽¹⁾	—		4
Downward changes for observable prices⁽¹⁾	14		18
Upward changes for observable prices⁽¹⁾	21		133


(1)	See Note 20 to the Consolidated Financial Statements for additional information on these nonrecurring fair value measurements.

A similar impairment analysis is performed for non-marketable equity securities carried at cost. For the three and nine months ended September 30, 2018, there was no impairment loss recognized in earnings for non-marketable equity securities carried at cost.

Investments in Alternative Investment Funds That Calculate Net Asset Value

The Company holds investments in certain alternative investment funds that calculate net asset value (NAV), or its equivalent, including hedge funds, private equity funds, funds

of funds and real estate funds, as provided by third-party asset managers. Investments in such funds are generally classified as non-marketable equity securities carried at fair value. The fair values of these investments are estimated using the NAV of the Company’s ownership interest in the funds. Some of

these investments are in “covered funds” for purposes of the Volcker Rule, which prohibits certain proprietary investment activities and limits the ownership of, and relationships with, covered funds. On April 21, 2017, Citi’s request for extension of the permitted holding period under the Volcker Rule for certain of its investments in illiquid funds was approved, allowing the Company to hold such investments until the earlier of 5 years from the July 21, 2017 expiration date of the general conformance period, or the date such investments mature or are otherwise conformed with the Volcker Rule.



	Fair value				Unfunded commitments				Redemption frequency (if currently eligible) monthly, quarterly, annually	Redemption notice period
In millions of dollars	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Hedge funds	$	—	$	1	$	—	$	—	Generally quarterly	10–95 days
Private equity funds⁽¹⁾⁽²⁾	186		372		62		62		—	—
Real estate funds ⁽²⁾⁽³⁾	14		31		19		20		—	—
Mutual/collective investment funds	25		—		—		—		—	—
Total	$	225	$	404	$	81	$	82	—	—


(1)	Private equity funds include funds that invest in infrastructure, emerging markets and venture capital.

(2)

With respect to the Company’s investments in private equity funds and real estate funds, distributions from each fund will be received as the underlying assets held by these funds are liquidated. It is estimated that the underlying assets of these funds will be liquidated over a period of several years as market conditions allow. Private equity and real estate funds do not allow redemption of investments by their investors. Investors are permitted to sell or transfer their investments, subject to the approval of the general partner or investment manager of these funds, which generally may not be unreasonably withheld.


(3)	Includes several real estate funds that invest primarily in commercial real estate in the U.S., Europe and Asia.