15. LOANS

Citigroup loans are reported in two categories—Consumer and Corporate. These categories are classified primarily according to the segment and subsegment that manage the loans.

Consumer Loans

Consumer loans represent loans and leases managed primarily by the Global Consumer Banking businesses in Citicorp and in Citi Holdings. The following table provides information by loan type:

In millions of dollars	2013			2012
Consumer loans
In U.S. offices
Mortgage and real estate(1)	$	108,453		$	125,946
Installment, revolving credit, and other	13,398			14,070
Cards	115,651			111,403
Commercial and industrial	6,592			5,344
	$	244,094		$	256,763
In offices outside the U.S.
Mortgage and real estate(1)	$	55,511		$	54,709
Installment, revolving credit, and other	33,182			33,958
Cards	36,740			40,653
Commercial and industrial	24,107			22,225
Lease financing	769			781
	$	150,309		$	152,326
Total Consumer loans	$	394,403		$	409,089
Net unearned income	(572		)	(418		)
Consumer loans, net of unearned income	$	393,831		$	408,671

(1) Loans secured primarily by real estate.

Included in the loan table above are lending products whose terms may give rise to greater credit issues. Credit cards with below-market introductory interest rates and interest-only loans are examples of such products. These products are closely managed using credit techniques that are intended to mitigate their higher inherent risk.

During the years ended December 31, 2013 and 2012, the Company sold and/or reclassified to held-for-sale $11.5 billion and $4.3 billion, respectively, of Consumer loans. During the year ended December 31, 2013, Citi acquired approximately $7 billion of loans related to the acquisition of Best Buy’s U.S. credit card portfolio. The Company did not have significant purchases of Consumer loans during the year ended December 31, 2012.

Citigroup has established a risk management process to monitor, evaluate and manage the principal risks associated with its Consumer loan portfolio. Credit quality indicators that are actively monitored include delinquency status, consumer credit scores (FICO), and loan to value (LTV) ratios, each as discussed in more detail below.

Delinquency Status

Delinquency status is monitored and considered a key indicator of credit quality of Consumer loans. Substantially all of the U.S. residential first mortgage loans use the Mortgage Banking Association (MBA) method of reporting delinquencies, which considers a loan delinquent if a monthly payment has not been received by the end of the day immediately preceding the loan’s next due date. All other loans use the Office of Thrift Supervision (OTS) method of reporting delinquencies, which considers a loan delinquent if a monthly payment has not been received by the close of business on the loan’s next due date.

As a general policy, residential first mortgages, home equity loans and installment loans are classified as non-accrual when loan payments are 90 days contractually past due. Credit cards and unsecured revolving loans generally accrue interest until payments are 180 days past due. Home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Mortgage loans in regulated bank entities discharged through Chapter 7 bankruptcy, other than FHA-insured loans, are classified as non-accrual. Commercial market loans are placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due.

The policy for re-aging modified U.S. Consumer loans to current status varies by product. Generally, one of the conditions to qualify for these modifications is that a minimum number of payments (typically ranging from one to three) be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended Consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended Consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least three consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans are modified under those respective agencies’ guidelines and payments are not always required in order to re-age a modified loan to current.

The following tables provide details on Citigroup’s Consumer loan delinquency and non-accrual loans as of December 31, 2013 and December 31, 2012:

Consumer Loan Delinquency and Non-Accrual Details at December 31, 2013

In millions of dollars	Total current(1)(2)		30-89 days past due(3)		> 90 days past due(3)		Past due government guaranteed(4)		Total loans(2)		Total non-accrual		90 days past due and accruing
In North America offices
Residential first mortgages	$	66,666	$	2,040	$	1,925	$	5,271	$	75,902	$	3,369	$	3,997
Home equity loans(5)	30,603		434		605		—		31,642		1,452		—
Credit cards	113,878		1,495		1,456		—		116,829		—		1,456
Installment and other	12,609		225		243		—		13,077		247		7
Commercial market loans	8,630		26		28		—		8,684		112		7
Total	$	232,386	$	4,220	$	4,257	$	5,271	$	246,134	$	5,180	$	5,467
In offices outside North America
Residential first mortgages	$	46,067	$	435	$	332	$	—	$	46,834	$	584	$	—
Home equity loans(5)	—		—		—		—		—		—		—
Credit cards	34,733		780		641		—		36,154		402		413
Installment and other	30,138		398		158		—		30,694		230		—
Commercial market loans	33,242		111		295		—		33,648		610		—
Total	$	144,180	$	1,724	$	1,426	$	—	$	147,330	$	1,826	$	413
Total GCB and Citi Holdings	$	376,566	$	5,944	$	5,683	$	5,271	$	393,464	$	7,006	$	5,880
Other	338		13		16		—		367		43		—
Total Citigroup	$	376,904	$	5,957	$	5,699	$	5,271	$	393,831	$	7,049	$	5,880

(1) Loans less than 30 days past due are presented as current.

(2) Includes $0.9 billion of residential first mortgages recorded at fair value.

(3) Excludes loans guaranteed by U.S. government entities.

(4) Consists of residential first mortgages that are guaranteed by U.S. government entities that are 30-89 days past due of $1.2 billion and 90 days past due of $4.1 billion.

(5) Fixed rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions.

Consumer Loan Delinquency and Non-Accrual Details at December 31, 2012

In millions of dollars	Total current(1)(2)		30-89 days past due(3)		> 90 days past due(3)		Past due government guaranteed(4)		Total loans(2)		Total non-accrual		90 days past due and accruing
In North America offices
Residential first mortgages	$	75,791	$	3,074	$	3,339	$	6,000	$	88,204	$	4,922	$	4,695
Home equity loans(5)	35,740		642		843		—		37,225		1,797		—
Credit cards	108,892		1,582		1,527		—		112,001		—		1,527
Installment and other	13,319		288		325		—		13,932		179		8
Commercial market loans	7,874		32		19		—		7,925		210		11
Total	$	241,616	$	5,618	$	6,053	$	6,000	$	259,287	$	7,108	$	6,241
In offices outside North America
Residential first mortgages	$	45,496	$	547	$	485	$	—	$	46,528	$	807	$	—
Home equity loans(5)	4		—		2		—		6		2		—
Credit cards	38,920		970		805		—		40,695		516		508
Installment and other	29,351		496		166		—		30,013		254		—
Commercial market loans	31,263		106		181		—		31,550		428		—
Total	$	145,034	$	2,119	$	1,639	$	—	$	148,792	$	2,007	$	508
Total GCB and Citi Holdings	$	386,650	$	7,737	$	7,692	$	6,000	$	408,079	$	9,115	$	6,749
Other	545		18		29		—		592		81		—
Total Citigroup	$	387,195	$	7,755	$	7,721	$	6,000	$	408,671	$	9,196	$	6,749

(1) Loans less than 30 days past due are presented as current.

(2) Includes $1.2 billion of residential first mortgages recorded at fair value.

(3) Excludes loans guaranteed by U.S. government entities.

(4) Consists of residential first mortgages that are guaranteed by U.S. government entities that are 30-89 days past due of $1.3 billion and 90 days past due of $4.7 billion.

(5) Fixed rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions.

Consumer Credit Scores (FICO)

In the U.S., independent credit agencies rate an individual’s risk for assuming debt based on the individual’s credit history and assign every consumer a “FICO” credit score. These scores are continually updated by the agencies based upon an individual’s credit actions (e.g., taking out a loan or missed or late payments).

The following table provides details on the FICO scores attributable to Citi’s U.S. Consumer loan portfolio as of December 31, 2013 and 2012 (commercial market loans are not included in the table since they are business-based and FICO scores are not a primary driver in their credit evaluation). FICO scores are updated monthly for substantially all of the portfolio or, otherwise, on a quarterly basis.

FICO score distribution in U.S. portfolio(1)(2)

	December 31, 2013
In millions of dollars	Less than 620		> 620 but less than 660		Equal to or greater than 660
Residential first mortgages	$	11,860	$	6,426	$	46,207
Home equity loans	4,093		2,779		23,152
Credit cards	8,125		10,693		94,437
Installment and other	3,900		2,399		5,186
Total	$	27,978	$	22,297	$	168,982

(1) Excludes loans guaranteed by U.S. government entities, loans subject to long-term standby commitments (LTSCs) with U.S. government-sponsored entities and loans recorded at fair value.

(2) Excludes balances where FICO was not available. Such amounts are not material.

FICO score distribution in U.S. portfolio(1)(2)

	December 31, 2012
In millions of dollars	Less than 620		> 620 but less than 660		Equal to or greater than 660
Residential first mortgages	$	16,754	$	8,013	$	50,833
Home equity loans	5,439		3,208		26,820
Credit cards	7,833		10,304		90,248
Installment and other	4,414		2,417		5,365
Total	$	34,440	$	23,942	$	173,266

(1) Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value.

(2) Excludes balances where FICO was not available. Such amounts are not material.

Loan to Value (LTV) Ratios

LTV ratios (loan balance divided by appraised value) are calculated at origination and updated by applying market price data.

The following tables provide details on the LTV ratios attributable to Citi’s U.S. Consumer mortgage portfolios as of December 31, 2013 and 2012. LTV ratios are updated monthly using the most recent Core Logic HPI data available for substantially all of the portfolio applied at the Metropolitan Statistical Area level, if available, or the state level if not. The remainder of the portfolio is updated in a similar manner using the Office of Federal Housing Enterprise Oversight indices.

LTV distribution in U.S. portfolio(1)(2)

	December 31, 2013
In millions of dollars	Less than or equal to 80%		> 80% but less than or equal to 100%		Greater than 100%
Residential first mortgages	$	45,809	$	13,458	$	5,269
Home equity loans	14,216		8,685		6,935
Total	$	60,025	$	22,143	$	12,204

(1) Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value.

(2) Excludes balances where LTV was not available. Such amounts are not material.

LTV distribution in U.S. portfolio(1)(2)

	December 31, 2012
In millions of dollars	Less than or equal to 80%		> 80% but less than or equal to 100%		Greater than 100%
Residential first mortgages	$	41,555	$	19,070	$	14,995
Home equity loans	12,611		9,529		13,153
Total	$	54,166	$	28,599	$	28,148

(1) Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value.

(2) Excludes balances where LTV was not available. Such amounts are not material.

Impaired Consumer Loans

Impaired loans are those loans that Citigroup believes it is probable all amounts due according to the original contractual terms of the loan will not be collected. Impaired Consumer loans include non-accrual commercial market loans, as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower’s financial difficulties and where Citigroup has granted a concession to the borrower. These modifications may include interest rate reductions and/or principal forgiveness. Impaired Consumer loans exclude smaller-balance homogeneous loans that have not been modified and are carried on a non-accrual basis. In addition, impaired Consumer loans exclude substantially all loans modified pursuant to Citi’s short-term modification programs (i.e., for periods of 12 months or less) that were modified prior to January 1, 2011.

As a result of OCC guidance issued in the third quarter of 2012, mortgage loans to borrowers that have gone through Chapter 7 bankruptcy are classified as troubled debt restructurings (TDRs). These TDRs, other than FHA-insured loans, are written down to collateral value less cost to sell. FHA-insured loans are reserved based on a discounted cash flow model (see Note 1 to the Consolidated Financial Statements). The recorded investment in receivables reclassified to TDRs in the third quarter of 2012 as a result of this OCC guidance approximated $1,714 million, composed of $1,327 million of residential first mortgages and $387 million of home equity loans.

The following tables present information about total impaired Consumer loans at and for the years ending December 31, 2013 and 2012, respectively:

Impaired Consumer Loans

At and for the year ended December 31, 2013

In millions of dollars

Recorded
investment(1)(2)

Unpaid
principal balance

Related
specific allowance(3)

Average
carrying value(4)

Interest income
recognized(5)(6)

Mortgage and real estate

Residential first mortgages

16,801

17,788

2,309

17,616

790

Home equity loans

2,141

2,806

427

2,116

Credit cards

3,339

3,385

1,178

3,720

234

Installment and other

Individual installment and other

1,114

1,143

536

1,094

153

Commercial market loans

398

605

183

404

Total(7)

23,793

25,727

4,633

24,950

1,280

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans.

(2) $2,169 million of residential first mortgages, $568 million of home equity loans and $111 million of commercial market loans do not have a specific allowance.

(3) Included in the Allowance for loan losses.

(4) Average carrying value represents the average recorded investment ending balance for the last four quarters and does not include the related specific allowance.

(5) Includes amounts recognized on both an accrual and cash basis.

(6) Cash interest receipts on smaller-balance homogeneous loans are generally recorded as revenue. The interest recognition policy for commercial market loans is identical to that for Corporate loans, as described below.

(7) Prior to 2008, the Company’s financial accounting systems did not separately track impaired smaller-balance, homogeneous Consumer loans whose terms were modified due to the borrowers’ financial difficulties and where it was determined that a concession was granted to the borrower. Smaller-balance Consumer loans modified since January 1, 2008 amounted to $23.4 billion at December 31, 2013. However, information derived from Citi’s risk management systems indicates that the amounts of outstanding modified loans, including those modified prior to 2008, approximated $24.0 billion at December 31, 2013.

	At and for the year ended December 31, 2012
In millions of dollars	Recorded investment(1)(2)		Unpaid principal balance		Related specific allowance(3)		Average carrying value(4)		Interest income recognized(5)(6)(7)
Mortgage and real estate
Residential first mortgages	$	20,870	$	22,062	$	3,585	$	19,956	$	875
Home equity loans	2,135		2,727		636		1,911		68
Credit cards	4,584		4,639		1,800		5,272		308
Installment and other
Individual installment and other	1,612		1,618		860		1,958		248
Commercial market loans	439		737		60		495		21
Total(8)	$	29,640	$	31,783	$	6,941	$	29,592	$	1,520

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans.

(2) $2,344 million of residential first mortgages, $378 million of home equity loans and $183 million of commercial market loans do not have a specific allowance.

(3) Included in the Allowance for loan losses.

(4) Average carrying value represents the average recorded investment ending balance for last four quarters and does not include related specific allowance.

(5) Includes amounts recognized on both an accrual and cash basis.

(7) Interest income recognized for the year ended December 31, 2011 was $1,711 million.

(8) Prior to 2008, the Company’s financial accounting systems did not separately track impaired smaller-balance, homogeneous Consumer loans whose terms were modified due to the borrowers’ financial difficulties and where it was determined that a concession was granted to the borrower. Smaller-balance Consumer loans modified since January 1, 2008 amounted to $29.2 billion at December 31, 2012. However, information derived from Citi’s risk management systems indicates that the amounts of outstanding modified loans, including those modified prior to 2008, approximated $30.1 billion at December 31, 2012.

Consumer Troubled Debt Restructurings

The following tables present Consumer TDRs occurring during the years ended December 31, 2013 and 2012:

	At and for the year ended December 31, 2013
In millions of dollars except number of loans modified	Number of loans modified	Post- modification recorded investment(1)(2)		Deferred principal(3)		Contingent principal forgiveness(4)		Principal forgiveness(5)		Average interest rate reduction
North America
Residential first mortgages	32,116	$	4,160	$	68	$	25	$	158	1	%
Home equity loans	11,043	349		1		—		91		1
Credit cards	172,211	826		—		—		—		14
Installment and other revolving	53,326	381		—		—		—		7
Commercial markets(6)	202	39		—		—		—		—
Total	268,898	$	5,755	$	69	$	25	$	249
International
Residential first mortgages	3,618	$	161	$	—	$	—	$	2	1	%
Home equity loans	68	2		—		—		—		—
Credit cards	199,025	613		—		—		21		15
Installment and other revolving	65,708	351		—		—		10		8
Commercial markets(6)	413	104		2		—		—		—
Total	268,832	$	1,231	$	2	$	—	$	33

	At and for the year ended December 31, 2012
In millions of dollars except number of loans modified	Number of loans modified	Post- modification recorded investment(1)(7)		Deferred principal(3)		Contingent principal forgiveness(4)		Principal forgiveness(5)		Average interest rate reduction
North America
Residential first mortgages	66,759	$	9,081	$	22	$	3	$	218	1	%
Home equity loans	32,710	833		5		—		78		2
Credit cards	234,460	1,191		—		—		—		15
Installment and other revolving	67,605	488		—		—		—		6
Commercial markets(6)	170	18		—		—		—		—
Total	401,704	$	11,611	$	27	$	3	$	296
International
Residential first mortgages	5,237	$	197	$	—	$	—	$	3	1	%
Home equity loans	7	1		—		—		—		—
Credit cards	142,107	528		—		—		23		15
Installment and other revolving	64,153	372		—		1		9		8
Commercial markets(6)	377	171		—		1		2		—
Total	211,881	$	1,269	$	—	$	2	$	37

(1) Post-modification balances include past due amounts that are capitalized at modification date.

(2) Post-modification balances in North America include $502 million of residential first mortgages and $101 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2013. These amounts include $332 million of residential first mortgages and $85 million of home equity loans that are newly classified as TDRs as a result of OCC guidance received in the year ended December 31, 2013, as described above.

(3) Represents portion of contractual loan principal that is non-interest bearing but still due from the borrower. Such deferred principal is charged off at the time of permanent modification to the extent that the related loan balance exceeds the underlying collateral value.

(4) Represents portion of contractual loan principal that is non-interest bearing and, depending upon borrower performance, eligible for forgiveness.

(5) Represents portion of contractual loan principal that was forgiven at the time of permanent modification.

(6) Commercial markets loans are generally borrower-specific modifications and incorporate changes in the amount and/or timing of principal and/or interest.

(7) Post-modification balances in North America include $2,702 million of residential first mortgages and $498 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2012. These amounts include $1,401 million of residential first mortgages and $408 million of home equity loans that are newly classified as TDRs as a result of OCC guidance received in the year ended December 31, 2012, as described above.

The following table presents Consumer TDRs that defaulted during the years ended December 31, 2013 and 2012, respectively, and for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due, except for classifiably managed commercial markets loans, where default is defined as 90 days past due.

	Year ended December 31,		Year ended December 31,
In millions of dollars	2013		2012
North America
Residential first mortgages	$	1,532	$	1,323
Home equity loans	180		126
Credit cards	204		508
Installment and other revolving	91		130
Commercial markets	3		—
Total	$	2,010	$	2,087
International
Residential first mortgages	$	61	$	74
Home equity loans	—		—
Credit cards	222		199
Installment and other revolving	105		106
Commercial markets	15		5
Total	$	403	$	384

Corporate Loans

Corporate loans represent loans and leases managed by the Institutional Clients Group in Citicorp or, to a much lesser extent, in Citi Holdings. The following table presents information by Corporate loan type as of December 31, 2013 and 2012:

In millions of dollars	December 31, 2013			December 31, 2012
Corporate
In U.S. offices
Commercial and industrial	$	32,704		$	26,985
Financial institutions	25,102			18,159
Mortgage and real estate(1)	29,425			24,705
Installment, revolving credit and other	34,434			32,446
Lease financing	1,647			1,410
	$	123,312		$	103,705
In offices outside the U.S.
Commercial and industrial	$	82,663		$	82,939
Financial institutions	38,372			37,739
Mortgage and real estate(1)	6,274			6,485
Installment, revolving credit and other	18,714			14,958
Lease financing	527			605
Governments and official institutions	2,341			1,159
	$	148,891		$	143,885
Total Corporate loans	$	272,203		$	247,590
Net unearned income	(562		)	(797		)
Corporate loans, net of unearned income	$	271,641		$	246,793

(1) Loans secured primarily by real estate.

The Company sold and/or reclassified (to held-for-sale) $5.8 billion and $4.4 billion of Corporate loans for the years ended December 31, 2013 and 2012, respectively.

Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired Corporate loans and leases is reversed at 90 days 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 collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. While Corporate loans are generally managed based on their internally assigned risk rating (see further discussion below), the following tables present delinquency information by Corporate loan type as of December 31, 2013 and December 31, 2012:

Corporate Loan Delinquency and Non-Accrual Details at December 31, 2013

In millions of dollars

30-89 days
past due
and accruing(1)

> 90 days
past due and
accruing(1)

Total past due
and accruing

Total
non-accrual(2)

Total
current(3)

Total
loans

Commercial and industrial

769

112,985

113,831

Financial institutions

—

365

61,704

62,069

Mortgage and real estate

183

175

358

515

34,027

34,900

Leases

189

1,975

2,174

Other

54,476

54,595

Loans at fair value

4,072

Total

311

183

494

1,908

265,167

271,641

(1) Corporate loans that are 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid.

(2) Citi generally does not manage Corporate loans on a delinquency basis. Non-accrual loans generally include those loans that are > 90 days past due or those loans for which Citi believes, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful.

(3) Corporate loans are past due when principal or interest is contractually due but unpaid. Loans less than 30 days past due are presented as current.

Corporate Loan Delinquency and Non-Accrual Details at December 31, 2012

In millions of dollars	30-89 days past due and accruing(1)		> 90 days past due and accruing(1)		Total past due and accruing		Total non-accrual(2)		Total current(3)		Total loans
Commercial and industrial	$	38	$	10	$	48	$	1,078	$	107,650	$	108,776
Financial institutions	5		—		5		454		53,858		54,317
Mortgage and real estate	224		109		333		680		30,057		31,070
Leases	7		—		7		52		1,956		2,015
Other	70		6		76		69		46,414		46,559
Loans at fair value											4,056
Total	$	344	$	125	$	469	$	2,333	$	239,935	$	246,793

(1) Corporate loans that are 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid.

(3) Corporate loans are past due when principal or interest is contractually due but unpaid. Loans less than 30 days past due are presented as current.

Citigroup has a risk management process to monitor, evaluate and manage the principal risks associated with its Corporate loan portfolio. As part of its risk management process, Citi assigns numeric risk ratings to its Corporate loan facilities based on quantitative and qualitative assessments of the obligor and facility. These risk ratings are reviewed at least annually or more often if material events related to the obligor or facility warrant. Factors considered in assigning the risk ratings include: financial condition of the obligor, qualitative assessment of management and strategy, amount and sources of repayment, amount and type of collateral and guarantee arrangements, amount and type of any contingencies associated with the obligor, and the obligor’s industry and geography.

The obligor risk ratings are defined by ranges of default probabilities. The facility risk ratings are defined by ranges of loss norms, which are the product of the probability of default and the loss given default. The investment grade rating categories are similar to the category BBB-/Baa3 and above as defined by S&P and Moody’s. Loans classified according to the bank regulatory definitions as special mention, substandard and doubtful will have risk ratings within the non-investment grade categories.

Corporate Loans Credit Quality Indicators at December 31, 2013 and 2012

	Recorded investment in loans(1)
In millions of dollars	December 31, 2013		December 31, 2012
Investment grade(2)
Commercial and industrial	$	79,360	$	73,822
Financial institutions	49,699		43,895
Mortgage and real estate	13,178		12,587
Leases	1,600		1,404
Other	51,370		42,575
Total investment grade	$	195,207	$	174,283
Non-investment grade(2)
Accrual
Commercial and industrial	$	33,702	$	33,876
Financial institutions	12,005		9,968
Mortgage and real estate	4,205		2,858
Leases	385		559
Other	3,155		3,915
Non-accrual
Commercial and industrial	769		1,078
Financial institutions	365		454
Mortgage and real estate	515		680
Leases	189		52
Other	70		69
Total non-investment grade	$	55,360	$	53,509
Private Banking loans managed on a delinquency basis (2)	$	17,002	$	14,945
Loans at fair value	4,072		4,056
Corporate loans, net of unearned income	$	271,641	$	246,793

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs.

(2) Held-for-investment loans are accounted for on an amortized cost basis.

Corporate loans and leases identified as impaired and placed on non-accrual status are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of 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, less cost to sell. 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, generally six months, in accordance with the contractual terms of the loan.

The following tables present non-accrual loan information by Corporate loan type at and for the years ended December 31, 2013, and 2012, respectively:

Non-Accrual Corporate Loans

	At and for the year ended December 31, 2013
In millions of dollars	Recorded investment(1)		Unpaid principal balance		Related specific allowance		Average carrying value(2)		Interest income recognized (3)
Non-accrual Corporate loans
Commercial and industrial	$	769	$	1,074	$	79	$	967	$	30
Financial institutions	365		382		3		378		9
Mortgage and real estate	515		651		35		585		3
Lease financing	189		190		131		189		—
Other	70		216		20		64		1
Total non-accrual Corporate loans	$	1,908	$	2,513	$	268	$	2,183	$	43

	At and for the year ended December 31, 2012
In millions of dollars	Recorded investment(1)		Unpaid principal balance		Related specific allowance		Average carrying value(2)		Interest income recognized (3)
Non-accrual Corporate loans
Commercial and industrial	$	1,078	$	1,368	$	155	$	1,076	$	65
Financial institutions	454		504		14		518		—
Mortgage and real estate	680		810		74		811		23
Lease financing	52		61		16		19		2
Other	69		245		25		154		8
Total non-accrual Corporate loans	$	2,333	$	2,988	$	284	$	2,578	$	98

	December 31, 2013				December 31, 2012
In millions of dollars	Recorded investment(1)		Related specific allowance		Recorded investment(1)		Related specific allowance
Non-accrual Corporate loans with valuation allowances
Commercial and industrial	$	401	$	79	$	608	$	155
Financial institutions	24		3		41		14
Mortgage and real estate	253		35		345		74
Lease financing	186		131		47		16
Other	61		20		59		25
Total non-accrual Corporate loans with specific allowance	$	925	$	268	$	1,100	$	284
Non-accrual Corporate loans without specific allowance
Commercial and industrial	$	368			$	470
Financial institutions	341				413
Mortgage and real estate	262				335
Lease financing	3				5
Other	9				10
Total non-accrual Corporate loans without specific allowance	$	983	N/A		$	1,233	N/A

(1) Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs.

(2) Average carrying value represents the average recorded investment balance and does not include related specific allowance.

(3) Interest income recognized for the year ended December 31, 2011 was $109 million.

N/A Not Applicable

Corporate Troubled Debt Restructurings

The following table presents TDR activity at and for the year ended December 31, 2013.

In millions of dollars	Carrying Value		TDRs involving changes in the amount and/or timing of principal payments(1)		TDRs involving changes in the amount and/or timing of interest payments(2)		TDRs involving changes in the amount and/or timing of both principal and interest payments		Balance of principal forgiven or deferred		Net P&L impact(3)
Commercial and industrial	$	130	$	55	$	58	$	17	$	—	$	1
Financial institutions	—		—		—		—		—		—
Mortgage and real estate	34		19		14		1		—		—
Other	5		—		—		5		—		—
Total	$	169	$	74	$	72	$	23	$	—	$	1

(1) TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal payments.

(2) TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate.

(3) Balances reflect charge-offs and reserves recorded during the year ended December 31, 2013 on loans subject to a TDR during the period then ended.

The following table presents TDR activity at and for the year ended December 31, 2012.

In millions of dollars	Carrying Value		TDRs involving changes in the amount and/or timing of principal payments(1)		TDRs involving changes in the amount and/or timing of interest payments(2)		TDRs involving changes in the amount and/or timing of both principal and interest payments		Balance of principal forgiven or deferred		Net P&L impact(3)
Commercial and industrial	$	99	$	84	$	4	$	11	$	—	$	1
Financial institutions	—		—		—		—		—		—
Mortgage and real estate	113		60		—		53		—		—
Other	—		—		—		—		—		—
Total	$	212	$	144	$	4	$	64	$	—	$	1

(1) TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal payments.

(2) TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate.

(3) Balances reflect charge-offs and reserves recorded during the year ended December 31, 2012 on loans subject to a TDR during the period then ended.

The following table presents total Corporate loans modified in a TDR at December 31, 2013 and 2012, as well as those TDRs that defaulted during the years ended 2013 and 2012, and for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due, except for classifiably managed commercial markets loans, where default is defined as 90 days past due.

	TDR balances at		TDR loans in payment default during the year ended		TDR balances at		TDR loans in payment default during the year ended
In millions of dollars	December 31, 2013		December 31, 2013		December 31, 2012		December 31, 2012
Commercial and industrial	$	197	$	27	$	275	$	94
Loans to financial institutions	14		—		17		—
Mortgage and real estate	161		17		131		—
Other	422		—		450		—
Total	$	794	$	44	$	873	$	94

Purchased Distressed Loans

Included in the Corporate and Consumer loan outstanding tables above are purchased distressed loans, which are loans that have evidenced significant credit deterioration subsequent to origination but prior to acquisition by Citigroup. In accordance with SOP 03-3 (codified as ASC 310-30), the difference between the total expected cash flows for these loans and the initial recorded investment is recognized in income over the life of the loans using a level yield. Accordingly, these loans have been excluded from the impaired loan table information presented above. In addition, per SOP 03-3, subsequent decreases in the expected cash flows for a purchased distressed loan require a build of an allowance so the loan retains its level yield. However, increases in the expected cash flows are first recognized as a reduction of any previously established allowance and then recognized as income prospectively over the remaining life of the loan by increasing the loan’s level yield. Where the expected cash flows cannot be reliably estimated, the purchased distressed loan is accounted for under the cost recovery method. The carrying amount of the Company’s purchased distressed loan portfolio was $636 million and $440 million, net of an allowance of $113 million, and $98 million at December 31, 2013 and December 31, 2012, respectively.

The changes in the accretable yield, related allowance and carrying amount net of accretable yield for 2013 and 2012 are as follows:

In millions of dollars	Accretable yield			Carrying amount of loan receivable			Allowance
Balance at December 31, 2011	$	2		$	511		$	68
Purchases (1)	15			269			—
Disposals/payments received	(6		)	(171		)	(6		)
Accretion	—			—			—
Builds (reductions) to the allowance	9			—			41
Increase to expected cash flows	5			1			—
FX/other	(3		)	(72		)	(5		)
Balance at December 31, 2012 (2)	$	22		$	538		$	98
Purchases (1)	46			405			—
Disposals/payments received	(5		)	(154		)	(8		)
Accretion	(10		)	10			—
Builds (reductions) to the allowance	22			—			25
Increase to expected cash flows	3			—			—
FX/other	—			(50		)	(2		)
Balance at December 31, 2013 (2)	$	78		$	749		$	113

(1) The balance reported in the column “Carrying amount of loan receivable” consists of $405 million and $269 million in 2013 and 2012, respectively, of purchased loans accounted for under the level-yield method. No purchased loans were accounted for under the cost-recovery method. These balances represent the fair value of these loans at their acquisition date. The related total expected cash flows for the level-yield loans at their acquisition dates were $451 million and $285 million in 2013 and 2012, respectively.

(2) The balance reported in the column “Carrying amount of loan receivable” consists of $737 million $524 million of loans accounted for under the level-yield method and $12 million and $14 million accounted for under the cost-recovery method in 2013 and 2012, respectively.