technology companies. Other factors that could impact Citi’s ability to attract and retain employees include its culture ~~compensation,~~ and the management and leadership of the ~~company~~Company as well as its individual businesses, presence in the particular market or region at issue and the professional opportunities it offers.

~~U.S. and Non-U.S.~~ Financial Services Companies and Others as well as Emerging Technologies Pose Increasingly Competitive Challenges to Citi.

Citi operates in an increasingly competitive environment, which includes both financial and non-financial services ~~firms.~~firms, such as traditional banks, online banks, financial technology companies and others. These companies compete on the basis of, among other factors, size, quality and type of products and services offered, price, technology and reputation. Emerging technologies have the potential to intensify competition and accelerate disruption in the financial services industry. Citi competes with financial services companies in the U.S. and globally ~~which continually~~that continue to develop and introduce new products and services. In ~~addition, in~~ recent years, non-financial services firms, such as financial technology ~~firms,~~companies, have begun to offer services traditionally provided by financial institutions, such as Citi. These firms attempt to use technology and mobile platforms to enhance the ability of companies and individuals to borrow money, save and invest. To the extent itCiti is not able to compete effectively ~~compete~~ with these and other firms, Citi could be placed at a competitive disadvantage, which could result in loss of customers and market share, and its businesses, results of operations and financial condition could suffer. For additional information on Citi’s competitors, see the co-brand and private label cards risk factor above and “Supervision, Regulation and Other—Competition” below.

Uncertainties Regarding the Possible Discontinuance of the London Inter-Bank Offered Rate (LIBOR) or Any Other Interest Rate Benchmark Could Have Adverse Consequences for Market Participants, Including Citi.

In 2017, the U.K. Financial Conduct Authority (FCA) noted that market conditions raised serious questions about the future sustainability of LIBOR benchmarks. With the FCA securing voluntary panel bank support to sustain LIBOR only until 2021, the future of LIBOR beyond 2021 remains uncertain. In addition, following guidance provided by the Financial Stability Board (FSB), other regulators have suggested reforming or replacing other benchmark rates with alternative reference rates.

Given LIBOR’s extensive use across financial markets, the transition away from LIBOR presents various risks and challenges to financial markets and institutions, including Citi. Citi’s consumer and institutional businesses issue, trade, hold or otherwise use various products and securities that reference LIBOR, including, among others, mortgages and other consumer loans, commercial loans, corporate loans, various types of debt, derivatives and other securities. If not sufficiently planned for, the discontinuation of LIBOR or any other interest rate benchmark could result in increased financial, operational, legal, reputational or compliance risks. For example, a significant challenge will be the impact of LIBOR transition on contractual mechanics of floating rate

financial instruments and contracts that reference LIBOR and mature after 2021. Certain of these instruments and contracts do not provide for alternative reference rates. Even if the instruments and contracts transition to alternative reference rates, the new reference rates are likely to differ from the prior benchmark rates. While there are a number of international working groups focused on transition plans and fallback contract language that seek to address market disruption and value transfer, replacement of LIBOR or any other benchmark with a new benchmark rate could adversely impact the value of and return on existing instruments and contracts. Moreover, replacement of LIBOR or other benchmark rates could result in market dislocations and have other adverse consequences for market participants, including the potential for increased costs, including by requiring Citi to pay higher interest on its obligations, and litigation risks. For information about Citi’s management of LIBOR transition risk, see “Managing Global Risk—Strategic Risk—LIBOR Transition Risk” below.

CREDIT RISKS

Credit Risk and Concentrations of Risk Can Increase the Potential for Citi to Incur Significant Losses.

Credit risk arises from Citi’s lending and other businesses in both GCB and ICG. Citi has credit exposures to counterparties in the U.S. and various countries and jurisdictions globally, including end-of-period consumer loans of $331 billion and end-of-period corporate loans of $354 billion at year-end 2018. A default by a borrower or counterparty, or a decline in the credit quality or value of any underlying collateral, exposes Citi to credit risk. Various macroeconomic, geopolitical and other factors, among other things, can increase Citi’s credit risk and credit costs (for additional information, see co-branding and private label credit card and macroeconomic challenges and uncertainties risk factors above). While Citi provides reserves for probable losses for its credit exposures, such reserves are subject to judgments and estimates that could be incorrect or differ from actual future events (see incorrect assumptions or estimates risk factor below). For additional information on Citi’s credit and country risk, see each respective business’ results of operations above and “Managing Global Risk—Credit Risk” and “Managing Global Risk—Strategic Risk—Country Risk” below and Note 14 to the Consolidated Financial Statements.

Concentrations of risk, particularly credit and market ~~risk,~~risks, can also increase Citi’s risk of significant losses. As of year-end ~~2017,~~2018, Citi’s most significant concentration of credit risk was with the U.S. government and its agencies, which primarily results from trading assets and investments issued by the U.S. government and its agencies (for additional information, including concentrations of credit risk to other public sector entities, see Note 23 to the Consolidated Financial Statements). Citi also routinely executes a high volume of securities, trading, derivative and foreign exchange transactions with non-U.S. sovereigns and with counterparties in the financial services industry, including banks, insurance companies, investment banks, governments, central banks and other financial institutions.

As regulatory or market developments continue to lead to increased centralization of trading activity through particular clearing houses, central agents, exchanges or other financial market utilities, Citi could also experience an increase in concentration of risk to these industries. These concentrations of risk as well as the risk of failure A rapid deterioration of a large counterparty ~~central counterparty clearing house~~ or ~~financial~~within a sector or country where Citi has large

exposures or unexpected market ~~utility~~dislocations could ~~limit the effectiveness of Citi’s hedging strategies and~~ cause Citi to incur significant losses.

LIQUIDITY RISKS

The Maintenance of Adequate Liquidity and Funding Depends on Numerous Factors, Including Those Outside of Citi’s Control, Such as Market Disruptions and Increases in Citi’s Credit Spreads.

As a global financial institution, adequate liquidity and sources of funding are essential to Citi’s businesses. Citi’s liquidity and sources of funding can be significantly and negatively impacted by factors it cannot control, such as general disruptions in the financial markets, governmental fiscal and monetary policies, regulatory changes or negative investor perceptions of Citi’s ~~creditworthiness.~~

creditworthiness, unexpected increases in cash or collateral requirements and the inability to monetize available liquidity resources. For example, Citi competes with other banks and financial institutions for deposits, which represent Citi’s most stable and lowest cost of long-term funding. The competitive environment has increased for retail banking deposits, including as online banks and other competitors have increased rates paid for deposits. More recently, as interest rates have increased, a growing number of customers have transferred deposits to other products, including investments and interest bearing accounts, and/or other financial institutions. This, along with slower industry growth in deposits, has resulted in a more challenging environment for deposits. In addition, as interest rates continue to rise, financial institutions, such as Citi, may have to raise the rates paid for deposits, thus increasing the cost of funds and affecting net interest income and margin.

Moreover, Citi’s costs to obtain and access secured funding and long-term unsecured funding are directly related to its credit spreads. Changes in credit spreads constantly occur and are market driven, including both external market factors and factors specific to Citi, and can be highly volatile. For additional information on Citi’s primary sources of funding, see “Liquidity Risk” below.

~~Moreover,~~In addition, Citi’s ability to obtain funding may be impaired if other market participants are seeking to access the markets at the same time, or if market appetite is reduced, as is likely to occur in a liquidity or other market crisis. A sudden drop in market liquidity could also cause a temporary or lengthier dislocation of underwriting and capital markets activity. In addition, clearing organizations, ~~regulators,~~central banks, clients and financial institutions with which Citi interacts may exercise the right to require additional collateral based on these market perceptions or market conditions, which could further impair Citi’s access to and cost of funding.

As a holding company, Citi relies on interest, dividends, distributions and other payments from its subsidiaries to fund

dividends as well as to satisfy its debt and other obligations. Several of Citi’s U.S. and non-U.S. subsidiaries are or may be subject to capital adequacy or other regulatory or contractual restrictions on their ability to provide such payments, including any local regulatory stress test requirements. Limitations on the payments that Citi receives from its subsidiaries could also impact its liquidity.

The Credit Rating Agencies Continuously Review the Credit Ratings of Citi and Certain of Its Subsidiaries, and Ratings Downgrades Could Have a Negative Impact on Citi’s Funding and Liquidity Due to Reduced Funding Capacity and Increased Funding Costs, Including Derivatives Triggers That Could Require Cash Obligations or Collateral Requirements.

The credit rating agencies, such as Fitch, Moody’s and S&P, continuously evaluate Citi and certain of its subsidiaries, and their ratings of Citi and its more significant subsidiaries’ long-term/senior debt and short-term/commercial paper, as applicable, are based on a number of factors, including standalone financial strength, as well as factors not entirely within the control of Citi and its subsidiaries, such as the agencies’ proprietary rating ~~agency~~ methodologies and assumptions,and conditions affecting the financial services industry and markets generally.

Citi and its subsidiaries may not be able to maintain their current respective ratings. Ratings downgrades could negatively impact Citi’s ability to access the capital markets and other sources of funds as well as the costs of those funds, and its ability to maintain certain deposits. A ratings downgrade could also have a negative impact on Citi’s funding and liquidity due to reduced funding capacity, as well as the impact of derivative triggers, which could require Citi to meet cash obligations and collateral requirements. In addition, a ratings downgrade could also have a negative impact on other funding sources, such as secured financing and other margined transactions for which there may be no explicit triggers, as well as on contractual provisions and other credit requirements of Citi’s counterparties and clients, which may contain minimum ratings thresholds in order for Citi to hold third-party funds.

Moreover, credit ratings downgrades can have impacts that may not be currently known to Citi or are not possible to quantify. For example, some entities may have ratings limitations as to their permissible counterparties, of which Citi may or may not be aware. ~~In addition,~~Further, certain of Citi’s corporate customers and trading counterparties, among other clients, could re-evaluate their business relationships with Citi and limit the trading of certain contracts or market instruments with Citi in response to ratings downgrades. Changes in customer and counterparty behavior could impact not only Citi’s funding and liquidity but also the results of operations of certain Citi businesses. For additional information on the potential impact of a reduction in Citi’s or Citibank’s credit ratings, see “Managing Global Risk—Liquidity Risk” below.

OPERATIONAL RISKS

A Disruption of Citi’s Operational Systems Could Negatively Impact Citi’s Reputation, Customers, Clients, Businesses or Results of Operations and Financial Condition.

A significant portion of Citi’s operations relies heavily on the secure processing, storage and transmission of confidential and other information as well as the monitoring of a large number of complex transactions on a minute-by-minute basis. For example, through its ~~Global Consumer Banking~~GCB and ~~credit card~~treasury and trade solutions and securities services businesses in ~~Institutional Clients Group~~ICG, Citi obtains and stores an extensive amount of personal and client-specific information for its retail, corporate and governmental customers and clients and must accurately record and reflect their extensive account transactions.

With the evolving proliferation of new technologies and the increasing use of the Internet, mobile devices and cloud technologies to conduct financial transactions, large global financial institutions such as Citi have been, and will continue to be, subject to an increasing risk of operational disruption or cyber or information security incidents from these activities (for additional information on cybersecurity risk, see the discussion below). These incidents are unpredictable and can arise from numerous sources, not all of which are in Citi’s control, including, among others, human error, fraud or malice on the part of employees, accidental technological failure, electrical or telecommunication outages, failures of computer servers or other similar damage to Citi’s property or assets. These issues can also arise as a result of failures by third parties with which Citi does business, such as failures by Internet, mobile technology and cloud service providers or other vendors to adequately safeguard their systems and prevent system disruptions or cyber attacks.

Such events could cause interruptions or malfunctions in the operations of Citi (such as the temporary loss of availability of Citi’s online banking system or mobile banking platform), as well as the operations of its clients, customers or other third parties. Given Citi’s global footprint and the high volume of transactions processed by Citi, certain errors or actions may be repeated or compounded before they are discovered and rectified, which would further increase these costs and consequences. Any such events could also result in financial losses as well as misappropriation, corruption or loss of confidential and other information or assets, which could negatively impact Citi’s reputation, customers, clients, businesses or results of operations and financial condition, perhaps significantly.

~~Citi’s~~Citi and Third Parties’ Computer Systems and Networks Have Been, and Will Continue to Be, ~~Subject~~Susceptible to an Increasing Risk of Continually Evolving, Sophisticated Cybersecurity ~~Risks~~Activities That Could Result in the Theft, Loss, Misuse or Disclosure of Confidential Client or Customer Information, Damage to Citi’s Reputation, Additional Costs to Citi, Regulatory Penalties, Legal Exposure and Financial Losses.

Citi’s computer systems, software and networks are subject to ongoing cyber incidents such as unauthorized access, loss or destruction of data (including confidential client information),

account takeovers, unavailability of service, computer viruses or other malicious code, cyber attacks and other similar events. These threats can arise from external parties, including ~~criminal organizations, extremist parties~~cyber criminals, cyber terrorists, hacktivists and ~~certain foreign~~nation state actors, ~~that~~as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities.

Third parties with which Citi does business, as well as retailers and other third parties with which Citi’s customers do business, may also be sources of cybersecurity risks, particularly where activities of customers are beyond Citi’s security and control systems. For example, Citi outsources certain functions, such as processing customer credit card transactions, uploading content on customer-facing websites, and developing software for new products and services. These relationships allow for the storage and processing of customer information by third-party hosting of or access to Citi websites, which could result in compromise or the potential to introduce vulnerable or malicious code, resulting in security breaches impacting Citi customers. Furthermore, because financial institutions are becoming increasingly interconnected with central agents, exchanges and clearing houses, including as a result of the derivatives reforms over the last few years, Citi has increased exposure to cyber attacks through third parties.

As further evidence of the increasing and potentially significant impact of cyber incidents, in 2017, a credit bureau reported a cyber incident that impacted sensitive information of an estimated 143 million consumers. In addition, in recent years, several U.S. retailers and financial institutions and other multinational companies reported cyber incidents that compromised customer data or resulted in theft of funds or theft or destruction of corporate information or other assets. Moreover, the U.S. government as well as several multinational companies reported cyber incidents in prior years that affected their computer systems resulting in the data of millions of customers and employees being compromised. These incidents have resulted in increased legislative and regulatory scrutiny of firms’ cybersecurity protection services and calls for additional laws and regulations to further enhance protection of consumers’ personal data.

~~While Citi has not been materially impacted by these reported or other cyber incidents,~~ Citi has been subject to ~~other~~ intentional cyber incidents from external sources over the last several years, including (i) denial of service attacks, which attempted to interrupt service to clients and customers, (ii) data breaches, which obtained unauthorized access to customer account data and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the extraction of client data. While Citi’s monitoring and protection services were able to detect and respond to the incidents targeting its systems before they became significant, they still resulted in limited losses in some instances as well as increases in expenditures to monitor against the threat of similar future cyber incidents. There can be no assurance that such cyber incidents will not occur again, and they could occur more frequently and on a more significant scale.

Further, although Citi devotes significant resources to implement, maintain, monitor and regularly upgrade its systems and networks with measures such as intrusion

detection and prevention and firewalls to safeguard critical business applications, there is no guarantee that these measures or any other measures can provide absolute security. Because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched or even later, Citi may be unable to implement effective preventive measures or proactively address these methods until they are discovered. In addition, given the evolving nature of cyber threat actors and the frequency and sophistication of cyber activities they carry out, the determination of the severity and potential impact of a cyber incident may not occur for a substantial period until after the incident has been discovered. Also, while Citi engages in certain actions to reduce the exposure resulting from outsourcing, such as performing ~~onsite~~ security control assessments of third-party vendors and limiting third-party access to the

least privileged level necessary to perform job functions, these actions cannot prevent all ~~external~~third-party related cyber attacks ~~information breaches~~ or ~~similar losses.~~data breaches.

Cyber incidents can result in the disclosure of personal, confidential or proprietary customer or client information, damage to Citi’s reputation with its clients and the market, customer dissatisfaction and additional costs, ~~(including~~including credit ~~costs)~~costs, to Citi, ~~(such~~such as repairing systems, replacing customer payment cards or adding new personnel or protection ~~technologies), regulatory~~technologies. Regulatory penalties, loss of revenues, exposure to litigation and other financial losses, including loss of funds, to both Citi and its clients and customers and disruption to Citi’s operational systems could also result from cyber incidents (for additional information on the potential impact ~~from cyber incidents,~~of operational disruptions, see the operational systems risk factor above). Moreover, the increasing risk of cyber incidents has resulted in increased legislative and regulatory scrutiny of firms’ cybersecurity protection services and calls for additional laws and regulations to further enhance protection of consumers’ personal data.

While Citi maintains insurance coverage that may, subject to policy terms and conditions including significant self-insured deductibles, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses.

For additional information about Citi’s management of cybersecurity risk, see “Managing Global Risk—Operational Risk—Cybersecurity Risk” below.

Incorrect Assumptions or Estimates in Citi’s Financial Statements Could Cause Significant Unexpected Losses in the Future, and Changes to Financial Accounting and Reporting Standards or Interpretations Could Have a Material Impact on How Citi Records and Reports Its Financial Condition and Results of Operations.

U.S. GAAP requires Citi to use certain assumptions and estimates in preparing its financial statements, including reserves related to litigation and regulatory exposures, valuation of DTAs, the estimate of the allowance for credit losses and the fair values of certain assets and liabilities, among other items. If Citi’s assumptions or estimates underlying its financial statements are incorrect or differ from actual ~~future~~ events, Citi could experience unexpected losses, some of which could be significant.

~~The~~Periodically, the Financial Accounting Standards Board (FASB) ~~has issued several~~issues financial accounting and reporting standards that ~~will~~may govern key aspects of Citi’s financial statements or interpretations thereof when those standards become effective, including those areas where Citi is required to make assumptions or estimates. For example, the FASB’s new accounting standard on credit losses (CECL), which will become effective for Citi on January 1, 2020, will require earlier recognition of credit losses on loans and held-to-maturity securities and other financial assets. The ~~new accounting model~~CECL methodology requires that lifetime “expected credit losses” ~~on financial assets not recorded at fair value through net income, such as loans and held-to-maturity securities,~~ be recorded at ~~inception of~~the time the financial asset ~~replacing~~is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The CECL methodology replaces the multiple existing impairment

~~multiple existing impairment~~ models under U.S. GAAP that generally require that a loss be “incurred” before it is ~~recognized (for~~recognized. For additional information on this and other accounting standards, including the expected impacts on Citi’s results of operations and financial condition, see ~~“Significant~~“Future Application of Accounting ~~Policies and Significant Estimates” below).~~Standards” below.

Changes to financial accounting or reporting standards or interpretations, whether promulgated or required by the FASB or other regulators, could present operational challenges and could require Citi to change certain of the assumptions or estimates it previously used in preparing its financial statements, which could negatively impact how it records and reports its financial condition and results of operations generally and/or with respect to particular businesses. For additional information on the key areas for which assumptions and estimates are used in preparing Citi’s financial statements, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 27 to the Consolidated Financial Statements.

Citi May Incur Significant Losses and Its Regulatory Capital and Capital Ratios Could beBe Negatively Impacted if Its Risk Management ~~Process,~~Processes, Strategies or Models Are Deficient or Ineffective.

Citi utilizes a broad and diversified set of risk management and mitigation processes and strategies, including the use of ~~various~~ risk models in analyzing and monitoring the various risks Citi assumes in conducting its activities. For example, Citi uses models as part of its ~~various~~comprehensive stress testing initiatives across Citi. Citi also relies on data to aggregate, assess and manage various risk exposures. Management of these risks is made even more challenging within a global financial institution such as Citi, particularly given the complex, diverse and rapidly changing financial markets and conditions in which Citi ~~operates.~~operates as well as that losses can occur from untimely, inaccurate or incomplete processes caused by unintentional human error.

These processes, strategies and models are inherently limited because they involve techniques, including the use of historical data in many circumstances, assumptions and judgments that cannot anticipate every economic and financial outcome in the markets in which Citi operates, nor can they anticipate the specifics and timing of such outcomes. Citi could incur significant losses, and its regulatory capital and capital ratios could be negatively impacted, if Citi’s risk management processes, including its ability to manage and aggregate data in a timely and accurate manner, strategies or models are deficient or ineffective. Such deficiencies or ineffectiveness could also result in inaccurate financial, regulatory or risk reporting.

Moreover, Citi’s Basel III regulatory capital models, including its credit, market and operational risk models, currently remain subject to ongoing regulatory review and approval, which may result in refinements, modifications or enhancements (required or otherwise) to these models. Modifications or requirements resulting from these ongoing reviews, as well as any future changes or guidance provided by the U.S. banking agencies regarding the regulatory capital framework applicable to Citi, have resulted in, and could continue to result in, significant changes to Citi’s ~~risk-weighted~~risk-

weighted assets. These changes can negatively impact Citi’s

capital ratios and its ability to achieve its regulatory capital requirements as it projects or as required.

COMPLIANCE ~~CONDUCT AND LEGAL~~ RISKS

Ongoing Implementation and Interpretation of Regulatory Changes and Requirements in the U.S. and Globally Have Increased Citi’s Compliance Risks and Costs.

As referenced above, over the past several years, Citi has been required to implement a significant number of regulatory changes across all of its businesses and functions, and these changes continue. In some cases, Citi’s implementation of a regulatory requirement is occurring simultaneously with changing or conflicting regulatory guidance, legal challenges or legislative action to modify or repeal existing rules or enact new rules. Moreover, in many cases, these are entirely new regulatory requirements or regimes, resulting in much uncertainty regarding regulatory expectations as to what is definitely required in order to be in compliance. Accompanying this compliance uncertainty is heightened regulatory scrutiny and expectations in the U.S. and globally for the financial services industry with respect to governance and risk management practices, including its compliance and regulatory risks (for a discussion of heightened regulatory expectations on “conduct risk” at, and the overall “culture” of, financial institutions such as Citi, see the legal and regulatory proceedings risk factor below). A failure to resolve any identified deficiencies could result in increased regulatory oversight and restrictions. All of these factors have resulted in increased compliance risks and costs for Citi.

Examples of regulatory changes that have resulted in increased compliance risks and costs include (i) a proliferation of laws relating to the ~~Federal Reserve Board’s~~limitation of cross-border data movement and/or collection and use of customer information, including data localization and protection and privacy laws, which also can conflict with or increase compliance complexity with respect to other laws, including anti-money laundering laws; and (ii) the FRB’s “total loss absorbing capacity” (TLAC) requirements, including, among other things, consequences of a breach of ~~the external long-term debt (LTD) requirement and~~ the clean holding company requirements, given there are no cure periods for the requirements, and the new “anti-evasion” provision that authorizes the Federal Reserve Board to exclude from a bank holding company’s outstanding external LTD any debt having certain features that would, in the Board’s view, “significantly impair” the debt’s ability to absorb losses; (ii) the Volcker Rule, which requires Citi to maintain an extensive global compliance regime, including significant documentation to support the prohibition against proprietary trading; and (iii) a proliferation of laws relating to the limitation of cross-border data movement, including data localization and protection and privacy laws, which can conflict with or increase compliance complexity with respect to anti-money laundering laws.requirements.

Extensive compliance requirements can result in increased reputational and legal risks, as failure to comply with regulations and requirements, or failure to comply as expected, can result in enforcement and/or regulatory proceedings (for additional discussion, see the legal and regulatory proceedings risk factor below). ~~In addition,~~Additionally, increased and ongoing compliance requirements and uncertainties have resulted in higher costs for Citi. For example, Citi employed roughly 30,000 risk, regulatory and compliance staff as of year-end ~~2017,~~2018, out of a total employee population of ~~209,000,~~204,000, compared to approximately 14,000 as of year-end 2008 with a total employee population of 323,000.

These higher regulatory and compliance costs can impede Citi’s ongoing, business-as-usual cost reduction efforts, and can also require management to reallocate resources, including

potentially away from ongoing business investment initiatives, as discussed above.

Citi Is Subject to Extensive Legal and Regulatory Proceedings, Investigations and Inquiries That Could Result in Significant Penalties and Other Negative Impacts on Citi, Its Businesses and Results of Operations.

At any given time, Citi is defending a significant number of legal and regulatory proceedings and is subject to numerous governmental and regulatory examinations, investigations and other inquiries. ~~Over the last several years, the frequency with which such proceedings, investigations and inquiries are initiated have increased substantially, and the~~The global judicial, regulatory and political environment has generally been unfavorable for large financial institutions. The complexity of the federal and state regulatory and enforcement regimes in the U.S., coupled with the global scope of Citi’s operations, also means that a single event or issue may give rise to a large number of overlapping investigations and regulatory proceedings, either by multiple federal and state agencies in the U.S. or by multiple regulators and other governmental entities in different jurisdictions, as well as multiple civil litigation claims in multiple jurisdictions.

Moreover, U.S. and non-U.S. regulators have been increasingly focused on “conduct risk,” a term used to describe the risks associated with behavior by employees and agents, including third-party vendors utilized by Citi, that could harm clients, customers, investors or the markets, such as improperly creating, selling, marketing or managing products and services or improper incentive compensation programs with respect thereto, failures to safeguard a party’s personal information, or failures to identify and manage conflicts of interest. In addition to increasing Citi’s compliance and reputational risks, this focus on conduct risk could lead to more regulatory or other enforcement proceedings and civil litigation, including for practices, which historically were acceptable but ~~are~~ now ~~receiving~~receive greater scrutiny. Further, while Citi takes numerous steps to prevent and detect conduct by employees and agents that could potentially harm clients, customers, investors or the markets, such behavior may not always be deterred or prevented. Banking regulators have also focused on the overall culture of financial services firms, including Citi. In addition to regulatory restrictions or structural changes that could result from perceived deficiencies in Citi’s culture, such focus could also lead to additional regulatory proceedings.

~~Further,~~In addition, the severity of the remedies sought in legal and regulatory proceedings to which Citi is subject has ~~increased substantially in recent years.~~remained elevated. U.S. and certain international governmental entities have increasingly brought criminal actions against, or have sought criminal convictions from, financial institutions, and criminal prosecutors in the U.S. have increasingly sought and obtained criminal guilty pleas or deferred prosecution agreements against corporate entities and other criminal sanctions from those institutions. ~~For example, in 2015, an affiliate of Citi pleaded guilty to an antitrust violation and paid a substantial fine to resolve a U.S.~~

~~Department of Justice investigation into Citi’s foreign exchange business practices.~~ These types of actions by U.S. and international governmental entities may, in the future, have significant collateral consequences for a financial institution, including loss of customers and business, and the inability to offer certain products or services and/or operate certain businesses. Citi may be required to accept or be subject to similar types of criminal remedies, consent orders, sanctions, substantial fines and penalties, remediation

and other financial costs or other requirements in the future, including for matters or practices not yet known to Citi, any of which could materially and negatively affect Citi’s businesses, business practices, financial condition or results of operations, require material changes in Citi’s operations or cause Citi reputational harm.

Further, many large claims—both private civil and regulatory—asserted against Citi are highly complex, slow to develop and may involve novel or untested legal theories. The outcome of such proceedings is difficult to predict or estimate until late in the proceedings. Although Citi establishes accruals for its legal and regulatory matters according to accounting requirements, Citi’s estimates of, and changes to, these accruals involve significant judgment and may be subject to significant uncertainty, and the amount of loss ultimately incurred in relation to those matters may be substantially higher than the amounts accrued. In addition, certain settlements are subject to court approval and may not be approved.

For additional information relating to Citi’s legal and regulatory proceedings and matters, including Citi’s policies on establishing legal accruals, see Note 27 to the Consolidated Financial Statements.

Managing Global Risk Table of Contents



MANAGING GLOBAL RISK		6659
Overview		6659
CREDIT RISK⁽¹⁾		7063
Overview		7063
Consumer Credit		7164
Corporate Credit		7971
Additional Consumer and Corporate Credit Details		8274
Loans Outstanding		8274
Details of Credit Loss Experience		8375
Allowance for Loan Losses		8577
Non-Accrual Loans and Assets and Renegotiated Loans		8678
Forgone Interest Revenue on Loans		8981
LIQUIDITY RISK		9082
Overview		9082
Liquidity Monitoring and Measurement		82
High-Quality Liquid Assets (HQLA)		9183
Loans		9184
Deposits		9285
Long-Term Debt⁽²⁾		9285
Secured Funding Transactions and Short-Term Borrowings		95
~~Liquidity Monitoring and Measurement~~		9788
Credit Ratings		9890
MARKET RISK⁽¹⁾		~~100~~92
Overview		~~100~~92
Market Risk of Non-Trading Portfolios		~~100~~92
Net Interest Revenue at Risk		~~100~~92
Interest Rate Risk of Investment Portfolios—Impact on AOCI		~~100~~92
Changes in Foreign Exchange Rates—Impacts on AOCI and Capital		~~102~~94
Interest Revenue/Expense and Net Interest Margin		~~103~~95
Additional Interest Rate Details		~~105~~97
Market Risk of Trading Portfolios		~~109~~101
Factor Sensitivities		~~110~~102
Value at Risk (VAR)		~~110~~102
Stress Testing		~~114~~105
OPERATIONAL RISK		~~115~~106
Overview		106
Cybersecurity Risk		106
COMPLIANCE RISK		~~115~~107
~~CONDUCT RISK~~		~~116~~
~~LEGAL RISK~~		~~116~~
REPUTATIONAL RISK		~~116~~108
STRATEGIC RISK		~~117~~ 108
Overview		108
Potential Exit of U.K. from EU		108
LIBOR Transition Risk		109
Country Risk		~~118~~110


(1)	For additional information regarding certain credit risk, market risk and other quantitative and qualitative information, refer to Citi’s Pillar 3 Basel III Advanced Approaches Disclosures, as required by the rules of the Federal Reserve Board, on Citi’s Investor Relations website.


(2)	See “Long-Term Debt—Resolution Plan” below for a description of the consequences to unsecured debt holders in the event of Citi’s bankruptcy.

MANAGING GLOBAL RISK

Overview

For Citi, effective risk management is of primary importance to its overall operations. Accordingly, Citi’s risk management process has been designed to monitor, evaluate and manage the principal risks it assumes in conducting its activities. Specifically, the activities that Citi engages in, and the risks those activities generate, must be consistent with Citi’s mission and value proposition, the key principles that guide it, and Citi's risk appetite.

Risk management must be built on a foundation of ethical culture. Under Citi’s mission and value proposition, which was developed by Citi’s senior leadership and distributed throughout the Company, Citi strives to serve its clients as a trusted partner by responsibly providing financial services that enable growth and economic progress while earning and maintaining the public’s trust by constantly adhering to the highest ethical standards. As such, Citi asks all employees to ensure that their decisions pass three tests: they are in our clients’ interests, create economic value and are always systemically responsible. Additionally, Citi evaluates employees’ performance against behavioral expectations set out in Citi’s leadership standards, which were designed in part to effectuate Citi’s mission and value proposition. Other culture-related efforts in connection with conduct risk, ethics and leadership, escalation and treating customers fairly help Citi to execute its mission and value proposition.

Citi’s Company-wide risk governance framework consists of the policies, standards, procedures and processes through which Citi identifies, assesses, measures, manages, monitors, reports and controls risks across the Company. It also emphasizes Citi’s risk culture and lays out standards, procedures and programs that are designed and undertaken to enhance the Company’s risk culture, embed this culture deeply within the organization, and give employees tools to make sound and ethical risk decisions and to escalate issues appropriately. The risk governance framework has been developed in alignment with the expectations of the Office of the Comptroller of the Currency (OCC) Heightened Standards. It is also aligned with the relevant components of the Basel Committee on Banking Supervision’s corporate governance principles for banks and relevant components of the Federal Reserve’s Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations.

Four key principles—common purpose, responsible finance, ingenuity and leadership—guide Citi as it performs its mission. Citi’s risk appetite, which is approved by the Citigroup Board of Directors, specifies the aggregate levels and types of risk the Board and management are willing to assume to achieve Citi’s strategic objectives and business plan, consistent with applicable capital, liquidity and other regulatory requirements.

Citi selectively takes risks in support of its underlying business strategy, while striving to ensure it operates within its mission and value proposition and risk appetite.

Citi’s risks are generally categorized and summarized as follows:

Credit risk is the risk of loss resulting from the decline in credit quality (or downgrade risk) or failure of a borrower, counterparty, third party or issuer to honor its financial or contractual obligations.

Liquidity risk is the risk that the Company will not be able to meet efficiently ~~meet~~ both expected and unexpected current and future cash flow and collateral needs without adversely affecting either daily operations or financial ~~condition~~conditions of the Company. The risk may be exacerbated by the inability of the Company to access funding sources or monetize assets and the composition of liability funding and liquid assets.

Market risk is the risk of loss arising from changes in the value of Citi’s assets and liabilities resulting from changes in market variables, such as interest rates, exchange rates or credit spreads. Losses can be exacerbated by the presence of basis or correlation risks.

Operational risk is the risk of loss resulting from inadequate or failed internal processes, systems or human factors, or from external events. It includes risk of failing to comply with applicable laws and regulations, but excludes strategic risk (see below). It also includes the reputation and franchise risk associated with business practices or market conduct in which Citi is involved, as well as compliance, conduct and legal risks. Operational risk is inherent in Citi’s global business activities, as well as related support, and can result in losses arising from events related to fraud, theft and unauthorized activity; employment practices and workplace environment; clients, products and business practices; physical assets and ~~infrastructure;~~infrastructure, and execution, delivery and process management.

Compliance risk is the risk to current or projected financial condition and resilience arising from violations of ~~or non-conformance with, local, national or cross-border~~ laws ~~rules~~ or regulations, ~~Citi’s~~or from nonconformance with prescribed practices, internal policies and procedures, or ~~other relevant standards~~ethical standards. This risk exposes a bank to fines, civil money penalties, payment of ~~conduct or~~damages and the voiding of contracts. Compliance risk is not limited to risk from failure to comply with consumer protection laws; it encompasses the risk of ~~harming customers, clients or~~noncompliance with all laws and regulations, as well as prudent ethical standards and contractual obligations. It also includes the ~~integrity~~exposure to litigation (known as legal risk) from all aspects of ~~the market.~~banking, traditional and nontraditional.

~~Conduct~~Compliance risk is spans across all risk types outlined in the risk ~~that Citi’s employees or agents may (intentionally or through negligence) harm customers, clients or the integrity of the markets, and thereby the integrity of Citi.~~

~~Legal risk~~ ~~includes the risk from uncertainty due to legal or regulatory actions, proceedings or investigations, or uncertainty in the applicability or interpretation of contracts, laws or regulations.~~governance framework.

Reputational risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value and resilience arising from negative public opinion.

Strategic risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from poor, but authorized business decisions (in compliance with regulations, policies and procedures), an inability to adapt to changes in the operating environment or other external factors that may impair the ability to carry out a business strategy. Strategic risk also includes:

Country risk, which is the risk that an event in a country (precipitated by developments within or

external to a country) will impair the value of Citi’s franchise or will adversely affect the ability of obligors within that country to honor their

obligations. Country risk events may include sovereign defaults, banking crises, currency crises, currency convertibility and/or transferability restrictions or political events.

Citi manages its risks through each of its three lines of defense: (i) business management, (ii) independent control functions and (iii) internal audit. The three lines of defense collaborate with each other in structured forums and processes to bring various perspectives together and to lead the organization toward outcomes that are in clients’ interests, create economic value and are systemically responsible.

First Line of Defense: Business Management

Each of Citi’s businesses owns its risks and is responsible for identifying, assessing and managing its risks. Each business is also responsible for establishing and operating controls to mitigate key risks, assessing internal controls and promoting a culture of compliance and control. In doing so, a business is required to maintain appropriate staffing and implement appropriate procedures to fulfill its risk governance responsibilities.

The CEOs of each region and business report to the Citigroup CEO. The Head of Enterprise Infrastructure, Operations and Technology ~~and the Head of Productivity,~~(EIO&T), who ~~are~~is considered part of the first line of defense, also ~~report~~reports to the Citigroup CEO.

Businesses at Citi organize and chair committees and councils that cover risk considerations with participation from independent control functions, including committees or councils that are designed to consider matters related to capital, assets and liabilities, business practices, business risks and controls, mergers and acquisitions, the Community Reinvestment Act and fair lending and incentives.

Second Line of Defense: Independent Control Functions

Citi’s independent control functions, including Risk, Independent Compliance Risk Management, Human Resources, Legal ~~Finance~~ and Finance, ~~& Risk Infrastructure,~~ set standards by which Citi and its businesses manage and oversee risks, including compliance with applicable laws, regulatory requirements, policies and other relevant standards of conduct. Additionally, among other responsibilities, the independent control functions provide advice and training to Citi’s businesses and establish tools, methodologies, processes and oversight for controls used by the businesses to foster a culture of compliance and control.

Risk

The Risk organization is designed to act as an independent partner of the business to manage market, credit and operational risk in a manner consistent with Citi’s risk appetite. Risk establishes policies and guidelines for risk assessments and risk management and contributes to controls and tools to manage, measure and mitigate risks taken by the Company.

There is an independent Chief Risk Officer for each of Citi’s consumer, commercial and corporate lending businesses

within ICG and GCB (Business CROs). Each of these Business CROs reports directly to Citi’s Chief Risk Officer. The Business CROs are the focal point for most day-to-day risk decisions, such as setting risk limits and approving transactions within the businesses. In addition there are Regional and Legal Entity Chief Risk Officers. There are independent Chief Risk Officers for Asia, EMEA and Latin America, including Mexico (Regional CROs). Each of these Regional CROs reports directly to Citi’s Chief Risk Officer. The Regional CROs are accountable for overseeing the management of all risks in their geographic areas and across businesses, and are the primary risk contacts for the Regional Chief Executive Officers and local regulators. Legal Entity Chief Risk Officers are responsible for identifying and managing risks in Citibank as well as other specific legal entities.

The Citi Chief Risk Officer reports to the Citigroup CEO and the Risk Management Committee of the Citigroup Board of Directors. The Chief Risk Officer has regular and unrestricted access to the Risk Management Committee of the Board and

also to the Citigroup Board of Directors to address risks and issues identified through Risk’s activities.

Independent Compliance Risk Management

The Independent Compliance Risk Management (ICRM) organization is designed to protect Citi by overseeing senior management, the businesses and other control functions in managing compliance risk, as well as promoting business conduct and activity that is consistent with Citi’s mission and value proposition. Citi’s objective is to embed an enterprise-wide compliance risk management framework and culture that identifies, measures, monitors, mitigates and controls compliance risk across the three lines of defense. For further information on Citi’s compliance risk framework, see “Compliance Risk” below.

The Chief Compliance Officer reports to the Citigroup CEO and has regular and unrestricted access to the committees of the Citigroup Board of Directors, including the Audit Committee and the Ethics and Culture Committee.

Human Resources

The Human Resources (HR) organization provides personnel support and governance in connection with, among other things: recognizing and rewarding employees who demonstrate Citi’s values and excel in their roles and responsibilities; setting ~~ethical-~~ethical and performance-related expectations and developing and promoting employees who meet those ~~expectations;~~expectations, and searching for, assessing and hiring staff who exemplify Citi’s leadership standards, which outline Citi’s expectations of its employees’ behavior. Through these activities, HR serves primarily as an independent control function advising business management, escalating identified risks and establishing policies or processes to manage risk. For select activities HR also acts in a first line capacity and is subject to appropriate review and challenge by second line functions.

The Head of Human Resources reports to the Citigroup CEO and interacts regularly with the Personnel and Compensation Committee of the Citigroup Board of Directors.

Legal

The Legal organization is involved in a number of activities designed to promote the appropriate management of Citi’s exposure to legal risk, which includes the risk of loss, whether financial or reputational, due to legal or regulatory actions, proceedings or investigations, or uncertainty in the applicability or interpretation of contracts, laws or regulations. Activities designed to promote appropriate management of legal risk include, among others: promoting and supporting Citigroup’s governance processes; advising business management, other independent control functions, the Citigroup Board of Directors and committees of the Board regarding analysis of laws and regulations, regulatory matters, disclosure matters, and potential risks and exposures on key litigation and transactional matters, among other things; advising other independent control functions in their efforts to ensure compliance with applicable laws and regulations as well as internal standards of conduct; serving on key management committees; reporting and escalating key legal issues to senior management or other independent control functions; participating in internal investigations and overseeing regulatory ~~investigations;~~investigations, and advising businesses on a day-to-day basis on legal, regulatory and contractual matters.

The General Counsel reports to the Citigroup CEO and is responsible to the full Citigroup Board. In addition to having regular and unrestricted access to the full Citigroup Board of Directors, the General Counsel or his/her delegates regularly attend meetings of the Risk Management Committee, Audit Committee, Personnel and Compensation Committee, Ethics and Culture Committee, Operations and Technology Committee, and Nomination, Governance and Public Affairs Committee, as well as other ad hoc committees of the Citigroup Board of Directors.

Finance

The Finance organization is primarily composed of the following disciplines: treasury, controllers, tax and financial planning and ~~analysis.~~analysis, capital planning/recovery and resolution planning, corporate M&A and investor relations. These disciplines partner with the businesses, providing key data and consultation to facilitate sound decisions in support of the businesses’ objectives. Through these activities, Finance serves primarily as an independent control function advising business management, escalating identified risks and establishing policies or processes to manage risk. For select activities Finance also acts in a first line capacity and is subject to appropriate review and challenge by second line functions.

Through the treasury discipline, Finance has overall responsibility for managing Citi’s balance sheet and accordingly partners with the businesses to manage Citi’s liquidity and interest rate risk (price risk for non-trading portfolios). Treasury works with the businesses to establish balance sheet targets and limits, as well as sets policies on funding costs charged for business assets based on their liquidity and duration.

Principally through the controllers discipline, Finance is responsible for establishing a strong control environment over Citi’s financial reporting processes consistent with the 2013 Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework.

Finance is led by Citi’s Chief Financial Officer (CFO), who reports directly to the Citigroup CEO. The CFO chairs or co-chairs several management committees that serve as key governance and oversight forums for business activities. In addition, the CFO has regular and unrestricted access to the full Citigroup Board of Directors as well as to the Audit Committee of the Board of Directors.

~~Finance & Risk Infrastructure~~

Finance & Risk Infrastructure (FRI) is a Citi global function that was formed in April 2016 from groups within the Finance and Risk global functions. FRI was established to globally implement common data and data standards, common processes and integrated technology platforms as well as integrate infrastructure activities across both Finance and Risk. FRI works to drive straight through data processing and produce more effective and efficient processes and governance aimed at supporting both the Finance and Risk organizations.

~~The head of the FRI global function reports jointly to Citi’s CFO and Chief Risk Officer.~~

Third Line of Defense: Internal Audit

Citi’s Internal Audit function independently reviews activities of the first two lines of defense based on a risk-based audit plan and methodology approved by the Audit Committee of the Citigroup Board of Directors. Internal Audit also provides independent assurance to the Citigroup Board of Directors, the Audit Committee of the Board, senior management and regulators regarding the effectiveness of Citi’s governance and controls designed to mitigate Citi’s exposure to risks and to enhance Citi’s culture of compliance and control.

The Chief Auditor reports functionally to the Chairman of the Citigroup Audit Committee and administratively to the CEO of Citigroup. Internal Audit’s responsibilities are carried out independently under the oversight of the Audit Committee. Internal Audit’s employees accordingly report to the Chief Auditor and do not have reporting lines to front-line units or senior management. Internal Audit’s staff members are not permitted to provide internal-audit services for a business line or function in which they had business line or function responsibilities within the previous 12 months.

Three Lines of Defense

Citigroup Board of Directors and Committees of the Board

Citigroup’s Board of Directors oversees Citi’s risk-taking activities and holds management accountable for adhering to the risk governance framework. To do so, directors review reports prepared by the businesses, Risk, Independent Compliance Risk Management, Internal Audit and others, and exercise sound independent judgment to question, probe and challenge recommendations and decisions made by management.

The standing committees of the Citigroup Board of Directors are the Executive Committee, Risk Management Committee, Audit Committee, Personnel and Compensation Committee, Ethics and Culture Committee, Operations and Technology Committee and Nomination, Governance and Public Affairs Committee. In addition to the standing committees, the Board creates ad hoc committees from time to time in response to regulatory, legal or other requirements.

CREDIT RISK

Overview

Credit risk is the risk of loss resulting from the decline in credit quality or the failure of a borrower, counterparty, third party or issuer to honor its financial or contractual obligations. Credit risk arises in many of Citigroup’s business activities, including:

consumer, commercial and corporate lending;

capital markets derivative transactions;

structured finance; and

securities financing transactions (repurchase and reverse repurchase agreements, securities loaned and borrowed).

Credit risk also arises from settlement and clearing activities, when Citi transfers an asset in advance of receiving its counter-value or advances funds to settle a transaction on behalf of a client. Concentration risk, within credit risk, is the risk associated with having credit exposure concentrated within a specific client, industry, region or other category.

Credit risk is one of the most significant risks Citi faces as an institution. For additional information, see “Risk Factors—Credit Risk” above. As a result, Citi has a well-established framework in place for managing credit risk across all businesses. This includes a defined risk appetite, credit limits and credit policies, both at the business level as well as at the ~~company-wide~~Company-wide level. Citi’s credit risk management also includes processes and policies with respect to problem recognition, including “watch lists,” portfolio reviews, stress tests, updated risk ratings and classification triggers.

With respect to Citi’s settlement and clearing activities, ~~intra-day~~intraday client usage of lines is monitored against limits, as well as against usage patterns. To the extent a problem develops, Citi typically moves the client to a secured (collateralized) operating model. Generally, Citi’s ~~intra-day~~intraday settlement and clearing lines are uncommitted and cancelable at any time.

To manage concentration of risk within credit risk, Citi has in place a correlation framework consisting of industry limits, an idiosyncratic framework consisting of single name concentrations for each business and across Citigroup and a specialized framework consisting of product limits.

Credit exposures are generally reported in notional terms for accrual loans, reflecting the value at which the loans as well as loan and other off-balance sheet commitments are carried on the Consolidated Balance Sheet. Credit exposure arising from capital markets activities is generally expressed as the current mark-to-market, net of margin, reflecting the net value owed to Citi by a given counterparty.

The credit risk associated with these credit exposures is a function of the idiosyncratic creditworthiness of the obligor, as well as the terms and conditions of the specific obligation. Citi assesses the credit risk associated with its credit exposures on a regular basis through its loan loss reserve process (see “Significant Accounting Policies and Significant Estimates—Allowance for Credit Losses” below and Notes 1 and 15 to the Consolidated Financial Statements), as well as through regular stress testing at the company, business, geography and product

levels. These stress-testing processes typically estimate

potential incremental credit costs that would occur as a result of either downgrades in the credit quality or defaults of the obligors or counterparties.

~~There is an independent Chief Risk Officer for each of Citi’s consumer, commercial and corporate lending businesses within~~ ~~ICG~~ ~~and~~ ~~GCB~~ (Business CROs). Each of these Business CROs reports directly to Citi’s Chief Risk Officer. The Business CROs are the focal point for most day-to-day risk decisions, such as setting risk limits and approving transactions within the businesses. In addition there are Regional and Legal Entity Chief Risk Officers. There is an independent Chief Risk Officer for ~~Asia~~, ~~EMEA~~ ~~and~~ ~~Latin America~~, including Mexico (Regional CROs). Each of these Regional CROs reports directly to Citi’s Chief Risk Officer. The Regional CROs are accountable for overseeing the management of all risks in their geographic areas and across businesses, and are the primary risk contacts for the Regional Chief Executive Officers and local regulators. Legal Entity Chief Risk Officers are responsible for identifying and managing risks in Citibank as well as other specific legal entities, with Citibank’s Chief Risk Officer reporting directly to Citi’s Chief Risk Officer.

For additional information on Citi’s credit risk management, see Note 14 to the Consolidated Financial Statements.

Consumer Credit

Citi provides traditional retail banking, including commercial banking, and credit card products in 19 countries and jurisdictions through North America GCB, Latin America GCB and Asia GCB. The retail banking products include consumer mortgages, home equity, personal and commercial loans and lines of credit and similar related products with a focus on lending to prime customers. Citi uses its risk appetite framework to define its lending parameters. In addition, Citi uses proprietary scoring models for new customer approvals.

As stated in “Global Consumer Banking” above, GCB’s overall strategy is to leverage Citi’s global footprint and be the pre-eminent bank for the affluent and emerging affluent consumers in large urban centers. In credit cards and in certain retail markets (including commercial banking), Citi serves customers in a somewhat broader set of segments and geographies. GCB’s commercial banking business primarily focuses on small to ~~mid-sized businesses.~~mid-size businesses and also serves larger middle market companies in certain regions.

As of December 31, ~~2017,~~2018, Citi iswas under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months, although Citi does not expect such audits to result in amounts that would cause a significant change to its effective tax rate.

The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:



Jurisdiction	Tax year
United States	2014
Mexico	~~2011~~2013
New York State and City	2009
United Kingdom	~~2014~~2015
India	~~2014~~2015
Singapore	2011
Hong Kong	~~2011~~2012
Ireland	~~2013~~2014

Non-U.S. Earnings

Non-U.S. pretax earnings approximated ~~$13.7~~$16.1 billion in ~~2017~~2018 (of which a ~~$0.1 billion~~$21 million loss was recorded in Discontinued operations), $13.7 billion in 2017 and $11.6 billion in ~~2016 and $11.3 billion in 2015.~~2016. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all non-U.S. pretax earnings of a non-U.S. ~~branch. Starting~~branches. Beginning in 2018, there ~~will be~~is a separate foreign tax credit (FTC) basket for branches. Also, ~~starting in 2018,~~ dividends from a non-U.S. subsidiary or affiliate are effectively exempt from U.S. taxation. The Company provides income taxes on the book over tax basis differences of non-U.S. subsidiaries except to the extent that such differences are indefinitely reinvested outside the U.S.

At December 31, ~~2017, $14.1~~2018, $15.5 billion of basis differences of non-U.S. subsidiaries was indefinitely invested. At the existing tax rates, additional taxes (net of U.S. FTCs) of ~~$3.5~~$4.3 billion would have to be provided if such basis differences were realized. These amounts are significantly less than the corresponding amounts at December 31, 2016 due to the deemed repatriation of unremitted earnings of non-U.S. subsidiaries under the provisions of Tax Reform.

Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent that such amounts are distributed in excess of limits prescribed by federal law. At December 31, ~~2017,~~2018, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $75 million).

~~Deferred Tax Assets~~Debt Securities

AsIn March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. The ASU requires entities to amortize premiums on debt securities by the first call date when the securities have fixed and determinable call dates and prices. The scope of the ASU includes all accounting premiums, such as purchase premiums and cumulative fair value hedge adjustments. The ASU does not change the accounting for discounts, which continue to be recognized over the contractual life of a security.

Citi early adopted the ASU in the second quarter of 2017, with an effective date of January 1, 2017. Adoption of the ASU is on a modified retrospective basis through a

cumulative effect adjustment to Retained earnings as of the beginning of the year of adoption. Adoption of the ASU primarily affected Citi’s AFS and HTM portfolios of callable state and municipal debt securities. The ASU adoption resulted in a net reduction to total stockholders’ equity of $156 million (after-tax), effective as of January 1, 2017. This amount is composed of a reduction of approximately $660 million to Retained earnings for the incremental amortization of purchase premiums and cumulative hedge adjustments generated under fair value hedges of these callable debt securities, offset by an increase to AOCI of $504 million related to the cumulative fair value hedge adjustments reclassified to Retained earnings for AFS debt securities.

Accounting for Stock-Based Compensation

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting in order to simplify certain complex aspects of the accounting for income taxes and forfeitures related to employee stock-based compensation. The guidance became effective for Citi beginning on January 1, 2017. Under the new standard, excess tax benefits and deficiencies related to employee stock-based compensation are recognized directly within income tax expense or benefit in Citi’s Consolidated Statement of Income, rather than within additional paid-in capital. The impact of this change was not material in the first quarter of 2017 or each subsequent quarterly period of 2017 as the majority of employees’ deferred stock-based compensation awards are granted within the first quarter of each year and, therefore, vest within the first quarter of each year, commensurate with vesting in equal annual installments. For additional information on these receivables and payables, see Note 7 to the Consolidated Financial Statements.

Additionally, as permitted under the new guidance, Citi made an accounting policy election to account for forfeitures of awards as they occur, which represents a change from the previous requirement to estimate forfeitures when recognizing compensation expense. This change resulted in a cumulative effect adjustment to Retained earnings that was not material at January 1, 2017.

Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments modify certain disclosure requirements for fair value measurements and are effective January 1, 2020, with early adoption permitted. The Company early adopted this ASU as of December 31, 2018 in its entirety. The adoption of this standard did not have a material impact on the Company.

2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS

Summary of Discontinued Operations

The Company’s Discontinued operations consisted of residual activities related to the sales of the Brazil Credicard business in 2013, the Egg Banking plc Credit Card Business in 2011 and the German Retail Banking business in 2008. All Discontinued operations results are recorded within Corporate/Other.

The following summarizes financial information for all Discontinued operations:



In millions of dollars	2018			2017			2016
Total revenues, net of interest expense	$	—		$	—		$	—
Loss from discontinued operations	$	(26	)	$	(104	)	$	(80	)
Provision (benefit) for income taxes	(18		)	7			(22		)
Loss from discontinued operations, net of taxes	$	(8	)	$	(111	)	$	(58	)

Cash flows from Discontinued operations were not material for all periods presented.

Significant Disposals

The transactions described below were identified as significant disposals during 2018, 2017 and 2016. The major classes of Assets and Liabilities derecognized from the Consolidated Balance Sheet at closing, and the income (loss) before taxes related to each business until the disposal date, are presented below.

Sale of Mexico Asset Management Business

On September 21, 2018, Citi completed the sale of its Mexico asset management business, which was part of Latin America GCB. As part of the sale, Citi derecognized total assets of $137 million, including goodwill of $32 million, which were classified as held-for-sale beginning in the fourth quarter of 2017, and total liabilities of $41 million. The transaction resulted in a pretax gain on sale of approximately $250 million (approximately $150 million after-tax) recorded in Other revenue in the third quarter of 2018. Further, Citi and the buyer entered into a 10-year services framework agreement, with Citi acting as the distributor in exchange for an ongoing fee.

Income before taxes, excluding the pretax gain on sale, for the divested business was as follows:



In millions of dollars	2018		2017		2016
Income before taxes	$	123	$	164	$	155

Sale of Fixed Income Analytics and Index Business

On August 31, 2017, Citi ~~had~~completed the sale of a ~~valuation allowance~~fixed income analytics business and a fixed income index business that were part of ~~$9.4 billion, composed~~Markets and securities services within Institutional Clients Group (ICG). As part of ~~valuation allowances~~the sale, Citi derecognized Total assets of ~~$5.7 billion~~$112 million, including goodwill of $72 million, while the derecognized liabilities were $18 million. The transaction resulted in a pretax gain on sale of approximately $580 million ($355 million after-tax) recorded in Other revenue in ICG during 2017.

Income before taxes excluding the pretax gain on sale for the divested businesses was immaterial for the periods presented.

Exit of U.S. Mortgage Service Operations

Citigroup executed agreements during the first quarter of 2017 to effectively exit its ~~FTC carry-forwards, $2.2 billion~~direct U.S. mortgage servicing operations by the end of 2018 to intensify focus on ~~its U.S. residual DTA~~originations. The exit of the mortgage servicing operations included the sale of mortgage servicing rights and execution of a subservicing agreement for the remaining Citi-owned loans and certain other mortgage servicing rights. As part of this transaction, Citi has also transferred certain employees.

This transaction, which was part of Corporate/Other, resulted in a pretax loss of $331 million ($207 million after-tax) recorded in Other revenue during 2017. The loss on sale did not include certain other costs and charges related to ~~its non-U.S. branches, $1.4 billion on local non-U.S. DTAs and $0.1 billion on state net operating~~the disposed operation recorded primarily in Operating expenses during 2017, resulting in a total pretax loss ~~carry-forwards. The valuation allowance against FTCs results from the impact~~of $382 million. As part of the ~~lower tax rate~~sale, Citi derecognized a total of $1,162 million of servicing-related assets, including $1,046 million of Mortgage servicing rights, related to approximately 750,000 Fannie Mae and Freddie Mac held loans with outstanding balances of approximately $93 billion. Excluding the loss on sale and the ~~new separate FTC basket~~additional charges, income before taxes for ~~non-U.S.~~the disposed operation was immaterial for the periods presented.

Sale of CitiFinancial Canada Consumer Finance Business

On March 31, 2017, Citi completed the sale of CitiFinancial Canada (CitiFinancial), which was part of Corporate/Other, and included 220 retail branches and approximately 1,400 employees. As part of the sale, Citi derecognized Total assets of approximately $1.9 billion, including $1.7 billion consumer loans (net of allowance), and Total liabilities of approximately $1.5 billion related to intercompany borrowings, which were settled at closing of the transaction. Separately, during 2017 and prior to closing of the transaction, CitiFinancial settled $0.4 billion of debt issued through loan securitizations. The sale of CitiFinancial generated a pretax gain on sale of approximately $350 million recorded in Other revenue ($178 million after-tax) during 2017.

Income before taxes, excluding the pretax gain on sale for the divested business, was as follows:



In millions of dollars	2018		2017		2016
Income before taxes	$	—	$	41	$	139

3. BUSINESS SEGMENTS

Citigroup’s activities are conducted through the following business segments: Global Consumer Banking (GCB) and Institutional Clients Group (ICG). In addition, Corporate/Other includes activities not assigned to a specific business segment, as well as ~~diminished ability under Tax Reform~~certain North America loan portfolios, discontinued operations and other legacy assets.

The business segments are determined based on products and services provided or type of customers served, of which those identified as non-core are recorded in Corporate/Other and are reflective of how management currently evaluates financial information to ~~generate~~make business decisions.

GCB includes a global, full-service consumer franchise delivering a wide array of banking, including commercial banking, credit card lending and investment services through a network of local branches, offices and electronic delivery systems and consists of three GCB businesses: North America, Latin America and Asia (including consumer banking activities in certain EMEA countries).

ICG consists of Banking and Markets and securities services and provides corporate, institutional, public sector and high-net-worth clients in 98 countries and jurisdictions with a broad range of banking and financial products and services.

Corporate/Other includes certain unallocated costs of global functions, other corporate expenses and net treasury results, unallocated corporate expenses, offsets to certain line-

item reclassifications and eliminations, the results of certain North America legacy loan portfolios, discontinued operations and unallocated taxes.

The accounting policies of these reportable segments are the same as those disclosed in Note 1 to the Consolidated Financial Statements.

The prior-period balances reflect reclassifications to conform the presentation for all periods to the current period’s presentation. Effective January 1, 2018, financial data was reclassified to reflect:

the adoption of ASU No. 2014-09, Revenue Recognition, which occurred on January 1, 2018 on a retrospective basis. See “Accounting Changes” in Note 1 to the Consolidated Financial Statements;

the re-attribution of certain costs between Corporate/Other and GCB and ICG; and

certain other immaterial reclassifications.

Citi’s consolidated net income ~~from sources outside~~(loss) reported in its 2017 Annual Report on Form 10-K remains unchanged for all periods presented as a result of the U.S. to support FTC utilization. The absolute amount of Citi’s post-Tax Reform-related valuation allowances may change in future years. First, the separate FTC basket for non-U.S. branches will result in additional DTAs (for FTCs) requiring a valuation allowance, given that the local tax rate for these branches exceeds on average the U.S. tax rate of 21%. Second, in Citi’s general basket for FTCs, changes in the forecasted amount of income in U.S. locations derived from sources outside the U.S. could alter the amount of valuation allowance that is needed against such FTCs. As of December 31, 2016, Citi had no valuation allowance on its DTAs. and reclassifications discussed above.

The following table ~~summarizes Citi’s DTAs:~~presents certain information regarding the Company’s continuing operations by segment:

In billions of dollars
Jurisdiction/component⁽¹⁾
DTAs balance December 31, 2017 DTAs balance December 31, 2016
U.S. federal⁽²⁾

Net operating losses (NOLs)⁽³⁾
$ 2.3
$ 3.5
Foreign tax credits (FTCs) 7.6
14.2
General business credits (GBCs) 1.4
0.9
Future tax deductions and credits 4.8
21.9
Total U.S. federal $ 16.1
$ 40.5
State and local

New York NOLs $ 2.3
$ 2.2
Other state NOLs 0.2
0.2
Future tax deductions 1.3
1.7
Total state and local $ 3.8
$ 4.1
Non-U.S.

NOLs $ 0.6
$ 0.6
Future tax deductions 2.0
1.5
Total non-U.S. $ 2.6
$ 2.1
Total $ 22.5
$ 46.7



	Revenues, net of interest expense⁽¹⁾						Provision (benefits) for income taxes⁽²⁾								Income (loss) from continuing operations⁽²⁾⁽³⁾							Identifiable assets
In millions of dollars, except identifiable assets in billions	2018		2017		2016		2018			2017		2016			2018		2017			2016		2018		2017
Global Consumer Banking	$	33,777	$	32,838	$	31,624	$	1,839		$	3,316	$	2,639		$	5,762	$	3,878		$	4,931	$	432	$	428
Institutional Clients Group	36,994		36,474		33,940		3,631			7,008		4,260			12,200		9,066			9,525		1,394		1,336
Corporate/Other	2,083		3,132		5,233		(113		)	19,064		(455		)	126		(19,571		)	577		91		78
Total	$	72,854	$	72,444	$	70,797	$	5,357		$	29,388	$	6,444		$	18,088	$	(6,627	)	$	15,033	$	1,917	$	1,842

(1)

~~All amounts are~~

Includes total revenues, net of ~~valuation allowances.~~interest expense (excluding Corporate/Other), in North America of $33.4 billion, $34.2 billion and $32.6 billion; in EMEA of $11.8 billion, $10.9 billion and $10.0 billion; in Latin America of $10.3 billion, $9.6 billion and $9.1 billion; and in Asia of $15.3 billion, $14.6 billion and $13.9 billion in 2018, 2017 and 2016, respectively. These regional numbers exclude Corporate/Other, which largely operates within the U.S.


(2)	~~Included in~~ Corporate/Other, GCB and ICG 2017 results include the ~~net U.S. federal DTAs~~one-time impact of ~~$16.1 billion as of December 31, 2017 were deferred tax liabilities of $2.4 billion that will reverse in the relevant carry-forward period and may be used to support the DTAs.~~Tax Reform.


(3)	~~Consists~~ Includes pretax provisions for credit losses and for benefits and claims in the GCB results of ~~non-consolidated tax return NOL carry-forwards that are eventually expected to be utilized~~$7.6 billion, $7.6 billion and $6.4 billion; in ~~Citigroup’s consolidated tax return.~~

the ICG results of $184

~~The following table summarizes the amounts of tax carry-forwards and their expiration dates:~~

In billions of dollars
Year of expiration December 31, 2017 December 31, 2016
U.S. tax return foreign tax credit carry-forwards⁽¹⁾

2018 $ 0.4
$ 2.7
2019 1.3
1.3
2020 3.2
3.1
2021 2.0
1.9
2022 3.4
3.3
2023⁽²⁾
0.4
0.5
2025⁽²⁾
1.4
1.4
2027⁽²⁾
1.2
—
Total U.S. tax return foreign tax credit carry-forwards $ 13.3
$ 14.2
U.S. tax return general business credit carry-forwards

2032 $ 0.2
$ —
2033 0.3
0.3
2034 0.2
0.2
2035 0.2
0.2
2036 0.2
0.2
2037 0.3
—
Total U.S. tax return general business credit carry-forwards $ 1.4
$ 0.9
U.S. subsidiary separate federal NOL carry-forwards

2027 $ 0.2
$ 0.2
2028 0.1
0.1
2030 0.3
0.3
2032 0.1
—
2033 1.6
1.7
2034 2.3
2.3
2035 3.3
3.2
2036 2.1
2.2
2037 1.0
—
Total U.S. subsidiary separate federal NOL carry-forwards⁽³⁾
$ 11.0
$ 10.0
New York State NOL carry-forwards⁽³⁾

2034 $ 13.6
$ 13.0
New York City NOL carry-forwards⁽³⁾

2034 $ 13.1
$ 12.2
Non-U.S. NOL carry-forwards⁽¹⁾

Various $ 2.0
$ 2.1


~~(1)~~	~~Before valuation allowance.~~


~~(2)~~	~~The $3.0 billion~~ million, ($15) million and $486 million; and in ~~FTC carry-forwards that expire~~Corporate/Other results of ($202) million, ($175) million and $69 million in ~~2023, 2025~~2018, 2017 and ~~2027 are in a non-consolidated tax return entity but are eventually expected to be utilized (net of valuation allowances) in Citigroup’s consolidated tax return.~~2016, respectively.


~~(3)~~	~~Pretax.~~

The time remaining for utilization of the FTC component has shortened, given the passage of time. Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $22.5 billion at December 31, 2017 is more-likely-than-not based upon expectations as to future taxable income in the jurisdictions in which the DTAs arise

~~and available tax planning strategies (as defined in ASC 740,~~ ~~Income Taxes) that would be implemented, if necessary, to prevent a carry-forward from expiring.~~

Citi believes the U.S. federal and New York state and city NOL carry-forward period of 20 years provides enough time to fully utilize the DTAs pertaining to the existing NOL carry-forwards. This is due to Citi’s forecast of sufficient U.S. taxable income and the fact that New York state and city continue to tax Citi’s non-U.S. income.

~~With respect to the FTCs component of the DTAs, the carry-forward period is~~ 10 ~~years. Utilization of FTCs in any year is restricted to~~ ~~21%~~ ~~of foreign source taxable income in that year. However, overall domestic losses that Citi has incurred of approximately~~ ~~$52 billion~~ as of December 31, 2017 are allowed to be reclassified as foreign source income to the extent of 50%–100% of domestic source income produced in subsequent years. Such resulting foreign source income would cover the FTC carry-forwards after valuation allowance. As noted in the tables above, Citi’s FTC carry-forwards were $7.6 billion ($13.3 billion before valuation allowance) as of December 31, 2017, compared to ~~$14.2 billion~~ as of December 31, 2016. This decrease represented $6.6 billion of the $24.2 billion decrease in Citi’s overall DTAs during 2017. Citi believes that it will generate sufficient U.S. taxable income within the 10-year carry-forward period to be able to utilize the net FTCs after the valuation allowance, in addition to any FTCs produced in the tax return for such period, which must be used prior to any carry-forward utilization.

~~10. EARNINGS PER SHARE~~

~~The following table reconciles the income and share data used in the basic and diluted earnings per share (EPS) computations:~~

In millions, except per-share amounts 2017 2016 2015
Income (loss) from continuing operations before attribution of noncontrolling interests $ (6,627 ) $ 15,033
$ 17,386
Less: Noncontrolling interests from continuing operations 60
63
90
Net income (loss) from continuing operations (for EPS purposes) $ (6,687 ) $ 14,970
$ 17,296
Income (loss) from discontinued operations, net of taxes (111 ) (58 ) (54 )
Citigroup's net income (loss) $ (6,798 ) $ 14,912
$ 17,242
Less: Preferred dividends⁽¹⁾
1,213
1,077
769
Net income (loss) available to common shareholders $ (8,011 ) $ 13,835
$ 16,473
Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to basic EPS 37
195
224
Net income (loss) allocated to common shareholders for basic EPS $ (8,048 ) $ 13,640
$ 16,249
Add: Interest expense, net of tax, and dividends on convertible securities and adjustment of undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to diluted EPS —
—
—
Net income (loss) allocated to common shareholders for diluted EPS $ (8,048 ) $ 13,640
$ 16,249
Weighted-average common shares outstanding applicable to basic EPS 2,698.5
2,888.1
3,004.0
Effect of dilutive securities⁽²⁾

Options⁽³⁾
—
0.1
3.6
Other employee plans non-dividend eligible —
0.1
0.1
Adjusted weighted-average common shares outstanding applicable to diluted EPS⁽⁴⁾
2,698.5
2,888.3
3,007.7
Basic earnings per share⁽⁵⁾

Income (loss) from continuing operations $ (2.94 ) $ 4.74
$ 5.43
Discontinued operations (0.04 ) (0.02 ) (0.02 )
Net income (loss) $ (2.98 ) $ 4.72
$ 5.41
Diluted earnings per share⁽⁵⁾

Income (loss) from continuing operations $ (2.94 ) $ 4.74
$ 5.42
Discontinued operations (0.04 ) (0.02 ) (0.02 )
Net income (loss) $ (2.98 ) $ 4.72
$ 5.40


~~(1)~~	~~See Note 20 to the Consolidated Financial Statements for the potential future impact of preferred stock dividends.~~

~~(2)~~

Warrants issued to the U.S. Treasury as part of the Troubled Asset Relief Program (TARP) and the loss-sharing agreement (all of which were subsequently sold to the public in January 2011), with exercise prices of $178.50 and $104.96 per share for approximately 21.0 million and 25.5 million shares of Citigroup common stock, respectively. Both warrants were not included in the computation of earnings per share in 2017, 2016 and 2015 because they were anti-dilutive.


~~(3)~~	During 2017, 2016 and 2015, weighted-average options to purchase 0.8 million, 4.2 million and 0.9 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per share because the weighted-average exercise prices of $204.80, $98.01 and $199.16 per share, respectively, were anti-dilutive.


~~(4)~~	~~Due to rounding, common shares outstanding applicable to basic EPS and the effect of dilutive securities may not sum to common shares outstanding applicable to diluted EPS.~~


~~(5)~~	~~Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.~~

~~11. FEDERAL FUNDS, SECURITIES BORROWED, LOANED~~4. INTEREST REVENUE AND ~~SUBJECT TO REPURCHASE AGREEMENTS~~EXPENSE

~~Federal funds sold and securities borrowed or purchased under agreements to resell, at their respective carrying values, consisted of the following:~~

December 31 December 31
In millions of dollars 2017 2016
Federal funds sold $ —
$ —
Securities purchased under agreements to resell 130,984
131,473
Deposits paid for securities borrowed 101,494
105,340
Total⁽¹⁾
$ 232,478
$ 236,813

~~Federal funds purchased and securities loaned or sold under agreements to repurchase, at their respective carrying values, consisted of the following:~~

December 31 December 31
In millions of dollars 2017 2016
Federal funds purchased $ 326
$ 178
Securities sold under agreements to repurchase 142,646
125,685
Deposits received for securities loaned 13,305
15,958
Total⁽¹⁾
$ 156,277
$ 141,821

~~(1)~~

The above tables do not include securities-for-securities lending transactions of $14.0 billion and $9.3 billion at December 31, 2017 and December 31, 2016, respectively, where the Company acts as lender and receives securities that can be sold or pledged as collateral. In these transactions, the Company recognizes the securities received at fair value within ~~Other assets~~Interest revenue ~~and the obligation to return those securities as a liability within~~ ~~Brokerage payables~~.

The resale and repurchase agreements represent collateralized financing transactions. Citi executes these transactions primarily through its broker-dealer subsidiaries to facilitate customer matched-book activity and to efficiently fund a portion of Citi’s trading inventory. Transactions executed by Citi’s bank subsidiaries primarily facilitate customer financing activity.

To maintain reliable funding under a wide range of market conditions, including under periods of stress, Citi manages these activities by taking into consideration the quality of the underlying collateral, and stipulating financing tenor. Citi manages the risks in its collateralized financing transactions by conducting daily stress tests to account for changes in capacity, tenors, haircut, collateral profile and client actions. Additionally, Citi maintains counterparty diversification by establishing concentration triggers and assessing counterparty reliability and stability under stress.

~~It is the Company’s policy to take possession of the underlying collateral, monitor its market value relative to the amounts due under the agreements and, when necessary,~~

require prompt transfer of additional collateral in order to maintain contractual margin protection. For resale and repurchase agreements, when necessary, the company posts additional collateral in order to maintain contractual margin protection.

~~Collateral typically consists of government and government-agency securities, corporate and municipal bonds, equities and mortgage-backed and other asset-backed securities.~~

The resale and repurchase agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other type of default under the relevant master agreement. Events of default generally include (i) failure to deliver cash or securities as required under the transaction, (ii) failure to provide or return cash or securities as used for margining purposes, (iii) breach of representation, (iv) cross-default to another transaction entered into among the parties, or, in some cases, their affiliates, and (v) a repudiation of obligations under the agreement. The counterparty that receives the securities in these transactions is generally unrestricted in its use of the securities, with the exception of transactions executed on a tri-party basis, where the collateral is maintained by a custodian and operational limitations may restrict its use of the securities.

A substantial portion of the resale and repurchase agreements is recorded at fair value, as described in Notes 24 and 25 to the Consolidated Financial Statements. The remaining portion is carried at the amount of cash initially advanced or received, plus accrued interest, as specified in the respective agreements.

The securities borrowing and lending agreements also represent collateralized financing transactions similar to the resale and repurchase agreements. Collateral typically consists of government and government-agency securities and corporate debt and equity securities.

Similar to the resale and repurchase agreements, securities borrowing and lending agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other default by the other party under the relevant master agreement. Events of default and rights to use securities under the securities borrowing and lending agreements are similar to the resale and repurchase agreements referenced above.

A substantial portion of securities borrowing and lending agreements is recorded at the amount of cash advanced or received. The remaining portion is recorded at fair value as the Company elected the fair value option for certain securities borrowed and loaned portfolios, as described in Note 25 to the Consolidated Financial Statements. With respect to securities loaned, the Company receives cash collateral in an amount generally in excess of the market value of the securities loaned. The Company monitors the market value of securities borrowed and securities loaned on a daily basis and obtains or

~~posts additional collateral in order to maintain contractual margin protection.~~

The enforceability of offsetting rights incorporated in the master netting agreements for resale and repurchase agreements and securities borrowing and lending agreements is evidenced to the extent that a supportive legal opinion has been obtained from counsel of recognized standing that provides the requisite level of certainty regarding the enforceability of these agreements. Also, the exercise of rights by the non-defaulting party to terminate and closeout transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding.

A legal opinion may not have been sought or obtained for certain jurisdictions where local law is silent or sufficiently ambiguous to determine the enforceability of offsetting rights or where adverse case law or conflicting regulation may cast

doubt on the enforceability of such rights. In some jurisdictions and for some counterparty types, the insolvency law for a particular counterparty type may be nonexistent or unclear as overlapping regimes may exist. For example, this may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.

~~The following tables present the gross and net resale and repurchase agreements and securities borrowing and lending~~

agreements and the related offsetting amount permitted under ASC 210-20-45. The tables also include amounts related to financial instruments that are not permitted to be offset under ASC 210-20-45 but would be eligible for offsetting to the extent that an event of default occurred and a legal opinion supporting enforceability of the offsetting rights has been obtained. Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtain a legal opinion evidencing enforceability of the offsetting right.

As of December 31, 2017
In millions of dollars Gross amounts
of recognized
assets
Gross amounts
offset on the
Consolidated
Balance Sheet⁽¹⁾
Net amounts of
assets included on
the Consolidated
Balance Sheet⁽²⁾
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default⁽³⁾
Net
amounts⁽⁴⁾
Securities purchased under agreements to resell $ 204,460
$ 73,476
$ 130,984
$ 103,022
$ 27,962
Deposits paid for securities borrowed 101,494
—
101,494
22,271
79,223
Total $ 305,954
$ 73,476
$ 232,478
$ 125,293
$ 107,185

In millions of dollars Gross amounts
of recognized
liabilities
Gross amounts
offset on the
Consolidated
Balance Sheet⁽¹⁾
Net amounts of
liabilities included on
the Consolidated
Balance Sheet⁽²⁾
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default⁽³⁾
Net
amounts⁽⁴⁾
Securities sold under agreements to repurchase $ 216,122
$ 73,476
$ 142,646
$ 73,716
$ 68,930
Deposits received for securities loaned 13,305
—
13,305
4,079
9,226
Total $ 229,427
$ 73,476
$ 155,951
$ 77,795
$ 78,156

As of December 31, 2016
In millions of dollars Gross amounts
of recognized
assets
Gross amounts
offset on the
Consolidated
Balance Sheet⁽¹⁾
Net amounts of
assets included on
the Consolidated
Balance Sheet⁽²⁾
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default⁽³⁾
Net
amounts⁽⁴⁾
Securities purchased under agreements to resell $ 176,284
$ 44,811
$ 131,473
$ 102,874
$ 28,599
Deposits paid for securities borrowed 105,340
—
105,340
16,200
89,140
Total $ 281,624
$ 44,811
$ 236,813
$ 119,074
$ 117,739

In millions of dollars Gross amounts
of recognized
liabilities
Gross amounts
offset on the
Consolidated
Balance Sheet⁽¹⁾
Net amounts of
liabilities included on
the Consolidated
Balance Sheet⁽²⁾
Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default⁽³⁾
Net
amounts⁽⁴⁾
Securities sold under agreements to repurchase $ 170,496
$ 44,811
$ 125,685
$ 63,517
$ 62,168
Deposits received for securities loaned 15,958
—
15,958
3,529
12,429
Total $ 186,454
$ 44,811
$ 141,643
$ 67,046
$ 74,597


~~(1)~~	~~Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45.~~


~~(2)~~	~~The total of this column for each period excludes federal funds sold/purchased. See tables above.~~


~~(3)~~	Includes financial instruments subject to enforceable master netting agreements that are not permitted to be offset under ASC 210-20-45 but would be eligible for offsetting to the extent that an event of default has occurred and a legal opinion supporting enforceability of the offsetting right has been obtained.


~~(4)~~	~~Remaining exposures continue to be secured by financial collateral, but Citi may not have sought or been able to obtain a legal opinion evidencing enforceability of the offsetting right.~~

~~The following tables present the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by remaining contractual maturity:~~

As of December 31, 2017
In millions of dollars Open and overnight Up to 30 days 31–90 days Greater than 90 days Total
Securities sold under agreements to repurchase $ 82,073
$ 68,372
$ 33,846
$ 31,831
$ 216,122
Deposits received for securities loaned 9,946
266
1,912
1,181
13,305
Total $ 92,019
$ 68,638
$ 35,758
$ 33,012
$ 229,427

As of December 31, 2016
In millions of dollars Open and overnight Up to 30 days 31–90 days Greater than 90 days Total
Securities sold under agreements to repurchase $ 79,740
$ 50,399
$ 19,396
$ 20,961
$ 170,496
Deposits received for securities loaned 10,813
2,169
2,044
932
15,958
Total $ 90,553
$ 52,568
$ 21,440
$ 21,893
$ 186,454

~~The following tables present the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by class of underlying collateral:~~

As of December 31, 2017
In millions of dollars Repurchase agreements Securities lending agreements Total
U.S. Treasury and federal agency securities $ 58,774
$ —
$ 58,774
State and municipal securities 1,605
—
1,605
Foreign government securities 89,576
105
89,681
Corporate bonds 20,194
657
20,851
Equity securities 20,724
11,907
32,631
Mortgage-backed securities 17,791
—
17,791
Asset-backed securities 5,479
—
5,479
Other 1,979
636
2,615
Total $ 216,122
$ 13,305
$ 229,427

As of December 31, 2016
In millions of dollars Repurchase agreements Securities lending agreements Total
U.S. Treasury and federal agency securities $ 66,263
$ —
$ 66,263
State and municipal securities 334
—
334
Foreign government securities 52,988
1,390
54,378
Corporate bonds 17,164
630
17,794
Equity securities 12,206
13,913
26,119
Mortgage-backed securities 11,421
—
11,421
Asset-backed securities 5,428
—
5,428
Other 4,692
25
4,717
Total $ 170,496
$ 15,958
$ 186,454

~~12. BROKERAGE RECEIVABLES AND BROKERAGE~~

~~PAYABLES~~

Citi has receivables and payables for financial instruments sold to and purchased from brokers, dealers and customers, which arise in the ordinary course of business. Citi is exposed to risk of loss from the inability of brokers, dealers or customers to pay for purchases or to deliver the financial instruments sold, in which case Citi would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transaction and replaces the broker, dealer or customer in question.

Citi seeks to protect itself from the risks associated with customer activities by requiring customers to maintain margin collateral in compliance with regulatory and internal guidelines. Margin levels are monitored daily, and customers deposit additional collateral as required. Where customers cannot meet collateral requirements, Citi may liquidate sufficient underlying financial instruments to bring the customer into compliance with the required margin level.

Exposure to credit risk is impacted by market volatility, which may impair the ability of clients to satisfy their obligations to Citi. Credit limits are established and closely monitored for customers and for brokers and dealers engaged in forwards, futures and other transactions deemed to be credit sensitive.

~~Brokerage receivables~~ and ~~Brokerage payables~~Interest expense consisted of the following:

December 31,
In millions of dollars 2017 2016
Receivables from customers $ 19,215
$ 10,374
Receivables from brokers, dealers and clearing organizations 19,169
18,513
Total brokerage receivables⁽¹⁾
$ 38,384
$ 28,887
Payables to customers $ 38,741
$ 37,237
Payables to brokers, dealers and clearing organizations 22,601
19,915
Total brokerage payables⁽¹⁾
$ 61,342
$ 57,152



In millions of dollars	2018		2017		2016
Interest revenue
Loan interest, including fees	$	45,682	$	41,736	$	40,125
Deposits with banks	2,203		1,635		971
Federal funds sold and securities borrowed or purchased under agreements to resell	5,492		3,249		2,543
Investments, including dividends	9,494		8,295		7,582
Trading account assets⁽¹⁾	6,284		5,501		5,738
Other interest	1,673		1,163		1,029
Total interest revenue	$	70,828	$	61,579	$	57,988
Interest expense
Deposits⁽²⁾	$	9,616	$	6,587	$	5,300
Federal funds purchased and securities loaned or sold under agreements to repurchase	4,889		2,661		1,912
Trading account liabilities⁽¹⁾	1,001		638		410
Short-term borrowings	2,209		1,059		477
Long-term debt	6,551		5,573		4,413
Total interest expense	$	24,266	$	16,518	$	12,512
Net interest revenue	$	46,562	$	45,061	$	45,476
Provision for loan losses	7,354		7,503		6,749
Net interest revenue after provision for loan losses	$	39,208	$	37,558	$	38,727


(1)	Interest expense on Trading account liabilities is reported as a reduction of interest revenue from Trading account assets.


(2)	Includes deposit insurance fees and charges of $1,182 million, $1,249 million and $1,145 million for 2018, 2017 and 2016, respectively.

5. COMMISSIONS AND FEES; ADMINISTRATION AND OTHER FIDUCIARY FEES

The primary components of Commissions and fees revenue are investment banking fees, brokerage commissions, credit- and bank-card income and deposit-related fees.

Investment banking fees are substantially composed of underwriting and advisory revenues. Such fees are recognized at the point in time when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the closing of a transaction. Reimbursed expenses related to these transactions are recorded as revenue and are included within investment banking fees. In certain instances for advisory contracts, Citi will receive amounts in advance of the deal’s closing. In these instances, the amounts received will be recognized as a liability and not recognized in revenue until the transaction closes. The contract liability amount for the periods presented was negligible. Out-of-pocket expenses associated with underwriting activity are deferred and recognized at the time the related revenue is recognized, while out-of-pocket expenses associated with advisory arrangements are expensed as incurred. In general, expenses incurred related to investment banking transactions, whether consummated or not, are recorded in Other operating expenses. The Company has determined that it acts as principal in the majority of these transactions and therefore presents expenses gross within Other operating expenses.

Brokerage commissions primarily include commissions and fees from the following: executing transactions for clients on exchanges and over-the-counter markets; sales of mutual funds and other annuity products; and assisting clients in clearing transactions, providing brokerage services and other such activities. Brokerage commissions are recognized in Commissions and fees at the point in time the associated service is fulfilled, generally on the trade execution date. Gains or losses, if any, on these transactions are included in Principal transactions (see Note 6 to the Consolidated Financial Statements). Sales of certain investment products include a portion of variable consideration associated with the underlying product. In these instances, a portion of the revenue associated with the sale of the product is not recognized until the variable consideration becomes fixed. The Company recognized $521 million, $416 million and $371 million of revenue related to such variable consideration for the years ended December 31, 2018, 2017 and 2016, respectively. These amounts primarily relate to performance obligations satisfied in prior periods.

Credit- and bank-card income is primarily composed of

interchange fees, which are earned by card issuers based on

purchase sales, and certain card fees, including annual fees.

Costs related to customer reward programs and certain

payments to partners (primarily based on program sales,

profitability and customer acquisitions) are recorded as a

reduction of credit- and bank-card income. Interchange

revenues are recognized as earned on a daily basis when Citi's

performance obligation to transmit funds to the payment

networks has been satisfied. Annual card fees, net of

origination costs, are deferred and amortized on a straight-line

basis over a 12-month period. Costs related to card reward

programs are recognized when the rewards are earned by the

cardholders. Payments to partners are recognized when

incurred.

Deposit-related fees consist of service charges on deposit

accounts and fees earned from performing cash management

activities and other deposit account services. Such fees are

recognized in the period in which the related service is

provided.

Transactional service fees primarily consist of fees

charged for processing services such as cash management,

global payments, clearing, international funds transfer and

other trade services. Such fees are recognized as/when the

associated service is satisfied, which normally occurs at the

point in time the service is requested by the customer and

provided by Citi.

Insurance distribution revenue consists of commissions

earned from third-party insurance companies for marketing

and selling insurance policies on behalf of such entities. Such

commissions are recognized in Commissions and fees at the

point in time the associated service is fulfilled, generally when

the insurance policy is sold to the policyholder. Sales of

certain insurance products include a portion of variable

consideration associated with the underlying product. In these

instances, a portion of the revenue associated with the sale of

the policy is not recognized until the variable consideration

becomes determinable. The Company recognized $386 million, $440 million and $479 million of revenue related to such variable consideration for the years ended December 31, 2018, 2017 and 2016, respectively. These amounts primarily relate to performance obligations in prior periods.

Insurance premiums consist of premium income from

insurance policies that Citi has underwritten and sold to

policyholders.

The following table presents Commissions and fees revenue:



	2018												2017												2016
In millions of dollars	ICG			GCB			Corp/Other			Total			ICG			GCB			Corp/Other			Total			ICG			GCB			Corp/Other			Total
Investment banking	$	3,568		$	—		$	—		$	3,568		$	3,817		$	—		$	—		$	3,817		$	3,000		$	—		$	—		$	3,000
Brokerage commissions	1,977			815			—			2,792			1,889			826			3			2,718			1,748			636			11			2,395
Credit- and bank-card income
Interchange fees	1,072			8,117			11			9,200			950			7,526			99			8,575			837			6,189			164			7,190
Card-related loan fees	63			627			12			702			53			693			48			794			27			784			65			876
Card rewards and partner payments	(503		)	(8,254		)	(12		)	(8,769		)	(425		)	(7,243		)	(57		)	(7,725		)	(361		)	(6,084		)	(111		)	(6,556		)
Deposit-related fees⁽¹⁾	949			654			1			1,604			947			726			14			1,687			818			721			19			1,558
Transactional service fees	718			98			4			820			738			91			49			878			700			84			136			920
Corporate finance⁽²⁾	729			5			—			734			761			5			—			766			741			4			—			745
Insurance distribution revenue⁽³⁾	14			565			11			590			12			562			68			642			10			584			90			684
Insurance premiums⁽³⁾	—			119			—			119			—			122			—			122			—			136			144			280
Loan servicing	156			122			37			315			146			101			95			342			147			127			77			351
Other	25			143			14			182			(38		)	99			30			91			31			90			114			235
Total commissions and fees⁽⁴⁾	$	8,768		$	3,011		$	78		$	11,857		$	8,850		$	3,508		$	349		$	12,707		$	7,698		$	3,271		$	709		$	11,678


(1)	Includes ~~brokerage receivables~~overdraft fees of $128 million, $135 million and ~~payables recorded by Citi broker-dealer entities that~~$133 million for the years ended December 31, 2018, 2017 and 2016, respectively. Overdraft fees are accounted for ~~in accordance with the AICPA Accounting Guide for Brokers and Dealers in Securities as codified in~~under ASC ~~940-320.~~

~~13. INVESTMENTS~~

~~Overview~~

~~The following table presents Citi’s investments by category:~~

December 31,
In millions of dollars 2017 2016
Securities available-for-sale (AFS) $ 290,914
$ 299,424
Debt securities held-to-maturity (HTM)⁽¹⁾
53,320
45,667
Non-marketable equity securities carried at fair value⁽²⁾
1,206
1,774
Non-marketable equity securities carried at cost⁽³⁾
6,850
6,439
Total investments $ 352,290
$ 353,304


~~(1)~~	~~Carried at adjusted amortized cost basis, net of any credit-related impairment.~~310.


(2)	~~Unrealized gains~~Consists primarily of fees earned from structuring and ~~losses~~underwriting loan syndications or related financing activity. This activity is accounted for ~~non-marketable equity securities carried at fair value are recognized in earnings.~~under ASC 310.


(3)	~~Primarily consists~~Previously reported as insurance premiums in the Consolidated Statement of ~~shares issued by~~Income.

(4)

Commissions and fees includes $(6,766) million, $(5,568) million and $(4,169) million not accounted for under ASC 606, Revenue from Contracts with Customers, for the ~~Federal Reserve Bank, Federal Home Loan Banks,~~years ended December 31, 2018, 2017 and ~~various clearing houses of which Citigroup is a member.~~2016, respectively. Amounts reported in Commissions and fees accounted for under other guidance primarily include card-related loan fees, card reward programs and certain partner payments, corporate finance fees, insurance premiums and loan servicing fees.

Administration and Other Fiduciary Fees

Administration and other fiduciary fees are primarily composed of custody fees and fiduciary fees.

The custody product is composed of numerous services related to the administration, safekeeping and reporting for both U.S. and non-U.S. denominated securities. The services offered to clients include trade settlement, safekeeping, income collection, corporate action notification, record-keeping and reporting, tax reporting and cash management. These services are provided for a wide range of securities, including but not limited to equities, municipal and corporate bonds, mortgage- and asset-backed securities, money market instruments, U.S. Treasuries and agencies, derivative instruments, mutual funds, alternative investments and precious metals. Custody fees are recognized as or when the associated promised service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi.

Fiduciary fees consist of trust services and investment management services. As an escrow agent, Citi receives, safe-

keeps, services and manages clients’ escrowed assets such as cash, securities, property (including intellectual property), contracts or other collateral. Citi performs its escrow agent duties by safekeeping the funds during the specified time period agreed upon by all parties and therefore earns its revenue evenly during the contract duration.

Investment management services consist of managing assets on behalf of Citi’s retail and institutional clients. Revenue from these services primarily consists of asset-based fees for advisory accounts, which are based on the market value of the client’s assets and recognized monthly, when the market value is fixed. In some instances, the Company contracts with third-party advisors and with third-party custodians. The Company has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to third parties gross within Other operating expenses.

The following table presents ~~interest~~Administration and ~~dividend income on investments:~~other fiduciary fees:

In millions of dollars 2017 2016 2015
Taxable interest $ 7,538
$ 6,858
$ 6,433
Interest exempt from U.S. federal income tax 535
549
196
Dividend income 222
175
388
Total interest and dividend income $ 8,295
$ 7,582
$ 7,017



	2018								2017								2016
In millions of dollars	ICG		GCB		Corp/Other		Total		ICG		GCB		Corp/Other		Total		ICG		GCB		Corp/Other		Total
Custody fees	$	1,494	$	136	$	65	$	1,695	$	1,505	$	167	$	56	$	1,728	$	1,353	$	163	$	48	$	1,564
Fiduciary fees	645		597		43		1,285		593		575		91		1,259		554		539		50		1,143
Guarantee fees	536		57		7		600		535		54		8		597		523		54		10		587
Total administration and other fiduciary fees⁽¹⁾	$	2,675	$	790	$	115	$	3,580	$	2,633	$	796	$	155	$	3,584	$	2,430	$	756	$	108	$	3,294


(1)	Administration and other fiduciary fees includes $600 million, $597 million and $587 million for the years ended December 31, 2018, 2017 and 2016, respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These amounts include guarantee fees.

6. PRINCIPAL TRANSACTIONS

Citi’s Principal transactions revenue consists of realized and unrealized gains and losses from trading activities. Trading activities include revenues from fixed income, equities, credit and commodities products and foreign exchange transactions that are managed on a portfolio basis characterized by primary risk. Not included in the table below is the impact of net interest revenue related to trading activities, which is an integral part of trading activities’ profitability. For additional information regarding Principal transactions revenue, see

Note 4 to the Consolidated Financial Statements for information about net interest revenue related to trading activities. Principal transactions include CVA (credit valuation adjustments on derivatives) and FVA (funding valuation adjustments) on over-the-counter derivatives. These adjustments are discussed further in Note 24 to the Consolidated Financial Statements.

The following table presents ~~realized gains and losses on the sale of investments, which excludes losses from other-than-temporary impairment (OTTI):~~

In millions of dollars 2017 2016 2015
Gross realized investment gains $ 1,039
$ 1,460
$ 1,124
Gross realized investment losses (261 ) (512 ) (442 )
Net realized gains on sale of investments $ 778
$ 948
$ 682

The Company has sold certain debt securities that were classified as HTM. These sales were in response to significant deterioration in the creditworthiness of the issuers or securities or because the Company has collected a substantial portion (at least 85%) of the principal outstanding at acquisition of the security. In addition, certain other securities were reclassified to AFS investments in response to

significant credit deterioration. Because the Company generally intends to sell these reclassified securities, Citi recorded OTTI on the securities. The following table sets forth, for the periods indicated, the carrying value of HTM securities sold and reclassified to AFS, as well as the related gain (loss) or the OTTI losses recorded on these securities.Principaltransactions revenue:

In millions of dollars 2017 2016 2015
Carrying value of HTM securities sold $ 81
$ 49
$ 392
Net realized gain (loss) on sale of HTM securities 13
14
10
Carrying value of securities reclassified to AFS 74
150
243
OTTI losses on securities reclassified to AFS —
(6 ) (15 )



In millions of dollars	2018		2017		2016
Interest rate risks⁽¹⁾	$	5,186	$	5,301	$	4,229
Foreign exchange risks⁽²⁾	1,423		2,435		1,699
Equity risks⁽³⁾	1,346		525		330
Commodity and other risks⁽⁴⁾	662		425		899
Credit products and risks⁽⁵⁾	445		789		700
Total	$	9,062	$	9,475	$	7,857

(1)

Includes revenues from government securities and corporate debt, municipal securities, mortgage securities and other debt instruments. Also includes spot and forward trading of currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial futures, OTC options and forward contracts on fixed income securities.


(2)	Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as foreign currency translation (FX translation) gains and losses.


(3)	Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes and exchange-traded and OTC equity options and warrants.


(4)	Primarily includes revenues from crude oil, refined oil products, natural gas and other commodities trades.


(5)	Includes revenues from structured credit products.

7. INCENTIVE PLANS

Discretionary Annual Incentive Awards

Citigroup grants immediate cash bonus payments and various forms of immediate and deferred awards as part of its discretionary annual incentive award program involving a large segment of Citigroup’s employees worldwide. Most of the shares of common stock issued by Citigroup as part of its equity compensation programs are to settle the vesting of the stock components of these awards.

Discretionary annual incentive awards are generally awarded in the first quarter of the year based on the previous year’s performance. Awards valued at less than U.S. $100,000 (or the local currency equivalent) are generally paid entirely in the form of an immediate cash bonus. Pursuant to Citigroup policy and/or regulatory requirements, certain employees and officers are subject to mandatory deferrals of incentive pay and generally receive 25%–60% of their awards in a combination of restricted or deferred stock, deferred cash stock units or deferred cash. Discretionary annual incentive awards to many employees in the EU are subject to deferral requirements regardless of the total award value, with at least 50% of the immediate incentive delivered in the form of a stock payment award subject to a restriction on sale or transfer (generally, for 12 months).

Deferred annual incentive awards may be delivered in the form of one or more award types: a restricted or deferred stock award under Citi’s Capital Accumulation Program (CAP), or a deferred cash stock unit award and/or a deferred cash award under Citi’s Deferred Cash Award Plan. The applicable mix of awards may vary based on the employee’s minimum deferral requirement and the country of employment.

Subject to certain exceptions (principally, for retirement-eligible employees), continuous employment within Citigroup is required to vest in CAP, deferred cash stock unit and deferred cash awards. Post employment vesting by retirement-eligible employees and participants who meet other conditions is generally conditioned upon their refraining from competition with Citigroup during the remaining vesting period, unless the employment relationship has been terminated by Citigroup under certain conditions.

Generally, the deferred awards vest in equal annual installments over three- or four-year periods. Vested CAP awards are delivered in shares of common stock. Deferred cash awards are payable in cash and, except as prohibited by applicable regulatory guidance, earn a fixed notional rate of interest that is paid only if and when the underlying principal award amount vests. Deferred cash stock unit awards are payable in cash at the vesting value of the underlying stock. Generally, in the EU, vested CAP shares are subject to a restriction on sale or transfer after vesting, and vested deferred cash awards and deferred cash stock units are subject to hold back (generally, for 12 months in each case).

Unvested CAP, deferred cash stock units and deferred cash awards are subject to one or more clawback provisions that apply in certain circumstances, including gross misconduct. CAP and deferred cash stock unit awards, made to certain employees, are subject to a formulaic performance-based vesting condition pursuant to which amounts otherwise

scheduled to vest will be reduced based on the amount of any pretax loss in the participant’s business in the calendar year preceding the scheduled vesting date. A minimum reduction of 20% applies for the first dollar of loss for CAP and deferred cash stock unit awards.

In addition, deferred cash awards are subject to a discretionary performance-based vesting condition under which an amount otherwise scheduled to vest may be reduced in the event of a “material adverse outcome” for which a participant has “significant responsibility.” These awards are also subject to an additional clawback provision pursuant to which unvested awards may be canceled if the employee engaged in misconduct or exercised materially imprudent judgment, or failed to supervise or escalate the behavior of other employees who did.

~~Securities Available-for-Sale~~Sign-on and Long-Term Retention Awards

~~The amortized cost~~Stock awards and ~~fair value~~deferred cash awards may be made at various times during the year as sign-on awards to induce new hires to join Citi or to high-potential employees as long-term retention awards.

Vesting periods and other terms and conditions pertaining to these awards tend to vary by grant. Generally, recipients must remain employed through the vesting dates to vest in the awards, except in cases of ~~AFS securities were~~death, disability or involuntary termination other than for gross misconduct. These awards do not usually provide for post employment vesting by retirement-eligible participants.

Outstanding (Unvested) Stock Awards

A summary of the status of unvested stock awards granted as ~~follows:~~discretionary annual incentive or sign-on and long-term retention awards is presented below:

2017 2016
In millions of dollars
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Debt securities AFS
Mortgage-backed securities⁽¹⁾

U.S. government-sponsored agency guaranteed $ 42,116
$ 125
$ 500
$ 41,741
$ 38,663
$ 248
$ 506
$ 38,405
Prime 11
6
—
17
2
—
—
2
Alt-A 26
90
—
116
43
7
—
50
Non-U.S. residential 2,744
13
6
2,751
3,852
13
7
3,858
Commercial 334
—
2
332
357
2
1
358
Total mortgage-backed securities $ 45,231
$ 234
$ 508
$ 44,957
$ 42,917
$ 270
$ 514
$ 42,673
U.S. Treasury and federal agency securities
U.S. Treasury $ 108,344
$ 77
$ 971
$ 107,450
$ 113,606
$ 629
$ 452
$ 113,783
Agency obligations 10,813
7
124
10,696
9,952
21
85
9,888
Total U.S. Treasury and federal agency securities $ 119,157
$ 84
$ 1,095
$ 118,146
$ 123,558
$ 650
$ 537
$ 123,671
State and municipal⁽²⁾
$ 8,870
$ 140
$ 245
$ 8,765
$ 10,797
$ 80
$ 757
$ 10,120
Foreign government 100,615
508
590
100,533
98,112
590
554
98,148
Corporate 14,144
51
86
14,109
17,195
105
176
17,124
Asset-backed securities⁽¹⁾
3,906
14
2
3,918
6,810
6
22
6,794
Other debt securities 297
—
—
297
503
—
—
503
Total debt securities AFS $ 292,220
$ 1,031
$ 2,526
$ 290,725
$ 299,892
$ 1,701
$ 2,560
$ 299,033
Marketable equity securities AFS $ 186
$ 4
$ 1
$ 189
$ 377
$ 20
$ 6
$ 391
Total securities AFS $ 292,406
$ 1,035
$ 2,527
$ 290,914
$ 300,269
$ 1,721
$ 2,566
$ 299,424



Unvested stock awards	Shares		Weighted- average grant date fair value per share
Unvested at December 31, 2017	36,931,040		$	47.89
Granted⁽¹⁾	12,896,599		73.87
Canceled	(1,315,456	)	54.50
Vested⁽²⁾	(16,783,587	)	49.54
Unvested at December 31, 2018	31,728,596		$	57.30

(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 amountweighted-average fair value of the ~~securities, which is reflected in the table above. For mortgage-backed~~shares granted during 2017 and ~~asset-backed securitizations in which the Company has other involvement, see Note 21 to the Consolidated Financial Statements.~~2016 was $59.12 and $37.35, respectively.


(2)	The weighted-average fair value of the shares vesting during 2018 was approximately $77.65 per share.

Total unrecognized compensation cost related to unvested stock awards was $538 million at December 31, 2018. The cost is expected to be recognized over a weighted-average period of 1.7 years.

Performance Share Units

Certain executive officers were awarded a target number of performance share units (PSUs) each February from 2015 to 2018, for performance in the year prior to the award date. For grants prior to 2016, PSUs will be earned only to the extent that Citigroup attains specified performance goals relating to Citigroup’s return on assets and relative total shareholder return against peers over the three-year period beginning with the year of award. The actual dollar amounts ultimately earned could vary from zero, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded.

The PSUs granted in February 2016 are earned over a three-year performance period based on Citigroup’s relative total shareholder return as compared to peers. The actual dollar amounts ultimately earned could vary from zero, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded.

The PSUs granted in February 2017 are earned over a three-year performance period based half on return on tangible common equity performance in 2019, and the remaining half on cumulative earnings per share over 2017 to 2019.

The PSUs granted in February 2018 are earned over a three-year performance period based half on return on tangible common equity performance in 2020, and the remaining half on cumulative earnings per share over 2018 to 2020.

For the PSUs awarded in 2016, 2017 and 2018, if the total shareholder return is negative over the three-year performance period, executives may earn no more than 100% of the target PSUs, regardless of the extent to which Citi outperforms peer firms.

For all award years, the value of each PSU is equal to the value of one share of Citi common stock. Dividend equivalents will be accrued and paid on the number of earned PSUs after the end of the performance period.

PSUs are subject to variable accounting, pursuant to which the associated value of the award will fluctuate with changes in Citigroup’s stock price and the attainment of the specified performance goals for each award, until the award is settled solely in cash after the end of the performance period. The value of the award, subject to the performance goals, is estimated using a simulation model that incorporates multiple valuation assumptions, including the probability of achieving the specified performance goals of each award. The risk-free rate used in the model is based on the applicable U.S. Treasury yield curve. Other significant assumptions for the awards are as follows:



Valuation assumptions	2018		2017		2016
Expected volatility	24.93	%	25.79	%	24.37	%
Expected dividend yield	1.75		1.30		0.40

A summary of the performance share unit activity for 2018 is presented below:



Performance share units	Units		Weighted- average grant date fair value per unit
Outstanding, beginning of period	1,786,726		$	40.94
Granted⁽¹⁾	495,099		83.24
Canceled	(25,160	)	44.07
Payments	(488,304	)	44.07
Outstanding, end of period	1,768,362		$	51.88


(1)	The weighted-average grant date fair value per unit awarded in 2017 and 2016 was $59.22 and $27.03, respectively.

PSUs granted in 2015 and 2017 were equitably adjusted after the enactment of Tax Reform, as required under the terms of those awards. The adjustments were intended to reproduce the expected value of the awards immediately prior to the passage of Tax Reform. The PSUs granted in 2016 were not impacted by Tax Reform.

Stock Option Programs

All outstanding stock options are fully vested, with the related expense recognized as a charge to income in prior periods. Generally, the stock options outstanding have a six-year term, with some stock options subject to various transfer restrictions.

The following table presents information with respect to stock option activity under Citigroup’s stock option programs:



	2018						2017						2016
	Options		Weighted- average exercise price		Intrinsic value per share		Options		Weighted- average exercise price		Intrinsic value per share		Options		Weighted- average exercise price		Intrinsic value per share
Outstanding, beginning of period	1,138,813		$	161.96	$	—	1,527,396		$	131.78	$	—	6,656,588		$	67.92	$	—
Canceled	—		—		—		—		—		—		(25,334	)	40.80		—
Expired	(376,588	)	283.63		—		—		—		—		(2,613,909	)	48.80		—
Exercised	—		—		—		(388,583	)	43.35		15.67		(2,489,949	)	49.10		6.60
Outstanding, end of period	762,225		$	101.84	$	—	1,138,813		$	161.96	$	—	1,527,396		$	131.78	$	—
Exercisable, end of period	762,225						1,138,813						1,527,396

The following table summarizes information about stock options outstanding under Citigroup’s stock option programs at December 31, 2018:



		Options outstanding			Options exercisable
Range of exercise prices	Number outstanding	Weighted-average contractual life remaining	Weighted-average exercise price		Number exercisable	Weighted-average exercise price
$39.00–$99.99	312,309	2.1 years	$	43.56	312,309	$	43.56
$100.00–$199.99	449,916	0.0 years	142.30		449,916	142.30
Total at December 31, 2018	762,225	0.9 years	$	101.84	762,225	$	101.84

Other Variable Incentive Compensation

Citigroup has various incentive plans globally that are used to motivate and reward performance primarily in the areas of sales, operational excellence and customer satisfaction. Participation in these plans is generally limited to employees who are not eligible for discretionary annual incentive awards. Other forms of variable compensation include monthly commissions paid to financial advisors and mortgage loan officers.

Summary

Except for awards subject to variable accounting, the total expense recognized for stock awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period, other than for awards to retirement-eligible employees and immediately vested awards. Whenever awards are made or are expected to be made to retirement-eligible employees, the charge to income is accelerated based on when the applicable conditions to retirement eligibility were or will be met. If the employee is retirement eligible on the grant date, or the award is vested at the grant date, the entire expense is recognized in the year prior to grant.

Recipients of Citigroup stock awards generally do not have any stockholder rights until shares are delivered upon vesting or exercise, or after the expiration of applicable required holding periods. Recipients of restricted or deferred stock awards and deferred cash stock unit awards, however, may, except as prohibited by applicable regulatory guidance, be entitled to receive dividends or dividend-equivalent payments during the vesting period. Recipients of restricted stock awards generally are entitled to vote the shares in their

award during the vesting period. Once a stock award vests, the shares are freely transferable, unless they are subject to a restriction on sale or transfer for a specified period.

All equity awards granted since April 19, 2005 have been made pursuant to stockholder-approved stock incentive plans that are administered by the Personnel and Compensation Committee of the Citigroup Board of Directors, which is composed entirely of independent non-employee directors.

At December 31, 2018, approximately 42.4 million shares of Citigroup common stock were authorized and available for grant under Citigroup’s 2014 Stock Incentive Plan, the only plan from which equity awards are currently granted.

The 2014 Stock Incentive Plan and predecessor plans permit the use of treasury stock or newly issued shares in connection with awards granted under the plans. Treasury shares were used to settle vestings from 2016 to 2018, and for the first quarter of 2019, except where local laws favor newly issued shares. The use of treasury stock or newly issued shares to settle stock awards does not affect the compensation expense recorded in the Consolidated Statement of Income for equity awards.

Incentive Compensation Cost

The following table shows components of compensation expense, relating to certain of the incentive compensation programs described above:



In millions of dollars	2018		2017		2016
Charges for estimated awards to retirement-eligible employees	$	669	$	659	$	555
Amortization of deferred cash awards, deferred cash stock units and performance stock units	202		354		336
Immediately vested stock award expense⁽¹⁾	75		70		73
Amortization of restricted and deferred stock awards⁽²⁾	435		474		509
Other variable incentive compensation	640		694		710
Total	$	2,021	$	2,251	$	2,183


(1)	Represents expense for immediately vested stock awards that generally were stock payments in lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the year prior to grant.


(2)	All periods include amortization expense for all unvested awards to non-retirement-eligible employees.

8. RETIREMENT BENEFITS

Pension and Postretirement Plans

The Company has several non-contributory defined benefit pension plans covering certain U.S. employees and has various defined benefit pension and termination indemnity plans covering employees outside the U.S.

The U.S. qualified defined benefit plan was frozen effective January 1, 2008 for most employees. Accordingly, no additional compensation-based contributions have been credited to the cash balance portion of the plan for existing plan participants after 2007. However, certain employees covered under the prior final pay plan formula continue to accrue benefits. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the U.S.

The Company also sponsors a number of non-contributory, nonqualified pension plans. These plans, which are unfunded, provide supplemental defined pension benefits to certain U.S.

employees. With the exception of certain employees covered under the prior final pay plan formula, the benefits under these plans were frozen in prior years.

The plan obligations, plan assets and periodic plan expense for the Company’s most significant pension and postretirement benefit plans (Significant Plans) are measured and disclosed quarterly, instead of annually. The Significant Plans captured approximately 90% of the Company’s global pension and postretirement plan obligations as of December 31, 2018. All other plans (All Other Plans) are measured annually with a December 31 measurement date.

Net (Benefit) Expense

The following table summarizes the components of net (benefit) expense recognized in the Consolidated Statement of Income for the Company’s pension and postretirement plans, for Significant Plans and All Other Plans:



	Pension plans																		Postretirement benefit plans
	U.S. plans									Non-U.S. plans									U.S. plans									Non-U.S. plans
In millions of dollars	2018			2017			2016			2018			2017			2016			2018			2017			2016			2018			2017			2016
Benefits earned during the year	$	1		$	3		$	4		$	146		$	153		$	154		$	—		$	—		$	—		$	9		$	9		$	10
Interest cost on benefit obligation	514			533			548			292			295			282			26			26			25			102			101			94
Expected return on plan assets	(844		)	(865		)	(886		)	(291		)	(299		)	(287		)	(14		)	(6		)	(9		)	(88		)	(89		)	(86		)
Amortization of unrecognized
Prior service cost (benefit)	2			2			2			(4		)	(3		)	(1		)	—			—			—			(10		)	(10		)	(10		)
Net actuarial loss (gain)	165			173			169			53			61			69			(1		)	—			(1		)	29			35			30
Curtailment loss (gain)⁽¹⁾	1			6			13			(1		)	—			(2		)	—			—			—			—			—			—
Settlement loss⁽¹⁾	—			—			—			7			12			6			—			—			—			—			—			—
Total net (benefit) expense	$	(161	)	$	(148	)	$	(150	)	$	202		$	219		$	221		$	11		$	20		$	15		$	42		$	46		$	38


(1)	Losses and gains due to curtailment and settlement relate to repositioning and divestiture actions.

Contributions

The Company’s funding practice for U.S. and non-U.S. pension and postretirement plans is generally to fund to minimum funding requirements in accordance with applicable local laws and regulations. The Company may increase its contributions above the minimum required contribution, if appropriate. In addition, management has the ability to change its funding practices. For the U.S. pension plans, there were no required minimum cash contributions for 2018 or 2017.

The following table summarizes the actual Company contributions for the years ended December 31, 2018 and 2017, as well as estimated expected Company contributions for 2019. Expected contributions are subject to change, since contribution decisions are affected by various factors, such as market performance, tax considerations and regulatory requirements.



	Pension plans⁽¹⁾												Postretirement benefit plans⁽¹⁾
	U.S. plans⁽²⁾						Non-U.S. plans						U.S. plans						Non-U.S. plans
In millions of dollars	2019		2018		2017		2019		2018		2017		2019		2018		2017		2019		2018		2017
Contributions made by the Company	$	—	$	—	$	50	$	97	$	140	$	90	$	—	$	145	$	140	$	4	$	3	$	4
Benefits paid directly by the Company	57		55		55		47		42		45		6		5		36		6		6		5


(1)	Amounts reported for 2019 are expected amounts.


(2)	The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.

Funded Status and Accumulated Other Comprehensive Income (AOCI)

The following tables summarize the funded status and amounts recognized in the Consolidated Balance Sheet for the Company’s pension and postretirement plans:



	Pension plans												Postretirement benefit plans
	U.S. plans						Non-U.S. plans						U.S. plans						Non-U.S. plans
In millions of dollars	2018			2017			2018			2017			2018			2017			2018			2017
Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	14,040		$	14,000		$	7,433		$	6,522		$	699		$	686		$	1,261		$	1,141
Benefits earned during the year	1			3			146			153			—			—			9			9
Interest cost on benefit obligation	514			533			292			295			26			26			102			101
Plan amendments	—			—			7			4			—			—			—			—
Actuarial (gain) loss	(1,056		)	536			(99		)	127			(1		)	43			(123		)	19
Benefits paid, net of participants’ contributions and government subsidy⁽¹⁾	(845		)	(769		)	(293		)	(278		)	(62		)	(56		)	(68		)	(64		)
Divestitures	—			—			—			(29		)	—			—			—			(4		)
Settlement gain⁽²⁾	—			—			(121		)	(192		)	—			—			—			—
Curtailment loss (gain)⁽²⁾	1			6			(1		)	(3		)	—			—			—			—
Foreign exchange impact and other⁽³⁾	—			(269		)	(215		)	834			—			—			(22		)	59
Projected benefit obligation at year end	$	12,655		$	14,040		$	7,149		$	7,433		$	662		$	699		$	1,159		$	1,261
Change in plan assets
Plan assets at fair value at beginning of year	$	12,725		$	12,363		$	7,128		$	6,149		$	262		$	129		$	1,119		$	1,015
Actual return on plan assets	(445		)	1,295			(11		)	462			(5		)	13			(26		)	113
Company contributions	55			105			182			135			150			176			9			9
Benefits paid, net of participants’ contributions and government subsidy⁽¹⁾	(845		)	(769		)	(293		)	(278		)	(62		)	(56		)	(68		)	(64		)
Divestitures	—			—			—			(31		)	—			—			—			—
Settlement⁽²⁾	—			—			(121		)	(192		)	—			—			—			—
Foreign exchange impact and other⁽³⁾	—			(269		)	(186		)	883			—			—			2			46
Plan assets at fair value at year end	$	11,490		$	12,725		$	6,699		$	7,128		$	345		$	262		$	1,036		$	1,119
Funded status of the plans
Qualified plans⁽⁴⁾	$	(483	)	$	(565	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Nonqualified plans⁽⁵⁾	(682		)	(750		)	—			—			—			—			—			—
Funded status of the plans at year end	$	(1,165	)	$	(1,315	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Net amount recognized
Qualified plans
Benefit asset	$	—		$	—		$	806		$	900		$	—		$	—		$	175		$	181
Benefit liability	(483		)	(565		)	(1,256		)	(1,205		)	(317		)	(437		)	(298		)	(323		)
Qualified plans	$	(483	)	$	(565	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Nonqualified plans	(682		)	(750		)	—			—			—			—			—			—
Net amount recognized on the balance sheet	$	(1,165	)	$	(1,315	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Amounts recognized in AOCI
Net transition obligation	$	—		$	—		$	(1	)	$	(1	)	$	—		$	—		$	—		$	—
Prior service benefit	(13		)	(15		)	12			22			—			—			83			92
Net actuarial (loss) gain	(6,892		)	(6,823		)	(1,420		)	(1,318		)	53			72			(340		)	(382		)
Net amount recognized in equity (pretax)	$	(6,905	)	$	(6,838	)	$	(1,409	)	$	(1,297	)	$	53		$	72		$	(257	)	$	(290	)

Accumulated benefit obligation at year end	$	12,646		$	14,034		$	6,720		$	7,038		$	662		$	699		$	1,159		$	1,261


(1)	U.S. Postretirement benefit plans was net of Employer Group Waiver Plan subsidy of $15 million in 2018 and 2017.


(2)	Curtailment and settlement (gains) losses relate to repositioning and divestiture activities.


(3)	With respect to the U.S. Plan, de-risking activities during 2017 resulted in a reduction to plan obligations and assets.


(4)	The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2019 and no minimum required funding is expected for 2019.


(5)	The nonqualified plans of the Company are unfunded.

The following table shows the change in AOCIrelated to the Company’s pension, postretirement and post employment plans:



In millions of dollars	2018			2017			2016
Beginning of year balance, net of tax⁽¹⁾⁽²⁾	$	(6,183	)	$	(5,164	)	$	(5,116	)
Actuarial assumptions changes and plan experience	1,288			(760		)	(854		)
Net asset (loss) gain due to difference between actual and expected returns	(1,732		)	625			400
Net amortization	214			229			232
Prior service (cost) credit	(7		)	(4		)	28
Curtailment/settlement gain⁽³⁾	7			17			17
Foreign exchange impact and other	136			(93		)	99
Impact of Tax Reform⁽⁴⁾	—			(1,020		)	—
Change in deferred taxes, net	20			(13		)	30
Change, net of tax	$	(74	)	$	(1,019	)	$	(48	)
End of year balance, net of tax⁽¹⁾⁽²⁾	$	(6,257	)	$	(6,183	)	$	(5,164	)


(1)	See Note 19 to the Consolidated Financial Statements for further discussion of net AOCI balance.


(2)	Includes net-of-tax amounts for certain profit sharing plans outside the U.S.


(3)	Curtailment and settlement relate to repositioning and divestiture activities.

(4)

In the ~~second~~fourth quarter of 2017, Citi ~~early~~ adopted ASU ~~2017-08~~2018-02, which transferred these amounts from AOCI to Retained earnings.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. See Note 1 to the Consolidated Financial Statements.

At December 31, 2018 and 2017, the ~~amortized cost of approximately 4,600 investments in equity~~aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation (ABO) and ~~fixed income securities exceeded their fair value by $2,527 million. Of~~ the $2,527 million, the gross unrealized losses on equity securities were $1 million. Of the remainder, $1,854 million represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for less than

a year and, of these, 99% were rated investment grade; and $672 million represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for a year or more and, of these, 94% were rated investment grade. Of the $672 million mentioned above, $234 million represent state and municipal securities.

~~The following table shows the~~aggregate fair value of ~~AFS securities that have been~~plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets and for all defined benefit pension plans with an ~~unrealized loss position:~~ABO in excess of plan assets as follows:

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
December 31, 2017
Securities AFS
Mortgage-backed securities
U.S. government-sponsored agency guaranteed $ 30,994
$ 438
$ 2,206
$ 62
$ 33,200
$ 500
Prime —
—
—
—
—
—
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 11
1
—
—
11
1
Total securities AFS $ 181,216
$ 1,854
$ 21,920
$ 673
$ 203,136
$ 2,527
December 31, 2016

Securities AFS

Mortgage-backed securities

U.S. government-sponsored agency guaranteed $ 23,534
$ 436
$ 2,236
$ 70
$ 25,770
$ 506
Prime 1
—
—
—
1
—
Non-U.S. residential 486
—
1,276
7
1,762
7
Commercial 75
1
58
—
133
1
Total mortgage-backed securities $ 24,096
$ 437
$ 3,570
$ 77
$ 27,666
$ 514
U.S. Treasury and federal agency securities

U.S. Treasury $ 44,342
$ 445
$ 1,335
$ 7
$ 45,677
$ 452
Agency obligations 6,552
83
250
2
6,802
85
Total U.S. Treasury and federal agency securities $ 50,894
$ 528
$ 1,585
$ 9
$ 52,479
$ 537
State and municipal $ 1,616
$ 55
$ 3,116
$ 702
$ 4,732
$ 757
Foreign government 38,226
243
8,973
311
47,199
554
Corporate 7,011
129
1,877
47
8,888
176
Asset-backed securities 411
—
3,213
22
3,624
22
Other debt securities 5
—
—
—
5
—
Marketable equity securities AFS 19
2
24
4
43
6
Total securities AFS $ 122,278
$ 1,394
$ 22,358
$ 1,172
$ 144,636
$ 2,566

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

December 31,
2017 2016
In millions of dollars
Amortized
cost
Fair
value
Amortized
cost
Fair
value
Mortgage-backed securities⁽¹⁾

Due within 1 year $ 45
$ 45
$ 132
$ 132
After 1 but within 5 years 1,306
1,304
736
738
After 5 but within 10 years 1,376
1,369
2,279
2,265
After 10 years⁽²⁾
42,504
42,239
39,770
39,538
Total $ 45,231
$ 44,957
$ 42,917
$ 42,673
U.S. Treasury and federal agency securities
Due within 1 year $ 4,913
$ 4,907
$ 4,945
$ 4,945
After 1 but within 5 years 111,236
110,238
101,369
101,323
After 5 but within 10 years 3,008
3,001
17,153
17,314
After 10 years⁽²⁾
—
—
91
89
Total $ 119,157
$ 118,146
$ 123,558
$ 123,671
State and municipal
Due within 1 year $ 1,792
$ 1,792
$ 2,093
$ 2,092
After 1 but within 5 years 2,579
2,576
2,668
2,662
After 5 but within 10 years 514
528
335
334
After 10 years⁽²⁾
3,985
3,869
5,701
5,032
Total $ 8,870
$ 8,765
$ 10,797
$ 10,120
Foreign government
Due within 1 year $ 32,130
$ 32,100
$ 32,540
$ 32,547
After 1 but within 5 years 53,034
53,165
51,008
50,881
After 5 but within 10 years 12,949
12,680
12,388
12,440
After 10 years⁽²⁾
2,502
2,588
2,176
2,280
Total $ 100,615
$ 100,533
$ 98,112
$ 98,148
All other⁽³⁾

Due within 1 year $ 3,998
$ 3,991
$ 2,629
$ 2,628
After 1 but within 5 years 9,047
9,027
12,339
12,334
After 5 but within 10 years 3,415
3,431
6,566
6,528
After 10 years⁽²⁾
1,887
1,875
2,974
2,931
Total $ 18,347
$ 18,324
$ 24,508
$ 24,421
Total debt securities AFS $ 292,220
$ 290,725
$ 299,892
$ 299,033



	PBO exceeds fair value of plan assets								ABO exceeds fair value of plan assets
	U.S. plans⁽¹⁾				Non-U.S. plans				U.S. plans⁽¹⁾				Non-U.S. plans
In millions of dollars	2018		2017		2018		2017		2018		2017		2018		2017
Projected benefit obligation	$	12,655	$	14,040	$	3,904	$	2,721	$	12,655	$	14,040	$	3,718	$	2,596
Accumulated benefit obligation	12,646		14,034		3,528		2,381		12,646		14,034		3,387		2,296
Fair value of plan assets	11,490		12,725		2,648		1,516		11,490		12,725		2,478		1,407


(1)	~~Includes mortgage-backed securities of~~At December 31, 2018 and 2017, for both the U.S. ~~government-sponsored agencies.~~qualified plan and nonqualified plans, the aggregate PBO and the aggregate ABO exceeded plan assets.

Plan Assumptions

The Company utilizes a number of assumptions to determine plan obligations and expenses. Changes in one or a combination of these assumptions will have an impact on the Company’s pension and postretirement PBO, funded status and (benefit) expense. Changes in the plans’ funded status resulting from changes in the PBO and fair value of plan assets will have a corresponding impact on Accumulated other comprehensive income (loss).

The actuarial assumptions at the respective years ended December 31 in the table below are used to measure the year-end PBO and the net periodic (benefit) expense for the subsequent year (period). Since Citi’s Significant Plans are measured on a quarterly basis, the year-end rates for those plans are used to calculate the net periodic (benefit) expense for the subsequent year’s first quarter. As a result of the quarterly measurement process, the net periodic (benefit) expense for the Significant Plans is calculated at each respective quarter end based on the preceding quarter-end rates (as shown below for the U.S. and non-U.S. pension and postretirement plans). The actuarial assumptions for All Other Plans are measured annually.

Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Company’s plans are shown in the following table:



At year end	2018	2017
Discount rate
U.S. plans
Qualified pension	4.25%	3.60%
Nonqualified pension	4.25	3.60
Postretirement	4.20	3.50
Non-U.S. pension plans
Range	0.25 to 12.00	0.00 to 10.20
Weighted average	4.47	4.17
Non-U.S. postretirement plans
Range	1.75 to 10.75	1.75 to 10.10
Weighted average	9.05	8.10
Future compensation increase rate⁽¹⁾
Non-U.S. pension plans
Range	1.30 to 13.67	1.17 to 13.67
Weighted average	3.16	3.08
Expected return on assets
U.S. plans
Qualified pension	6.70	6.80
Postretirement⁽²⁾	6.70/3.00	6.80/3.00
Non-U.S. pension plans
Range	1.00 to 11.50	0.00 to 11.50
Weighted average	4.30	4.52
Non-U.S. postretirement plans
Range	8.00 to 9.20	8.00 to 9.80
Weighted average	8.01	8.01


(1)	Not material for U.S. plans.


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


~~(3)~~	~~Includes corporate, asset-backed and other debt securities.~~return for the VEBA Trust was 3.00%.

~~Debt Securities Held-to-Maturity~~



During the year	2018	2017	2016
Discount rate
U.S. plans
Qualified pension	3.60%/3.95%/ 4.25%/4.30%	4.10%/4.05%/ 3.80%/3.75%	4.40%/3.95%/ 3.65%/3.55%
Nonqualified pension	3.60/3.95/ 4.25/4.30	4.00/3.95/ 3.75/3.65	4.35/3.90/ 3.55/3.45
Postretirement	3.50/3.90/ 4.20/4.20	3.90/3.85/ 3.60/3.55	4.20/3.75/ 3.40/3.30
Non-U.S. pension plans⁽¹⁾
Range	0.00 to 10.75	0.25 to 72.50	0.25 to 42.00
Weighted average	4.17	4.40	4.76
Non-U.S. postretirement plans⁽¹⁾
Range	1.75 to 10.10	1.75 to 11.05	2.00 to 13.20
Weighted average	8.10	8.27	7.90
Future compensation increase rate⁽²⁾
Non-U.S. pension plans⁽¹⁾
Range	1.17 to 13.67	1.25 to 70.00	1.00 to 40.00
Weighted average	3.08	3.21	3.24
Expected return on assets
U.S. plans
Qualified pension⁽³⁾	6.80/6.70	6.80	7.00
Postretirement⁽³⁾⁽⁴⁾	6.80/6.70/3.00	6.80	7.00
Non-U.S. pension plans⁽¹⁾
Range	0.00 to 11.60	1.00 to 11.50	1.60 to 11.50
Weighted average	4.52	4.55	4.95
Non-U.S. postretirement plans⁽¹⁾
Range	8.00 to 9.80	8.00 to 10.30	8.00 to 10.70
Weighted average	8.01	8.02	8.01

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

In millions of dollars
Adjusted amortized
cost basis⁽¹⁾
Net unrealized gains
(losses)
recognized in
AOCI
Carrying
value⁽²⁾
Gross
unrealized
gains
Gross
unrealized
(losses)
Fair
value
December 31, 2017
Debt securities held-to-maturity
Mortgage-backed securities⁽³⁾

U.S. government agency guaranteed $ 23,854
$ 26
$ 23,880
$ 40
$ (157 ) $ 23,763
Prime —
—
—
—
—
—
Alt-A 206
(65 ) 141
57
—
198
Non-U.S. residential 1,887
(46 ) 1,841
65
—
1,906
Commercial 237
—
237
—
—
237
Total mortgage-backed securities $ 26,184
$ (85 ) $ 26,099
$ 162
$ (157 ) $ 26,104
State and municipal ⁽⁴⁾
$ 8,925
$ (28 ) $ 8,897
$ 378
$ (73 ) $ 9,202
Foreign government 740
—
740
—
(18 ) 722
Asset-backed securities⁽³⁾
17,588
(4 ) 17,584
162
(22 ) 17,724
Total debt securities held-to-maturity $ 53,437
$ (117 ) $ 53,320
$ 702
$ (270 ) $ 53,752
December 31, 2016

Debt securities held-to-maturity

Mortgage-backed securities⁽³⁾

U.S. government agency guaranteed $ 22,462
$ 33
$ 22,495
$ 47
$ (186 ) $ 22,356
Prime 31
(7 ) 24
10
(1 ) 33
Alt-A 314
(27 ) 287
69
(1 ) 355
Non-U.S. residential 1,871
(47 ) 1,824
49
—
1,873
Commercial 14
—
14
—
—
14
Total mortgage-backed securities $ 24,692
$ (48 ) $ 24,644
$ 175
$ (188 ) $ 24,631
State and municipal $ 9,025
$ (442 ) $ 8,583
$ 129
$ (238 ) $ 8,474
Foreign government 1,339
—
1,339
—
(26 ) 1,313
Asset-backed securities⁽³⁾
11,107
(6 ) 11,101
41
(5 ) 11,137
Total debt securities held-to-maturity⁽⁵⁾
$ 46,163
$ (496 ) $ 45,667
$ 345
$ (457 ) $ 45,555

(1)

~~For securities transferred~~Reflects rates utilized to ~~HTM from~~ ~~Trading account assets, adjusted amortized cost basis is defined as~~determine the ~~fair value of the securities at the date of transfer plus any accretion income~~quarterly expense for Significant non-U.S. pension and less any impairments recognized in earnings subsequent to transfer. For securities transferred to HTM from AFS, adjusted amortized cost basis 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 other-than-temporary impairment recognized in earnings.

postretirement plans.

(2)

HTM securities are carried on the Consolidated Balance Sheet at adjusted amortized cost basis, plus or minus any unamortized unrealized gains and losses and fair value hedge adjustments recognized in AOCI prior to reclassifying the securities from AFS to HTM. Changes in the values of these securities are not reported in the financial statements, exceptNot material for the amortization of any difference between the carrying value at the transfer date and par value of the securities, and the recognition of any non-credit fair value adjustments in AOCI in connection with the recognition of any credit impairment in earnings related to securities the Company continues to intend to hold until maturity.U.S. plans.

(3)

The ~~Company invests in mortgage-backed~~expected rate of return for the U.S. pension and ~~asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure~~postretirement plans was lowered from 6.80% to ~~loss from these VIEs is equal to the carrying amount of the securities, which is reflected~~6.70% effective in the ~~table above. For mortgage-backed and asset-backed securitizations~~second quarter of 2018 to reflect a change in ~~which the Company has other involvement, see Note 21 to the Consolidated Financial Statements.~~target asset allocation.


(4)	In 2017, the VEBA Trust was funded with an expected rate of return on assets of 3.00%.

Discount Rate

The discount rates for the U.S. pension and postretirement plans were selected by reference to a Citigroup-specific analysis using each plan’s specific cash flows and compared with high-quality corporate bond indices for reasonableness. The discount rates for the non-U.S. pension and postretirement plans are selected by reference to high-quality corporate bond rates in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds in certain countries.

The established rounding convention is to the nearest 5 bps for the top five non-U.S. countries, and 25 bps for all other countries.

Expected Rate of Return

The Company determines its assumptions for the expected rate of return on plan assets for its U.S. pension and postretirement plans using a “building block” approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted average range of nominal rates is then determined based on target allocations to each asset class. Market performance over a number of earlier years is evaluated covering a wide range of economic conditions to determine whether there are sound reasons for projecting any past trends.

The Company considers the expected rate of return to be a long-term assessment of return expectations and does not anticipate changing this assumption unless there are significant changes in investment strategy or economic conditions. This contrasts with the selection of the discount rate and certain other assumptions, which are reconsidered annually (or quarterly for the Significant Plans) in accordance with GAAP.

The expected rate of return for the U.S. pension and postretirement plans was 6.70% at December 31, 2018 and 6.80% at December 31, 2017 and 2016. The expected return on assets reflects the expected annual appreciation of the plan assets and reduces the Company’s annual pension expense. The expected return on assets is deducted from the sum of service cost, interest cost and other components of pension expense to arrive at the net pension (benefit) expense. Net pension (benefit) expense for the U.S. pension plans for 2018, 2017 and 2016 reflects deductions of $844 million, $865 million and $886 million of expected returns, respectively.

The following table shows the expected rates of return used in determining the Company’s pension expense compared to the actual rate of return on plan assets during 2018, 2017 and 2016 for the U.S. pension and postretirement plans:



U.S. plans	2018	2017	2016
Expected rate of return
U.S. pension and postretirement trust	6.80%/6.70%	6.80%	7.00%
VEBA trust⁽¹⁾	3.00	3.00	—
Actual rate of return⁽²⁾
U.S. pension and postretirement trust	-3.40	10.90	4.90
VEBA trust⁽¹⁾	0.43 to 1.41	—	—


(1)	In December 2017, the VEBA Trust was funded for postretirement benefits with an expected rate of return on assets of 3.00%.


(2)	Actual rates of return are presented net of fees.

For the non-U.S. pension plans, pension expense for 2018 was reduced by the expected return of $291 million, compared with the actual return of $(11) million. Pension expense for 2017 and 2016 was reduced by expected returns of $299 million and $287 million, respectively.

Mortality Tables

At December 31, 2018, the Company maintained the Retirement Plan 2014 (RP-2014) mortality table and adopted the Mortality Projection 2018 (MP-2018) projection table for the U.S. plans.



U.S. plans	In2018⁽¹⁾	2017⁽²⁾
Mortality
Pension	RP-2014/MP-2018	RP-2014/MP-2017
Postretirement	RP-2014/MP-2018	RP-2014/MP-2017


(1)	The RP-2014 table is the ~~second quarter~~white-collar RP-2014 table. The MP-2018 projection scale is projected from 2006, with convergence to 0.75% ultimate rate of annual improvement by 2034.


(2)	The RP-2014 table is the white-collar RP-2014 table, The MP-2017 projection scale is projected from 2006, with convergence to 0.75% ultimate rate of annual improvement by 2033.

Sensitivities of Certain Key Assumptions

The following tables summarize the effect on pension expense of a one-percentage-point change in the discount rate:



	One-percentage-point increase
In millions of dollars	2018			2017			2016
U.S. plans	$	25		$	29		$	31
Non-U.S. plans	(22		)	(27		)	(33		)
	One-percentage-point decrease
In millions of dollars	2018			2017			2016
U.S. plans	$	(37	)	$	(44	)	$	(47	)
Non-U.S. plans	32			41			37

Since the U.S. qualified pension plan was frozen, most of the prospective service cost has been eliminated and the gain/loss amortization period was changed to the life expectancy for inactive participants. As a result, pension expense for the U.S. qualified pension plan is driven more by interest costs than service costs, and an increase in the discount rate would increase pension expense, while a decrease in the discount rate would decrease pension expense.

The following tables summarize the effect on pension expense of a one-percentage-point change in the expected rates of return:



	One-percentage-point increase
In millions of dollars	2018			2017			2016
U.S. plans	$	(126	)	$	(127	)	$	(127	)
Non-U.S. plans	(64		)	(64		)	(61		)
	One-percentage-point decrease
In millions of dollars	2018			2017			2016
U.S. plans	$	126		$	127		$	127
Non-U.S. plans	64			64			61

Health Care Cost Trend Rate

Assumed health care cost trend rates were as follows:



	2018	2017
Health care cost increase rate for U.S. plans
Following year	7.00%	6.50%
Ultimate rate to which cost increase is assumed to decline	5.00	5.00
Year in which the ultimate rate is reached	2027	2023

Health care cost increase rate for Non-U.S. plans (weighted average)
Following year	6.90%	6.87%
Ultimate rate to which cost increase is assumed to decline	6.90	6.87
Range of years in which the ultimate rate is reached	2019	2018–2019

Interest Crediting Rate

The Company has cash balance plans and other plans with promised interest crediting rates. For these plans, the interest crediting rates are set in line with plan rules or country legislation and do not change with market conditions.



	Weighted average interest crediting rate
At year end	2018	2017	2016
U.S. plans	3.25%	2.60%	3.10%
Non-U.S. plans	1.68	1.74	1.75

Plan Assets

Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on asset fair values, are as follows:



	Target asset allocation	U.S. pension assets at December 31,				U.S. postretirement assets at December 31,
Asset category⁽¹⁾	2019	2018		2017		2018		2017
Equity securities⁽²⁾	0–26%	15	%	20	%	15	%	20	%
Debt securities⁽³⁾	35–82	57		48		57		48
Real estate	0–7	5		5		5		5
Private equity	0–10	3		3		3		3
Other investments	0–30	20		24		20		24
Total		100	%	100	%	100	%	100	%


(1)	Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real estate are classified in the real estate asset category, not private equity.


(2)	Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2018 and 2017.


(3)	The VEBA Trust for postretirement benefits are primarily invested in debt securities which are not reflected in the table above.

Third-party investment managers and advisors provide their services to Citigroup’s U.S. pension and postretirement plans. Assets are rebalanced as the Company’s Pension Plan Investment Committee deems appropriate. Citigroup’s investment strategy, with respect to its assets, is to maintain a globally diversified investment portfolio across several asset classes that, when combined with Citigroup’s contributions to

the plans, will maintain the plans’ ability to meet all required benefit obligations.

Citigroup’s pension and postretirement plans’ weighted-average asset allocations for the non-U.S. plans and the actual ranges, and the weighted-average target allocations by asset category based on asset fair values, are as follows:



	Non-U.S. pension plans
	Target asset allocation	Actual range at December 31,		Weighted-average at December 31,
Asset category⁽¹⁾	2019	2018	2017	2018		2017
Equity securities	0–63%	0–66%	0–67%	13	%	15	%
Debt securities	0–100	0–100	0–99	80		79
Real estate	0–15	0–12	0–18	1		1
Other investments	0–100	0–100	0–100	6		5
Total				100	%	100	%


(1)	Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.



	Non-U.S. postretirement plans
	Target asset allocation	Actual range at December 31,		Weighted-average at December 31,
Asset category⁽¹⁾	2019	2018	2017	2018		2017
Equity securities	0–30%	0–35%	0–38%	35	%	38	%
Debt securities	64–100	62–100	58–100	62		58
Other investments	0–6	0–3	0–4	3		4
Total				100	%	100	%


(1)	Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.

Fair Value Disclosure

For information on fair value measurements, including descriptions of Levels 1, 2 and 3 of the fair value hierarchy and the valuation methodology utilized by the Company, see Notes 1 and 24 to the Consolidated Financial Statements. ASU 2015-07 removed the requirement to categorize within the fair value hierarchy investments for which fair value is measured using the NAV per share practical expedient.

Certain investments may transfer between the fair value hierarchy classifications during the year due to changes in valuation methodology and pricing sources.

Plan assets by detailed asset categories and the fair value hierarchy are as follows:



	U.S. pension and postretirement benefit plans⁽¹⁾
In millions of dollars	Fair value measurement at December 31, 2018
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	625		$	—		$	—	$	625
Non-U.S. equities	481			—			—		481
Mutual funds and other registered investment companies	215			—			—		215
Commingled funds	—			1,344			—		1,344
Debt securities	1,346			3,475			—		4,821
Annuity contracts	—			—			1		1
Derivatives	16			252			—		268
Other investments	—			—			127		127
Total investments	$	2,683		$	5,071		$	128	$	7,882
Cash and short-term investments	$	93		$	865		$	—	$	958
Other investment liabilities	(100		)	(254		)	—		(354		)
Net investments at fair value	$	2,676		$	5,682		$	128	$	8,486
Other investment receivables redeemed at NAV									$	80
Securities valued at NAV									3,269
Total net assets									$	11,835


(1)	The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2018, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for the postretirement benefits are reflected in the above table.



	U.S. pension and postretirement benefit plans⁽¹⁾
In millions of dollars	Fair value measurement at December 31, 2017
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	726		$	—		$	—	$	726
Non-U.S. equities	821			—			—		821
Mutual funds and other registered investment companies	376			—			—		376
Commingled funds	—			1,184			—		1,184
Debt securities	1,381			3,080			—		4,461
Annuity contracts	—			—			1		1
Derivatives	11			323			—		334
Other investments	—			—			148		148
Total investments	$	3,315		$	4,587		$	149	$	8,051
Cash and short-term investments	$	257		$	1,004		$	—	$	1,261
Other investment liabilities	(60		)	(343		)	—		(403		)
Net investments at fair value	$	3,512		$	5,248		$	149	$	8,909
Other investment receivables redeemed at NAV									$	16
Securities valued at NAV									4,062
Total net assets									$	12,987


(1)	The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2017, ~~Citi early adopted~~the allocable interests of the U.S. pension and postretirement plans were 99.0% and 1.0%, respectively. The investments of the VEBA Trust for the postretirement benefits are reflected in the above table.



	Non-U.S. pension and postretirement benefit plans
In millions of dollars	Fair value measurement at December 31, 2018
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	4		$	9		$	—	$	13
Non-U.S. equities	100			100			—		200
Mutual funds and other registered investment companies	2,887			63			—		2,950
Commingled funds	21			—			—		21
Debt securities	5,145			1,500			9		6,654
Real estate	—			3			1		4
Annuity contracts	—			1			10		11
Derivatives	—			156			—		156
Other investments	1			—			210		211
Total investments	$	8,158		$	1,832		$	230	$	10,220
Cash and short-term investments	$	91		$	3		$	—	$	94
Other investment liabilities	(1		)	(2,589		)	—		(2,590		)
Net investments at fair value	$	8,248		$	(754	)	$	230	$	7,724
Securities valued at NAV									$	11
Total net assets									$	7,735



	Non-U.S. pension and postretirement benefit plans
In millions of dollars	Fair value measurement at December 31, 2017
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	4		$	12		$	—	$	16
Non-U.S. equities	103			122			1		226
Mutual funds and other registered investment companies	3,098			74			—		3,172
Commingled funds	24			—			—		24
Debt securities	3,999			1,555			7		5,561
Real estate	—			3			1		4
Annuity contracts	—			1			9		10
Derivatives	1			3,102			—		3,103
Other investments	1			—			214		215
Total investments	$	7,230		$	4,869		$	232	$	12,331
Cash and short-term investments	$	119		$	3		$	—	$	122
Other investment liabilities	(2		)	(4,220		)	—		(4,222		)
Net investments at fair value	$	7,347		$	652		$	232	$	8,231
Securities valued at NAV									$	16
Total net assets									$	8,247

Level 3 Rollforward

The reconciliations of the beginning and ending balances during the year for Level 3 assets are as follows:



In millions of dollars	U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2017		Realized gains (losses)			Unrealized gains (losses)			Purchases, sales and issuances			Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2018
Annuity contracts	$	1	$	—		$	—		$	—		$	—	$	1
Other investments	148		(2		)	(18		)	(1		)	—		127
Total investments	$	149	$	(2	)	$	(18	)	$	(1	)	$	—	$	128



In millions of dollars	U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2016		Realized gains (losses)		Unrealized gains (losses)		Purchases, sales and issuances		Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2017
Annuity contracts	$	1	$	—	$	—	$	—	$	—	$	1
Other investments	129		—		—		19		—		148
Total investments	$	130	$	—	$	—	$	19	$	—	$	149



In millions of dollars	Non-U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2017		Unrealized gains (losses)			Purchases, sales and issuances			Transfers in and/or out of Level 3			Ending Level 3 fair value at Dec. 31, 2018
Non-U.S. equities	$	1	$	—		$	—		$	(1	)	$	—
Debt securities	7		(1		)	3			—			9
Real estate	1		—			—			—			1
Annuity contracts	9		(1		)	1			1			10
Other investments	214		(3		)	(1		)	—			210
Total investments	$	232	$	(5	)	$	3		$	—		$	230



In millions of dollars	Non-U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2016		Unrealized gains (losses)		Purchases, sales and issuances			Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2017
Non-U.S. equities	$	1	$	—	$	—		$	—	$	1
Debt securities	7		—		—			—		7
Real estate	1		—		—			—		1
Annuity contracts	8		1		—			—		9
Other investments	187		31		(4		)	—		214
Total investments	$	204	$	32	$	(4	)	$	—	$	232

Investment Strategy

The Company’s global pension and postretirement funds’ investment strategy is to invest in a prudent manner for the exclusive purpose of providing benefits to participants. The investment strategies are targeted to produce a total return that, when combined with the Company’s contributions to the funds, will maintain the funds’ ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed income securities and cash and short-term investments. The target asset allocation in most locations outside the U.S. is primarily in equity and debt securities. These allocations may vary by geographic region and country depending on the nature of applicable obligations and various other regional considerations. The wide variation in the actual range of plan asset allocations for the funded non-U.S. plans is a result of differing local statutory requirements and economic conditions. For example, in certain countries local law requires that all pension plan assets must be invested in fixed income investments, government funds or local-country securities.

Significant Concentrations of Risk in Plan Assets

The assets of the Company’s pension plans are diversified to limit the impact of any individual investment. The U.S. qualified pension plan is diversified across multiple asset classes, with publicly traded fixed income, hedge funds, publicly traded equity and real estate representing the most significant asset allocations. Investments in these four asset classes are further diversified across funds, managers, strategies, vintages, sectors and geographies, depending on the specific characteristics of each asset class. The pension assets for the Company’s non-U.S. Significant Plans are primarily invested in publicly traded fixed income and publicly traded equity securities.

Oversight and Risk Management Practices

The framework for the Company’s pension oversight process includes monitoring of retirement plans by plan fiduciaries and/or management at the global, regional or country level, as appropriate. Independent Risk Management contributes to the risk oversight and monitoring for the Company’s U.S. qualified pension plan and non-U.S. Significant Pension Plans. Although the specific components of the oversight process are tailored to the requirements of each region, country and plan, the following elements are common to the Company’s monitoring and risk management process:

periodic asset/liability management studies and strategic asset allocation reviews;

periodic monitoring of funding levels and funding ratios;

periodic monitoring of compliance with asset allocation guidelines;

periodic monitoring of asset class and/or investment manager performance against benchmarks; and

periodic risk capital analysis and stress testing.

Estimated Future Benefit Payments

The Company expects to pay the following estimated benefit payments in future years:



	Pension plans				Postretirement benefit plans
In millions of dollars	U.S. plans		Non-U.S. plans		U.S. plans		Non-U.S. plans
2019	$	797	$	435	$	62	$	70
2020	828		417		62		75
2021	847		426		61		80
2022	857		448		59		86
2023	873		471		57		92
2024–2028	4,365		2,557		252		547

Post Employment Plans

The Company sponsors U.S. post employment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long-term disability.

As of December 31, 2018 and 2017, the plans’ funded status recognized in the Company’s Consolidated Balance Sheet was $(32) million and $(46) million, respectively. The pretax amounts recognized in Accumulated other comprehensive income (loss) as of December 31, 2018 and 2017 were $(15) million and $3 million, respectively. The improvement in funded status as of December 31, 2017 was primarily due to the Company’s funding of the VEBA Trust during 2017.

The following table summarizes the components of net expense recognized in the Consolidated Statement of Income for the Company’s U.S. post employment plans:



	Net expense
In millions of dollars	2018			2017			2016
Service-related expense
Interest cost on benefit obligation	$	2		$	2		$	3
Expected return on plan assets	(1		)	—			—
Amortization of unrecognized
Prior service (benefit) cost	(23		)	(31		)	(31		)
Net actuarial loss	2			2			5
Total service-related benefit	$	(20	)	$	(27	)	$	(23	)
Non-service-related expense	2			30			21
Total net expense (benefit)	$	(18	)	$	3		$	(2	)

The following table summarizes certain assumptions used in determining the post employment benefit obligations and net benefit expense for the Company’s U.S. post employment plans:



	2018	2017
Discount rate	3.95%	3.20%
Expected return on assets	3.00	3.00

Health care cost increase rate
Following year	7.00	6.50
Ultimate rate to which cost increase is assumed to decline	5.00	5.00
Year in which the ultimate rate is reached	2027	2023

Defined Contribution Plans

The Company sponsors defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The most significant defined contribution plan is the Citi Retirement Savings Plan (formerly known as the Citigroup 401(k) Plan) sponsored by the Company in the U.S.

Under the Citi Retirement Savings Plan, eligible U.S. employees received matching contributions of up to 6% of their eligible compensation for 2018 and 2017, subject to statutory limits. Additionally, for eligible employees whose eligible compensation is $100,000 or less, a fixed contribution of up to 2% of eligible compensation is provided. All Company contributions are invested according to participants’ individual elections. The following table summarizes the Company contributions for the defined contribution plans:



	U.S. plans
In millions of dollars	2018		2017		2016
Company contributions	$	396	$	383	$	371

	Non-U.S. plans
In millions of dollars	2018		2017		2016
Company contributions	$	283	$	270	$	268

9. INCOME TAXES

Income Tax Provision

Details of the Company’s income tax provision are presented below:



In millions of dollars	2018			2017			2016
Current
Federal	$	834		$	332		$	1,016
Non-U.S.	4,290			3,910			3,585
State	284			269			384
Total current income taxes	$	5,408		$	4,511		$	4,985
Deferred
Federal	$	(620	)	$	24,902		$	1,280
Non-U.S.	371			(377		)	53
State	198			352			126
Total deferred income taxes	$	(51	)	$	24,877		$	1,459
Provision for income tax on continuing operations before noncontrolling interests⁽¹⁾	$	5,357		$	29,388		$	6,444
Provision (benefit) for income taxes on discontinued operations	(18		)	7			(22		)
Income tax expense (benefit) reported in stockholders’ equity related to:
FX translation	(263		)	188			(402		)
Investment securities	(346		)	(149		)	59
Employee stock plans	(2		)	(4		)	13
Cash flow hedges	(8		)	(12		)	27
Benefit plans	(20		)	13			(30		)
FVO DVA	302			(250		)	(201		)
Excluded fair value hedges	(17		)	—			—
Retained earnings⁽²⁾	(305		)	(295		)	—
Income taxes before noncontrolling interests	$	4,680		$	28,886		$	5,888


(1)	Includes the effect of securities transactions and other-than-temporary-impairment losses resulting in a provision (benefit) of $104 million and $(32) million in 2018, $272 million and $(22) million in 2017 and $332 million and $(217) million in 2016, respectively.

(2)

2018 reflects the tax effect of the accounting change for ASU 2016-16 and the tax effect of the accounting change for ASU 2018-03, to report the net unrealized gains on former AFS equity securities. 2017 reflects the tax effect of the accounting change for ASU 2017-08.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 that would have been recorded under the ASU on callable state and municipal debt securities. See Note 1 to the Consolidated Financial Statements.

~~(5)~~

During the fourth quarter of 2016, securities with a total fair value of approximately $5.8 billion were transferred from AFS to HTM, composed of $5 billion of U.S. government agency mortgage-backed securities and $830 million of municipal securities. The transfer reflects the Company’s intent to hold these securities to maturity or to issuer call, in part, in order to reduce the impact of price volatility on AOCI and certain capital measures under Basel III. While these securities were transferred to HTM at fair value as of the transfer date, no subsequent changes in value may be recorded, other than in connection with the recognition of any subsequent other-than-temporary impairment and the amortization of differences between the carrying values at the transfer date and the par values of each security as an adjustment of yield. Any net unrealized holding losses within AOCI related to the respective securities at the date of transfer, inclusive of any cumulative fair value hedge adjustments, will be amortized as an adjustment of yield in a manner consistent with the amortization of any premium or discount.

The Company has the positive intent and ability to hold these securities to maturity or, where applicable, the exercise of any issuer call options, absent any unforeseen significant changes in circumstances, including deterioration in credit or changes in regulatory capital requirements.

~~The net unrealized losses classified in AOCI for HTM securities primarily relate to debt securities previously classified as AFS that were transferred to HTM, and include any cumulative fair~~

Tax Rate

~~value hedge adjustments.~~ The net unrealized loss amount also includes any non-credit-related changes in fair value of HTM securities that have suffered credit impairment recorded in earnings. The AOCI balance related to HTM securities is amortized as an adjustment of yield, in a manner consistent with the accretion of any difference between the carrying value at the transfer date and par valuereconciliation of the ~~same debt securities.~~

~~The table below shows~~federal statutory income tax rate to the ~~fair value~~Company’s effective income tax rate applicable to income from continuing operations (before noncontrolling interests and the cumulative effect of ~~debt securities HTM that have been in an unrecognized loss position:~~accounting changes) for each of the periods indicated is as follows:

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
December 31, 2017
Debt securities held-to-maturity
Mortgage-backed securities $ 46
$ —
$ 15,096
$ 157
$ 15,142
$ 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 $ 1,193
$ 26
$ 16,065
$ 244
$ 17,258
$ 270
December 31, 2016
Debt securities held-to-maturity
Mortgage-backed securities $ 17
$ —
$ 17,176
$ 188
$ 17,193
$ 188
State and municipal 2,200
58
1,210
180
3,410
238
Foreign government 1,313
26
—
—
1,313
26
Asset-backed securities 2
—
2,503
5
2,505
5
Total debt securities held-to-maturity $ 3,532
$ 84
$ 20,889
$ 373
$ 24,421
$ 457

Note: Excluded from the gross unrecognized losses presented in the above table are $(117) million and $(496) million of net unrealized losses recorded in AOCI as of December 31, 2017 and December 31, 2016, respectively, primarily related to the difference between the amortized cost and carrying value of HTM 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 December 31, 2017 and December 31, 2016.

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

December 31,
2017 2016
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 720
720
760
766
After 5 but within 10 years 148
149
54
55
After 10 years⁽¹⁾
25,231
25,235
23,830
23,810
Total $ 26,099
$ 26,104
$ 24,644
$ 24,631
State and municipal
Due within 1 year $ 407
$ 425
$ 406
$ 406
After 1 but within 5 years 259
270
112
110
After 5 but within 10 years 512
524
363
367
After 10 years⁽¹⁾
7,719
7,983
7,702
7,591
Total $ 8,897
$ 9,202
$ 8,583
$ 8,474
Foreign government
Due within 1 year $ 381
$ 381
$ 824
$ 818
After 1 but within 5 years 359
341
515
495
After 5 but within 10 years —
—
—
—
After 10 years⁽¹⁾
—
—
—
—
Total $ 740
$ 722
$ 1,339
$ 1,313
All other⁽²⁾

Due within 1 year $ —
$ —
$ —
$ —
After 1 but within 5 years —
—
—
—
After 5 but within 10 years 1,669
1,680
513
514
After 10 years⁽¹⁾
15,915
16,044
10,588
10,623
Total $ 17,584
$ 17,724
$ 11,101
$ 11,137
Total debt securities held-to-maturity $ 53,320
$ 53,752
$ 45,667
$ 45,555



	2018		2017		2016
Federal statutory rate	21.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	1.8		1.1		1.8
Non-U.S. income tax rate differential	5.3		(1.6	)	(3.6	)
Effect of tax law changes⁽¹⁾	(0.6	)	99.7		—
Basis difference in affiliates	(2.4	)	(2.1	)	(0.1	)
Tax advantaged investments	(2.0	)	(2.2	)	(2.4	)
Other, net	(0.3	)	(0.8	)	(0.7	)
Effective income tax rate	22.8	%	129.1	%	30.0	%


(1)	~~Investments with no stated maturities are included as contractual maturities~~2018 includes one-time Tax Reform benefits of ~~greater than 10 years. Actual maturities may differ due~~$94 million for amounts that were considered provisional pursuant to ~~call or prepayment rights.~~SAB 118. 2017 includes the one-time $22,594 million charge for Tax Reform.

As set forth in the table above, Citi’s effective tax rate for 2018 was 22.8% (23.3% excluding the effect of provisional amounts pursuant to SAB 118). The rate is lower than the 29.8% reported in 2017 (excluding the one-time impact of Tax Reform) primarily due to the U.S. statutory rate reduction from 35% to 21% as part of Tax Reform.

Deferred Income Taxes

Deferred income taxes at December 31 related to the following:



In millions of dollars	2018			2017
Deferred tax assets
Credit loss deduction	$	3,419		$	3,423
Deferred compensation and employee benefits	1,975			1,585
Repositioning and settlement reserves	428			454
U.S. tax on non-U.S. earnings	2,080			2,452
Investment and loan basis differences	4,891			3,384
Cash flow hedges	240			233
Tax credit and net operating loss carry-forwards	20,759			21,575
Fixed assets and leases	1,006			1,090
Other deferred tax assets	2,145			1,988
Gross deferred tax assets	$	36,943		$	36,184
Valuation allowance	$	9,258		$	9,387
Deferred tax assets after valuation allowance	$	27,685		$	26,797
Deferred tax liabilities
Intangibles	$	(975	)	$	(1,247	)
Debt issuances	(530		)	(294		)
Non-U.S. withholding taxes	(1,040		)	(668		)
Interest-related items	(594		)	(562		)
Other deferred tax liabilities	(1,643		)	(1,545		)
Gross deferred tax liabilities	$	(4,782	)	$	(4,316	)
Net deferred tax assets	$	22,903		$	22,481

Unrecognized Tax Benefits

The following is a rollforward of the Company’s unrecognized tax benefits:



In millions of dollars	2018			2017			2016
Total unrecognized tax benefits at January 1	$	1,013		$	1,092		$	1,235
Net amount of increases for current year’s tax positions	40			43			34
Gross amount of increases for prior years’ tax positions	46			324			273
Gross amount of decreases for prior years’ tax positions	(174		)	(246		)	(225		)
Amounts of decreases relating to settlements	(283		)	(199		)	(174		)
Reductions due to lapse of statutes of limitation	(23		)	(11		)	(21		)
Foreign exchange, acquisitions and dispositions	(12		)	10			(30		)
Total unrecognized tax benefits at December 31	$	607		$	1,013		$	1,092

The total amounts of unrecognized tax benefits at December 31, 2018, 2017 and 2016 that, if recognized, would affect Citi’s tax expense, are $0.4 billion, $0.8 billion and $0.8 billion, respectively. The remaining uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.

Interest and penalties (not included in “unrecognized tax benefits” above) are a component of Provision for income taxes.



	2018				2017				2016
In millions of dollars	Pretax		Net of tax		Pretax		Net of tax		Pretax		Net of tax
Total interest and penalties on the Consolidated Balance Sheet at January 1	$	121	$	101	$	260	$	164	$	233	$	146
Total interest and penalties in the Consolidated Statement of Income	6		6		5		21		105		68
Total interest and penalties on the Consolidated Balance Sheet at December 31⁽¹⁾	103		85		121		101		260		164


~~(2)~~(1)	Includes ~~corporate~~$2 million, $3 million and ~~asset-backed securities.~~$3 million for non-U.S. penalties in 2018, 2017 and 2016. Also includes $1 million, $3 million and $3 million for state penalties in 2018, 2017 and 2016.

As of December 31, 2018, Citi was under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months, although Citi does not expect such audits to result in amounts that would cause a significant change to its effective tax rate.

The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:



Jurisdiction	Tax year
United States	2014
Mexico	2013
New York State and City	2009
United Kingdom	2015
India	2015
Singapore	2011
Hong Kong	2012
Ireland	2014

Non-U.S. Earnings

Non-U.S. pretax earnings approximated $16.1 billion in 2018 (of which a $21 million loss was recorded in Discontinued operations), $13.7 billion in 2017 and $11.6 billion in 2016. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all non-U.S. pretax earnings of non-U.S. branches. Beginning in 2018, there is a separate foreign tax credit (FTC) basket for branches. Also, dividends from a non-U.S. subsidiary or affiliate are effectively exempt from U.S. taxation. The Company provides income taxes on the book over tax basis differences of non-U.S. subsidiaries except to the extent that such differences are indefinitely reinvested outside the U.S.

At December 31, 2018, $15.5 billion of basis differences of non-U.S. subsidiaries was indefinitely invested. At the existing tax rates, additional taxes (net of U.S. FTCs) of $4.3 billion would have to be provided if such basis differences were realized.

Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent that such amounts are distributed in excess of limits prescribed by federal law. At December 31, 2018, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $75 million).

~~Evaluating Investments for Other-Than-Temporary Impairment (OTTI)~~

~~Overview~~

~~The Company conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary.~~

An unrealized loss exists when the current fair value of an individual security is less than its adjusted amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities. Losses related to HTM securities generally are not recorded, as these investments are carried at adjusted amortized cost basis. However, for HTM securities with credit-related losses, 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.

Regardless of the classification of the 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 recovery of the amortized cost basis.~~

~~The Company’s review for impairment generally entails:~~

~~identification and evaluation of impaired investments;~~

analysis of individual investments that have fair values less than the 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

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. The ASU requires entities to amortize premiums on debt securities by the first call date when the securities have fixed and determinable call dates and prices. The scope of the ASU includes all accounting premiums, such as purchase premiums and cumulative fair value hedge adjustments. The ASU does not change the accounting for discounts, which continue to be recognized over the contractual life of a security.

Citi early adopted the ASU in the second quarter of 2017, with an effective date of January 1, 2017. Adoption of the ASU is on a modified retrospective basis through a

Accounting for Stock-Based Compensation

Fair Value Measurement

2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS

Summary of Discontinued Operations

The following summarizes financial information for all Discontinued operations:



In millions of dollars	2018			2017			2016
Total revenues, net of interest expense	$	—		$	—		$	—
Loss from discontinued operations	$	(26	)	$	(104	)	$	(80	)
Provision (benefit) for income taxes	(18		)	7			(22		)
Loss from discontinued operations, net of taxes	$	(8	)	$	(111	)	$	(58	)

Cash flows from Discontinued operations were not material for all periods presented.

Significant Disposals

Sale of Mexico Asset Management Business

Income before taxes, excluding the pretax gain on sale, for the divested business was as follows:



In millions of dollars	2018		2017		2016
Income before taxes	$	123	$	164	$	155

Sale of Fixed Income Analytics and Index Business

On August 31, 2017, Citi completed the sale of a fixed income analytics business and a fixed income index business that were part of Markets and securities services within Institutional Clients Group (ICG). As part of the sale, Citi derecognized Total assets of $112 million, including goodwill of $72 million, while the derecognized liabilities were $18 million. The transaction resulted in a pretax gain on sale of approximately $580 million ($355 million after-tax) recorded in Other revenue in ICG during 2017.

Income before taxes excluding the pretax gain on sale for the divested businesses was immaterial for the periods presented.

Exit of U.S. Mortgage Service Operations

Citigroup executed agreements during the first quarter of 2017 to effectively exit its direct U.S. mortgage servicing operations by the end of 2018 to intensify focus on originations. The exit of the mortgage servicing operations included the sale of mortgage servicing rights and execution of a subservicing agreement for the remaining Citi-owned loans and certain other mortgage servicing rights. As part of this transaction, Citi has also transferred certain employees.

This transaction, which was part of Corporate/Other, resulted in a pretax loss of $331 million ($207 million after-tax) recorded in Other revenue during 2017. The loss on sale did not include certain other costs and charges related to the disposed operation recorded primarily in Operating expenses during 2017, resulting in a total pretax loss of $382 million. As part of the sale, Citi derecognized a total of $1,162 million of servicing-related assets, including $1,046 million of Mortgage servicing rights, related to approximately 750,000 Fannie Mae and Freddie Mac held loans with outstanding balances of approximately $93 billion. Excluding the loss on sale and the additional charges, income before taxes for the disposed operation was immaterial for the periods presented.

Sale of CitiFinancial Canada Consumer Finance Business

Income before taxes, excluding the pretax gain on sale for the divested business, was as follows:



In millions of dollars	2018		2017		2016
Income before taxes	$	—	$	41	$	139

3. BUSINESS SEGMENTS

Citigroup’s activities are conducted through the following business segments: Global Consumer Banking (GCB) and Institutional Clients Group (ICG). In addition, Corporate/Other includes activities not assigned to a specific business segment, as well as certain North America loan portfolios, discontinued operations and other legacy assets.

Corporate/Other includes certain unallocated costs of global functions, other corporate expenses and net treasury results, unallocated corporate expenses, offsets to certain line-

item reclassifications and eliminations, the results of certain North America legacy loan portfolios, discontinued operations and unallocated taxes.

The accounting policies of these reportable segments are the same as those disclosed in Note 1 to the Consolidated Financial Statements.

the adoption of ASU No. 2014-09, Revenue Recognition, which occurred on January 1, 2018 on a retrospective basis. See “Accounting Changes” in Note 1 to the Consolidated Financial Statements;

the re-attribution of certain costs between Corporate/Other and GCB and ICG; and

certain other immaterial reclassifications.

Citi’s consolidated net income (loss) reported in its 2017 Annual Report on Form 10-K remains unchanged for all periods presented as a result of the changes and reclassifications discussed above.

The following table presents certain information regarding the Company’s continuing operations by segment:



	Revenues, net of interest expense⁽¹⁾						Provision (benefits) for income taxes⁽²⁾								Income (loss) from continuing operations⁽²⁾⁽³⁾							Identifiable assets
In millions of dollars, except identifiable assets in billions	2018		2017		2016		2018			2017		2016			2018		2017			2016		2018		2017
Global Consumer Banking	$	33,777	$	32,838	$	31,624	$	1,839		$	3,316	$	2,639		$	5,762	$	3,878		$	4,931	$	432	$	428
Institutional Clients Group	36,994		36,474		33,940		3,631			7,008		4,260			12,200		9,066			9,525		1,394		1,336
Corporate/Other	2,083		3,132		5,233		(113		)	19,064		(455		)	126		(19,571		)	577		91		78
Total	$	72,854	$	72,444	$	70,797	$	5,357		$	29,388	$	6,444		$	18,088	$	(6,627	)	$	15,033	$	1,917	$	1,842

(1)

Includes total revenues, net of interest expense (excluding Corporate/Other), in North America of $33.4 billion, $34.2 billion and $32.6 billion; in EMEA of $11.8 billion, $10.9 billion and $10.0 billion; in Latin America of $10.3 billion, $9.6 billion and $9.1 billion; and in Asia of $15.3 billion, $14.6 billion and $13.9 billion in 2018, 2017 and 2016, respectively. These regional numbers exclude Corporate/Other, which largely operates within the U.S.


(2)	Corporate/Other, GCB and ICG 2017 results include the one-time impact of Tax Reform.


(3)	Includes pretax provisions for credit losses and for benefits and claims in the GCB results of $7.6 billion, $7.6 billion and $6.4 billion; in the ICG results of $184


	million, ($15) million and $486 million; and in Corporate/Other results of ($202) million, ($175) million and $69 million in 2018, 2017 and 2016, respectively.

4. INTEREST REVENUE AND EXPENSE

Interest revenue and Interest expense consisted of the following:



In millions of dollars	2018		2017		2016
Interest revenue
Loan interest, including fees	$	45,682	$	41,736	$	40,125
Deposits with banks	2,203		1,635		971
Federal funds sold and securities borrowed or purchased under agreements to resell	5,492		3,249		2,543
Investments, including dividends	9,494		8,295		7,582
Trading account assets⁽¹⁾	6,284		5,501		5,738
Other interest	1,673		1,163		1,029
Total interest revenue	$	70,828	$	61,579	$	57,988
Interest expense
Deposits⁽²⁾	$	9,616	$	6,587	$	5,300
Federal funds purchased and securities loaned or sold under agreements to repurchase	4,889		2,661		1,912
Trading account liabilities⁽¹⁾	1,001		638		410
Short-term borrowings	2,209		1,059		477
Long-term debt	6,551		5,573		4,413
Total interest expense	$	24,266	$	16,518	$	12,512
Net interest revenue	$	46,562	$	45,061	$	45,476
Provision for loan losses	7,354		7,503		6,749
Net interest revenue after provision for loan losses	$	39,208	$	37,558	$	38,727


(1)	Interest expense on Trading account liabilities is reported as a reduction of interest revenue from Trading account assets.


(2)	Includes deposit insurance fees and charges of $1,182 million, $1,249 million and $1,145 million for 2018, 2017 and 2016, respectively.

5. COMMISSIONS AND FEES; ADMINISTRATION AND OTHER FIDUCIARY FEES

The primary components of Commissions and fees revenue are investment banking fees, brokerage commissions, credit- and bank-card income and deposit-related fees.

Credit- and bank-card income is primarily composed of

interchange fees, which are earned by card issuers based on

purchase sales, and certain card fees, including annual fees.

Costs related to customer reward programs and certain

payments to partners (primarily based on program sales,

profitability and customer acquisitions) are recorded as a

reduction of credit- and bank-card income. Interchange

revenues are recognized as earned on a daily basis when Citi's

performance obligation to transmit funds to the payment

networks has been satisfied. Annual card fees, net of

origination costs, are deferred and amortized on a straight-line

basis over a 12-month period. Costs related to card reward

programs are recognized when the rewards are earned by the

cardholders. Payments to partners are recognized when

incurred.

Deposit-related fees consist of service charges on deposit

accounts and fees earned from performing cash management

activities and other deposit account services. Such fees are

recognized in the period in which the related service is

provided.

Transactional service fees primarily consist of fees

charged for processing services such as cash management,

global payments, clearing, international funds transfer and

other trade services. Such fees are recognized as/when the

associated service is satisfied, which normally occurs at the

point in time the service is requested by the customer and

provided by Citi.

Insurance distribution revenue consists of commissions

earned from third-party insurance companies for marketing

and selling insurance policies on behalf of such entities. Such

commissions are recognized in Commissions and fees at the

point in time the associated service is fulfilled, generally when

the insurance policy is sold to the policyholder. Sales of

certain insurance products include a portion of variable

consideration associated with the underlying product. In these

instances, a portion of the revenue associated with the sale of

the policy is not recognized until the variable consideration

Insurance premiums consist of premium income from

insurance policies that Citi has underwritten and sold to

policyholders.

The following table presents Commissions and fees revenue:



	2018												2017												2016
In millions of dollars	ICG			GCB			Corp/Other			Total			ICG			GCB			Corp/Other			Total			ICG			GCB			Corp/Other			Total
Investment banking	$	3,568		$	—		$	—		$	3,568		$	3,817		$	—		$	—		$	3,817		$	3,000		$	—		$	—		$	3,000
Brokerage commissions	1,977			815			—			2,792			1,889			826			3			2,718			1,748			636			11			2,395
Credit- and bank-card income
Interchange fees	1,072			8,117			11			9,200			950			7,526			99			8,575			837			6,189			164			7,190
Card-related loan fees	63			627			12			702			53			693			48			794			27			784			65			876
Card rewards and partner payments	(503		)	(8,254		)	(12		)	(8,769		)	(425		)	(7,243		)	(57		)	(7,725		)	(361		)	(6,084		)	(111		)	(6,556		)
Deposit-related fees⁽¹⁾	949			654			1			1,604			947			726			14			1,687			818			721			19			1,558
Transactional service fees	718			98			4			820			738			91			49			878			700			84			136			920
Corporate finance⁽²⁾	729			5			—			734			761			5			—			766			741			4			—			745
Insurance distribution revenue⁽³⁾	14			565			11			590			12			562			68			642			10			584			90			684
Insurance premiums⁽³⁾	—			119			—			119			—			122			—			122			—			136			144			280
Loan servicing	156			122			37			315			146			101			95			342			147			127			77			351
Other	25			143			14			182			(38		)	99			30			91			31			90			114			235
Total commissions and fees⁽⁴⁾	$	8,768		$	3,011		$	78		$	11,857		$	8,850		$	3,508		$	349		$	12,707		$	7,698		$	3,271		$	709		$	11,678


(1)	Includes overdraft fees of $128 million, $135 million and $133 million for the years ended December 31, 2018, 2017 and 2016, respectively. Overdraft fees are accounted for under ASC 310.


(2)	Consists primarily of fees earned from structuring and underwriting loan syndications or related financing activity. This activity is accounted for under ASC 310.


(3)	Previously reported as insurance premiums in the Consolidated Statement of Income.

(4)

Commissions and fees includes $(6,766) million, $(5,568) million and $(4,169) million not accounted for under ASC 606, Revenue from Contracts with Customers, for the years ended December 31, 2018, 2017 and 2016, respectively. Amounts reported in Commissions and fees accounted for under other guidance primarily include card-related loan fees, card reward programs and certain partner payments, corporate finance fees, insurance premiums and loan servicing fees.

Administration and Other Fiduciary Fees

Administration and other fiduciary fees are primarily composed of custody fees and fiduciary fees.

Fiduciary fees consist of trust services and investment management services. As an escrow agent, Citi receives, safe-

The following table presents Administration and other fiduciary fees:



	2018								2017								2016
In millions of dollars	ICG		GCB		Corp/Other		Total		ICG		GCB		Corp/Other		Total		ICG		GCB		Corp/Other		Total
Custody fees	$	1,494	$	136	$	65	$	1,695	$	1,505	$	167	$	56	$	1,728	$	1,353	$	163	$	48	$	1,564
Fiduciary fees	645		597		43		1,285		593		575		91		1,259		554		539		50		1,143
Guarantee fees	536		57		7		600		535		54		8		597		523		54		10		587
Total administration and other fiduciary fees⁽¹⁾	$	2,675	$	790	$	115	$	3,580	$	2,633	$	796	$	155	$	3,584	$	2,430	$	756	$	108	$	3,294


(1)	Administration and other fiduciary fees includes $600 million, $597 million and $587 million for the years ended December 31, 2018, 2017 and 2016, respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These amounts include guarantee fees.

6. PRINCIPAL TRANSACTIONS

The following table presents Principaltransactions revenue:



In millions of dollars	2018		2017		2016
Interest rate risks⁽¹⁾	$	5,186	$	5,301	$	4,229
Foreign exchange risks⁽²⁾	1,423		2,435		1,699
Equity risks⁽³⁾	1,346		525		330
Commodity and other risks⁽⁴⁾	662		425		899
Credit products and risks⁽⁵⁾	445		789		700
Total	$	9,062	$	9,475	$	7,857

(1)


(2)	Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as foreign currency translation (FX translation) gains and losses.


(3)	Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes and exchange-traded and OTC equity options and warrants.


(4)	Primarily includes revenues from crude oil, refined oil products, natural gas and other commodities trades.


(5)	Includes revenues from structured credit products.

7. INCENTIVE PLANS

Discretionary Annual Incentive Awards

Sign-on and Long-Term Retention Awards

Stock awards and deferred cash awards may be made at various times during the year as sign-on awards to induce new hires to join Citi or to high-potential employees as long-term retention awards.

Vesting periods and other terms and conditions pertaining to these awards tend to vary by grant. Generally, recipients must remain employed through the vesting dates to vest in the awards, except in cases of death, disability or involuntary termination other than for gross misconduct. These awards do not usually provide for post employment vesting by retirement-eligible participants.

Outstanding (Unvested) Stock Awards

A summary of the status of unvested stock awards granted as discretionary annual incentive or sign-on and long-term retention awards is presented below:



Unvested stock awards	Shares		Weighted- average grant date fair value per share
Unvested at December 31, 2017	36,931,040		$	47.89
Granted⁽¹⁾	12,896,599		73.87
Canceled	(1,315,456	)	54.50
Vested⁽²⁾	(16,783,587	)	49.54
Unvested at December 31, 2018	31,728,596		$	57.30


(1)	The weighted-average fair value of the shares granted during 2017 and 2016 was $59.12 and $37.35, respectively.


(2)	The weighted-average fair value of the shares vesting during 2018 was approximately $77.65 per share.

Total unrecognized compensation cost related to unvested stock awards was $538 million at December 31, 2018. The cost is expected to be recognized over a weighted-average period of 1.7 years.

Performance Share Units



Valuation assumptions	2018		2017		2016
Expected volatility	24.93	%	25.79	%	24.37	%
Expected dividend yield	1.75		1.30		0.40

A summary of the performance share unit activity for 2018 is presented below:



Performance share units	Units		Weighted- average grant date fair value per unit
Outstanding, beginning of period	1,786,726		$	40.94
Granted⁽¹⁾	495,099		83.24
Canceled	(25,160	)	44.07
Payments	(488,304	)	44.07
Outstanding, end of period	1,768,362		$	51.88


(1)	The weighted-average grant date fair value per unit awarded in 2017 and 2016 was $59.22 and $27.03, respectively.

Stock Option Programs

The following table presents information with respect to stock option activity under Citigroup’s stock option programs:



	2018						2017						2016
	Options		Weighted- average exercise price		Intrinsic value per share		Options		Weighted- average exercise price		Intrinsic value per share		Options		Weighted- average exercise price		Intrinsic value per share
Outstanding, beginning of period	1,138,813		$	161.96	$	—	1,527,396		$	131.78	$	—	6,656,588		$	67.92	$	—
Canceled	—		—		—		—		—		—		(25,334	)	40.80		—
Expired	(376,588	)	283.63		—		—		—		—		(2,613,909	)	48.80		—
Exercised	—		—		—		(388,583	)	43.35		15.67		(2,489,949	)	49.10		6.60
Outstanding, end of period	762,225		$	101.84	$	—	1,138,813		$	161.96	$	—	1,527,396		$	131.78	$	—
Exercisable, end of period	762,225						1,138,813						1,527,396

The following table summarizes information about stock options outstanding under Citigroup’s stock option programs at December 31, 2018:



		Options outstanding			Options exercisable
Range of exercise prices	Number outstanding	Weighted-average contractual life remaining	Weighted-average exercise price		Number exercisable	Weighted-average exercise price
$39.00–$99.99	312,309	2.1 years	$	43.56	312,309	$	43.56
$100.00–$199.99	449,916	0.0 years	142.30		449,916	142.30
Total at December 31, 2018	762,225	0.9 years	$	101.84	762,225	$	101.84

Other Variable Incentive Compensation

Summary

award during the vesting period. Once a stock award vests, the shares are freely transferable, unless they are subject to a restriction on sale or transfer for a specified period.

Incentive Compensation Cost

The following table shows components of compensation expense, relating to certain of the incentive compensation programs described above:



In millions of dollars	2018		2017		2016
Charges for estimated awards to retirement-eligible employees	$	669	$	659	$	555
Amortization of deferred cash awards, deferred cash stock units and performance stock units	202		354		336
Immediately vested stock award expense⁽¹⁾	75		70		73
Amortization of restricted and deferred stock awards⁽²⁾	435		474		509
Other variable incentive compensation	640		694		710
Total	$	2,021	$	2,251	$	2,183


(1)	Represents expense for immediately vested stock awards that generally were stock payments in lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the year prior to grant.


(2)	All periods include amortization expense for all unvested awards to non-retirement-eligible employees.

8. RETIREMENT BENEFITS

Pension and Postretirement Plans

The Company also sponsors a number of non-contributory, nonqualified pension plans. These plans, which are unfunded, provide supplemental defined pension benefits to certain U.S.

employees. With the exception of certain employees covered under the prior final pay plan formula, the benefits under these plans were frozen in prior years.

Net (Benefit) Expense



	Pension plans																		Postretirement benefit plans
	U.S. plans									Non-U.S. plans									U.S. plans									Non-U.S. plans
In millions of dollars	2018			2017			2016			2018			2017			2016			2018			2017			2016			2018			2017			2016
Benefits earned during the year	$	1		$	3		$	4		$	146		$	153		$	154		$	—		$	—		$	—		$	9		$	9		$	10
Interest cost on benefit obligation	514			533			548			292			295			282			26			26			25			102			101			94
Expected return on plan assets	(844		)	(865		)	(886		)	(291		)	(299		)	(287		)	(14		)	(6		)	(9		)	(88		)	(89		)	(86		)
Amortization of unrecognized
Prior service cost (benefit)	2			2			2			(4		)	(3		)	(1		)	—			—			—			(10		)	(10		)	(10		)
Net actuarial loss (gain)	165			173			169			53			61			69			(1		)	—			(1		)	29			35			30
Curtailment loss (gain)⁽¹⁾	1			6			13			(1		)	—			(2		)	—			—			—			—			—			—
Settlement loss⁽¹⁾	—			—			—			7			12			6			—			—			—			—			—			—
Total net (benefit) expense	$	(161	)	$	(148	)	$	(150	)	$	202		$	219		$	221		$	11		$	20		$	15		$	42		$	46		$	38


(1)	Losses and gains due to curtailment and settlement relate to repositioning and divestiture actions.

Contributions



	Pension plans⁽¹⁾												Postretirement benefit plans⁽¹⁾
	U.S. plans⁽²⁾						Non-U.S. plans						U.S. plans						Non-U.S. plans
In millions of dollars	2019		2018		2017		2019		2018		2017		2019		2018		2017		2019		2018		2017
Contributions made by the Company	$	—	$	—	$	50	$	97	$	140	$	90	$	—	$	145	$	140	$	4	$	3	$	4
Benefits paid directly by the Company	57		55		55		47		42		45		6		5		36		6		6		5


(1)	Amounts reported for 2019 are expected amounts.


(2)	The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.

Funded Status and Accumulated Other Comprehensive Income (AOCI)

The following tables summarize the funded status and amounts recognized in the Consolidated Balance Sheet for the Company’s pension and postretirement plans:



	Pension plans												Postretirement benefit plans
	U.S. plans						Non-U.S. plans						U.S. plans						Non-U.S. plans
In millions of dollars	2018			2017			2018			2017			2018			2017			2018			2017
Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	14,040		$	14,000		$	7,433		$	6,522		$	699		$	686		$	1,261		$	1,141
Benefits earned during the year	1			3			146			153			—			—			9			9
Interest cost on benefit obligation	514			533			292			295			26			26			102			101
Plan amendments	—			—			7			4			—			—			—			—
Actuarial (gain) loss	(1,056		)	536			(99		)	127			(1		)	43			(123		)	19
Benefits paid, net of participants’ contributions and government subsidy⁽¹⁾	(845		)	(769		)	(293		)	(278		)	(62		)	(56		)	(68		)	(64		)
Divestitures	—			—			—			(29		)	—			—			—			(4		)
Settlement gain⁽²⁾	—			—			(121		)	(192		)	—			—			—			—
Curtailment loss (gain)⁽²⁾	1			6			(1		)	(3		)	—			—			—			—
Foreign exchange impact and other⁽³⁾	—			(269		)	(215		)	834			—			—			(22		)	59
Projected benefit obligation at year end	$	12,655		$	14,040		$	7,149		$	7,433		$	662		$	699		$	1,159		$	1,261
Change in plan assets
Plan assets at fair value at beginning of year	$	12,725		$	12,363		$	7,128		$	6,149		$	262		$	129		$	1,119		$	1,015
Actual return on plan assets	(445		)	1,295			(11		)	462			(5		)	13			(26		)	113
Company contributions	55			105			182			135			150			176			9			9
Benefits paid, net of participants’ contributions and government subsidy⁽¹⁾	(845		)	(769		)	(293		)	(278		)	(62		)	(56		)	(68		)	(64		)
Divestitures	—			—			—			(31		)	—			—			—			—
Settlement⁽²⁾	—			—			(121		)	(192		)	—			—			—			—
Foreign exchange impact and other⁽³⁾	—			(269		)	(186		)	883			—			—			2			46
Plan assets at fair value at year end	$	11,490		$	12,725		$	6,699		$	7,128		$	345		$	262		$	1,036		$	1,119
Funded status of the plans
Qualified plans⁽⁴⁾	$	(483	)	$	(565	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Nonqualified plans⁽⁵⁾	(682		)	(750		)	—			—			—			—			—			—
Funded status of the plans at year end	$	(1,165	)	$	(1,315	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Net amount recognized
Qualified plans
Benefit asset	$	—		$	—		$	806		$	900		$	—		$	—		$	175		$	181
Benefit liability	(483		)	(565		)	(1,256		)	(1,205		)	(317		)	(437		)	(298		)	(323		)
Qualified plans	$	(483	)	$	(565	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Nonqualified plans	(682		)	(750		)	—			—			—			—			—			—
Net amount recognized on the balance sheet	$	(1,165	)	$	(1,315	)	$	(450	)	$	(305	)	$	(317	)	$	(437	)	$	(123	)	$	(142	)
Amounts recognized in AOCI
Net transition obligation	$	—		$	—		$	(1	)	$	(1	)	$	—		$	—		$	—		$	—
Prior service benefit	(13		)	(15		)	12			22			—			—			83			92
Net actuarial (loss) gain	(6,892		)	(6,823		)	(1,420		)	(1,318		)	53			72			(340		)	(382		)
Net amount recognized in equity (pretax)	$	(6,905	)	$	(6,838	)	$	(1,409	)	$	(1,297	)	$	53		$	72		$	(257	)	$	(290	)

Accumulated benefit obligation at year end	$	12,646		$	14,034		$	6,720		$	7,038		$	662		$	699		$	1,159		$	1,261


(1)	U.S. Postretirement benefit plans was net of Employer Group Waiver Plan subsidy of $15 million in 2018 and 2017.


(2)	Curtailment and settlement (gains) losses relate to repositioning and divestiture activities.


(3)	With respect to the U.S. Plan, de-risking activities during 2017 resulted in a reduction to plan obligations and assets.


(4)	The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2019 and no minimum required funding is expected for 2019.


(5)	The nonqualified plans of the Company are unfunded.

The following table shows the change in AOCIrelated to the Company’s pension, postretirement and post employment plans:



In millions of dollars	2018			2017			2016
Beginning of year balance, net of tax⁽¹⁾⁽²⁾	$	(6,183	)	$	(5,164	)	$	(5,116	)
Actuarial assumptions changes and plan experience	1,288			(760		)	(854		)
Net asset (loss) gain due to difference between actual and expected returns	(1,732		)	625			400
Net amortization	214			229			232
Prior service (cost) credit	(7		)	(4		)	28
Curtailment/settlement gain⁽³⁾	7			17			17
Foreign exchange impact and other	136			(93		)	99
Impact of Tax Reform⁽⁴⁾	—			(1,020		)	—
Change in deferred taxes, net	20			(13		)	30
Change, net of tax	$	(74	)	$	(1,019	)	$	(48	)
End of year balance, net of tax⁽¹⁾⁽²⁾	$	(6,257	)	$	(6,183	)	$	(5,164	)


(1)	See Note 19 to the Consolidated Financial Statements for further discussion of net AOCI balance.


(2)	Includes net-of-tax amounts for certain profit sharing plans outside the U.S.


(3)	Curtailment and settlement relate to repositioning and divestiture activities.


(4)	In the fourth quarter of 2017, Citi adopted ASU 2018-02, which transferred these amounts from AOCI to Retained earnings. See Note 1 to the Consolidated Financial Statements.

At December 31, 2018 and 2017, the aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation (ABO) and the aggregate fair value of plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets and for all defined benefit pension plans with an ABO in excess of plan assets as follows:



	PBO exceeds fair value of plan assets								ABO exceeds fair value of plan assets
	U.S. plans⁽¹⁾				Non-U.S. plans				U.S. plans⁽¹⁾				Non-U.S. plans
In millions of dollars	2018		2017		2018		2017		2018		2017		2018		2017
Projected benefit obligation	$	12,655	$	14,040	$	3,904	$	2,721	$	12,655	$	14,040	$	3,718	$	2,596
Accumulated benefit obligation	12,646		14,034		3,528		2,381		12,646		14,034		3,387		2,296
Fair value of plan assets	11,490		12,725		2,648		1,516		11,490		12,725		2,478		1,407


(1)	At December 31, 2018 and 2017, for both the U.S. qualified plan and nonqualified plans, the aggregate PBO and the aggregate ABO exceeded plan assets.

Plan Assumptions

Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Company’s plans are shown in the following table:



At year end	2018	2017
Discount rate
U.S. plans
Qualified pension	4.25%	3.60%
Nonqualified pension	4.25	3.60
Postretirement	4.20	3.50
Non-U.S. pension plans
Range	0.25 to 12.00	0.00 to 10.20
Weighted average	4.47	4.17
Non-U.S. postretirement plans
Range	1.75 to 10.75	1.75 to 10.10
Weighted average	9.05	8.10
Future compensation increase rate⁽¹⁾
Non-U.S. pension plans
Range	1.30 to 13.67	1.17 to 13.67
Weighted average	3.16	3.08
Expected return on assets
U.S. plans
Qualified pension	6.70	6.80
Postretirement⁽²⁾	6.70/3.00	6.80/3.00
Non-U.S. pension plans
Range	1.00 to 11.50	0.00 to 11.50
Weighted average	4.30	4.52
Non-U.S. postretirement plans
Range	8.00 to 9.20	8.00 to 9.80
Weighted average	8.01	8.01


(1)	Not material for U.S. plans.


(2)	The expected rate of return for the VEBA Trust was 3.00%.



During the year	2018	2017	2016
Discount rate
U.S. plans
Qualified pension	3.60%/3.95%/ 4.25%/4.30%	4.10%/4.05%/ 3.80%/3.75%	4.40%/3.95%/ 3.65%/3.55%
Nonqualified pension	3.60/3.95/ 4.25/4.30	4.00/3.95/ 3.75/3.65	4.35/3.90/ 3.55/3.45
Postretirement	3.50/3.90/ 4.20/4.20	3.90/3.85/ 3.60/3.55	4.20/3.75/ 3.40/3.30
Non-U.S. pension plans⁽¹⁾
Range	0.00 to 10.75	0.25 to 72.50	0.25 to 42.00
Weighted average	4.17	4.40	4.76
Non-U.S. postretirement plans⁽¹⁾
Range	1.75 to 10.10	1.75 to 11.05	2.00 to 13.20
Weighted average	8.10	8.27	7.90
Future compensation increase rate⁽²⁾
Non-U.S. pension plans⁽¹⁾
Range	1.17 to 13.67	1.25 to 70.00	1.00 to 40.00
Weighted average	3.08	3.21	3.24
Expected return on assets
U.S. plans
Qualified pension⁽³⁾	6.80/6.70	6.80	7.00
Postretirement⁽³⁾⁽⁴⁾	6.80/6.70/3.00	6.80	7.00
Non-U.S. pension plans⁽¹⁾
Range	0.00 to 11.60	1.00 to 11.50	1.60 to 11.50
Weighted average	4.52	4.55	4.95
Non-U.S. postretirement plans⁽¹⁾
Range	8.00 to 9.80	8.00 to 10.30	8.00 to 10.70
Weighted average	8.01	8.02	8.01


(1)	Reflects rates utilized to determine the quarterly expense for Significant non-U.S. pension and postretirement plans.


(2)	Not material for U.S. plans.


(3)	The expected rate of return for the U.S. pension and postretirement plans was lowered from 6.80% to 6.70% effective in the second quarter of 2018 to reflect a change in target asset allocation.


(4)	In 2017, the VEBA Trust was funded with an expected rate of return on assets of 3.00%.

Discount Rate

The established rounding convention is to the nearest 5 bps for the top five non-U.S. countries, and 25 bps for all other countries.

Expected Rate of Return



U.S. plans	2018	2017	2016
Expected rate of return
U.S. pension and postretirement trust	6.80%/6.70%	6.80%	7.00%
VEBA trust⁽¹⁾	3.00	3.00	—
Actual rate of return⁽²⁾
U.S. pension and postretirement trust	-3.40	10.90	4.90
VEBA trust⁽¹⁾	0.43 to 1.41	—	—


(1)	In December 2017, the VEBA Trust was funded for postretirement benefits with an expected rate of return on assets of 3.00%.


(2)	Actual rates of return are presented net of fees.

Mortality Tables

At December 31, 2018, the Company maintained the Retirement Plan 2014 (RP-2014) mortality table and adopted the Mortality Projection 2018 (MP-2018) projection table for the U.S. plans.



U.S. plans	2018⁽¹⁾	2017⁽²⁾
Mortality
Pension	RP-2014/MP-2018	RP-2014/MP-2017
Postretirement	RP-2014/MP-2018	RP-2014/MP-2017


(1)	The RP-2014 table is the white-collar RP-2014 table. The MP-2018 projection scale is projected from 2006, with convergence to 0.75% ultimate rate of annual improvement by 2034.


(2)	The RP-2014 table is the white-collar RP-2014 table, The MP-2017 projection scale is projected from 2006, with convergence to 0.75% ultimate rate of annual improvement by 2033.

Sensitivities of Certain Key Assumptions

The following tables summarize the effect on pension expense of a one-percentage-point change in the discount rate:



	One-percentage-point increase
In millions of dollars	2018			2017			2016
U.S. plans	$	25		$	29		$	31
Non-U.S. plans	(22		)	(27		)	(33		)
	One-percentage-point decrease
In millions of dollars	2018			2017			2016
U.S. plans	$	(37	)	$	(44	)	$	(47	)
Non-U.S. plans	32			41			37

The following tables summarize the effect on pension expense of a one-percentage-point change in the expected rates of return:



	One-percentage-point increase
In millions of dollars	2018			2017			2016
U.S. plans	$	(126	)	$	(127	)	$	(127	)
Non-U.S. plans	(64		)	(64		)	(61		)
	One-percentage-point decrease
In millions of dollars	2018			2017			2016
U.S. plans	$	126		$	127		$	127
Non-U.S. plans	64			64			61

Health Care Cost Trend Rate

Assumed health care cost trend rates were as follows:



	2018	2017
Health care cost increase rate for U.S. plans
Following year	7.00%	6.50%
Ultimate rate to which cost increase is assumed to decline	5.00	5.00
Year in which the ultimate rate is reached	2027	2023

Health care cost increase rate for Non-U.S. plans (weighted average)
Following year	6.90%	6.87%
Ultimate rate to which cost increase is assumed to decline	6.90	6.87
Range of years in which the ultimate rate is reached	2019	2018–2019

Interest Crediting Rate



	Weighted average interest crediting rate
At year end	2018	2017	2016
U.S. plans	3.25%	2.60%	3.10%
Non-U.S. plans	1.68	1.74	1.75

Plan Assets

Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on asset fair values, are as follows:



	Target asset allocation	U.S. pension assets at December 31,				U.S. postretirement assets at December 31,
Asset category⁽¹⁾	2019	2018		2017		2018		2017
Equity securities⁽²⁾	0–26%	15	%	20	%	15	%	20	%
Debt securities⁽³⁾	35–82	57		48		57		48
Real estate	0–7	5		5		5		5
Private equity	0–10	3		3		3		3
Other investments	0–30	20		24		20		24
Total		100	%	100	%	100	%	100	%


(1)	Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real estate are classified in the real estate asset category, not private equity.


(2)	Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2018 and 2017.


(3)	The VEBA Trust for postretirement benefits are primarily invested in debt securities which are not reflected in the table above.

the plans, will maintain the plans’ ability to meet all required benefit obligations.



	Non-U.S. pension plans
	Target asset allocation	Actual range at December 31,		Weighted-average at December 31,
Asset category⁽¹⁾	2019	2018	2017	2018		2017
Equity securities	0–63%	0–66%	0–67%	13	%	15	%
Debt securities	0–100	0–100	0–99	80		79
Real estate	0–15	0–12	0–18	1		1
Other investments	0–100	0–100	0–100	6		5
Total				100	%	100	%


(1)	Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.



	Non-U.S. postretirement plans
	Target asset allocation	Actual range at December 31,		Weighted-average at December 31,
Asset category⁽¹⁾	2019	2018	2017	2018		2017
Equity securities	0–30%	0–35%	0–38%	35	%	38	%
Debt securities	64–100	62–100	58–100	62		58
Other investments	0–6	0–3	0–4	3		4
Total				100	%	100	%


(1)	Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.

Fair Value Disclosure

Certain investments may transfer between the fair value hierarchy classifications during the year due to changes in valuation methodology and pricing sources.

Plan assets by detailed asset categories and the fair value hierarchy are as follows:



	U.S. pension and postretirement benefit plans⁽¹⁾
In millions of dollars	Fair value measurement at December 31, 2018
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	625		$	—		$	—	$	625
Non-U.S. equities	481			—			—		481
Mutual funds and other registered investment companies	215			—			—		215
Commingled funds	—			1,344			—		1,344
Debt securities	1,346			3,475			—		4,821
Annuity contracts	—			—			1		1
Derivatives	16			252			—		268
Other investments	—			—			127		127
Total investments	$	2,683		$	5,071		$	128	$	7,882
Cash and short-term investments	$	93		$	865		$	—	$	958
Other investment liabilities	(100		)	(254		)	—		(354		)
Net investments at fair value	$	2,676		$	5,682		$	128	$	8,486
Other investment receivables redeemed at NAV									$	80
Securities valued at NAV									3,269
Total net assets									$	11,835


(1)	The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2018, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for the postretirement benefits are reflected in the above table.



	U.S. pension and postretirement benefit plans⁽¹⁾
In millions of dollars	Fair value measurement at December 31, 2017
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	726		$	—		$	—	$	726
Non-U.S. equities	821			—			—		821
Mutual funds and other registered investment companies	376			—			—		376
Commingled funds	—			1,184			—		1,184
Debt securities	1,381			3,080			—		4,461
Annuity contracts	—			—			1		1
Derivatives	11			323			—		334
Other investments	—			—			148		148
Total investments	$	3,315		$	4,587		$	149	$	8,051
Cash and short-term investments	$	257		$	1,004		$	—	$	1,261
Other investment liabilities	(60		)	(343		)	—		(403		)
Net investments at fair value	$	3,512		$	5,248		$	149	$	8,909
Other investment receivables redeemed at NAV									$	16
Securities valued at NAV									4,062
Total net assets									$	12,987


(1)	The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2017, the allocable interests of the U.S. pension and postretirement plans were 99.0% and 1.0%, respectively. The investments of the VEBA Trust for the postretirement benefits are reflected in the above table.



	Non-U.S. pension and postretirement benefit plans
In millions of dollars	Fair value measurement at December 31, 2018
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	4		$	9		$	—	$	13
Non-U.S. equities	100			100			—		200
Mutual funds and other registered investment companies	2,887			63			—		2,950
Commingled funds	21			—			—		21
Debt securities	5,145			1,500			9		6,654
Real estate	—			3			1		4
Annuity contracts	—			1			10		11
Derivatives	—			156			—		156
Other investments	1			—			210		211
Total investments	$	8,158		$	1,832		$	230	$	10,220
Cash and short-term investments	$	91		$	3		$	—	$	94
Other investment liabilities	(1		)	(2,589		)	—		(2,590		)
Net investments at fair value	$	8,248		$	(754	)	$	230	$	7,724
Securities valued at NAV									$	11
Total net assets									$	7,735



	Non-U.S. pension and postretirement benefit plans
In millions of dollars	Fair value measurement at December 31, 2017
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	4		$	12		$	—	$	16
Non-U.S. equities	103			122			1		226
Mutual funds and other registered investment companies	3,098			74			—		3,172
Commingled funds	24			—			—		24
Debt securities	3,999			1,555			7		5,561
Real estate	—			3			1		4
Annuity contracts	—			1			9		10
Derivatives	1			3,102			—		3,103
Other investments	1			—			214		215
Total investments	$	7,230		$	4,869		$	232	$	12,331
Cash and short-term investments	$	119		$	3		$	—	$	122
Other investment liabilities	(2		)	(4,220		)	—		(4,222		)
Net investments at fair value	$	7,347		$	652		$	232	$	8,231
Securities valued at NAV									$	16
Total net assets									$	8,247

Level 3 Rollforward

The reconciliations of the beginning and ending balances during the year for Level 3 assets are as follows:



In millions of dollars	U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2017		Realized gains (losses)			Unrealized gains (losses)			Purchases, sales and issuances			Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2018
Annuity contracts	$	1	$	—		$	—		$	—		$	—	$	1
Other investments	148		(2		)	(18		)	(1		)	—		127
Total investments	$	149	$	(2	)	$	(18	)	$	(1	)	$	—	$	128



In millions of dollars	U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2016		Realized gains (losses)		Unrealized gains (losses)		Purchases, sales and issuances		Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2017
Annuity contracts	$	1	$	—	$	—	$	—	$	—	$	1
Other investments	129		—		—		19		—		148
Total investments	$	130	$	—	$	—	$	19	$	—	$	149



In millions of dollars	Non-U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2017		Unrealized gains (losses)			Purchases, sales and issuances			Transfers in and/or out of Level 3			Ending Level 3 fair value at Dec. 31, 2018
Non-U.S. equities	$	1	$	—		$	—		$	(1	)	$	—
Debt securities	7		(1		)	3			—			9
Real estate	1		—			—			—			1
Annuity contracts	9		(1		)	1			1			10
Other investments	214		(3		)	(1		)	—			210
Total investments	$	232	$	(5	)	$	3		$	—		$	230



In millions of dollars	Non-U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2016		Unrealized gains (losses)		Purchases, sales and issuances			Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2017
Non-U.S. equities	$	1	$	—	$	—		$	—	$	1
Debt securities	7		—		—			—		7
Real estate	1		—		—			—		1
Annuity contracts	8		1		—			—		9
Other investments	187		31		(4		)	—		214
Total investments	$	204	$	32	$	(4	)	$	—	$	232

Investment Strategy

Significant Concentrations of Risk in Plan Assets

Oversight and Risk Management Practices

periodic asset/liability management studies and strategic asset allocation reviews;

periodic monitoring of funding levels and funding ratios;

periodic monitoring of compliance with asset allocation guidelines;

periodic monitoring of asset class and/or investment manager performance against benchmarks; and

periodic risk capital analysis and stress testing.

Estimated Future Benefit Payments

The Company expects to pay the following estimated benefit payments in future years:



	Pension plans				Postretirement benefit plans
In millions of dollars	U.S. plans		Non-U.S. plans		U.S. plans		Non-U.S. plans
2019	$	797	$	435	$	62	$	70
2020	828		417		62		75
2021	847		426		61		80
2022	857		448		59		86
2023	873		471		57		92
2024–2028	4,365		2,557		252		547

Post Employment Plans

The Company sponsors U.S. post employment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long-term disability.

The following table summarizes the components of net expense recognized in the Consolidated Statement of Income for the Company’s U.S. post employment plans:



	Net expense
In millions of dollars	2018			2017			2016
Service-related expense
Interest cost on benefit obligation	$	2		$	2		$	3
Expected return on plan assets	(1		)	—			—
Amortization of unrecognized
Prior service (benefit) cost	(23		)	(31		)	(31		)
Net actuarial loss	2			2			5
Total service-related benefit	$	(20	)	$	(27	)	$	(23	)
Non-service-related expense	2			30			21
Total net expense (benefit)	$	(18	)	$	3		$	(2	)

The following table summarizes certain assumptions used in determining the post employment benefit obligations and net benefit expense for the Company’s U.S. post employment plans:



	2018	2017
Discount rate	3.95%	3.20%
Expected return on assets	3.00	3.00

Health care cost increase rate
Following year	7.00	6.50
Ultimate rate to which cost increase is assumed to decline	5.00	5.00
Year in which the ultimate rate is reached	2027	2023

Defined Contribution Plans



	U.S. plans
In millions of dollars	2018		2017		2016
Company contributions	$	396	$	383	$	371

	Non-U.S. plans
In millions of dollars	2018		2017		2016
Company contributions	$	283	$	270	$	268

9. INCOME TAXES

Income Tax Provision

Details of the Company’s income tax provision are presented below:



In millions of dollars	2018			2017			2016
Current
Federal	$	834		$	332		$	1,016
Non-U.S.	4,290			3,910			3,585
State	284			269			384
Total current income taxes	$	5,408		$	4,511		$	4,985
Deferred
Federal	$	(620	)	$	24,902		$	1,280
Non-U.S.	371			(377		)	53
State	198			352			126
Total deferred income taxes	$	(51	)	$	24,877		$	1,459
Provision for income tax on continuing operations before noncontrolling interests⁽¹⁾	$	5,357		$	29,388		$	6,444
Provision (benefit) for income taxes on discontinued operations	(18		)	7			(22		)
Income tax expense (benefit) reported in stockholders’ equity related to:
FX translation	(263		)	188			(402		)
Investment securities	(346		)	(149		)	59
Employee stock plans	(2		)	(4		)	13
Cash flow hedges	(8		)	(12		)	27
Benefit plans	(20		)	13			(30		)
FVO DVA	302			(250		)	(201		)
Excluded fair value hedges	(17		)	—			—
Retained earnings⁽²⁾	(305		)	(295		)	—
Income taxes before noncontrolling interests	$	4,680		$	28,886		$	5,888


(1)	Includes the effect of securities transactions and other-than-temporary-impairment losses resulting in a provision (benefit) of $104 million and $(32) million in 2018, $272 million and $(22) million in 2017 and $332 million and $(217) million in 2016, respectively.


(2)	2018 reflects the tax effect of the accounting change for ASU 2016-16 and the tax effect of the accounting change for ASU 2018-03, to report the net unrealized gains on former AFS equity securities. 2017 reflects the tax effect of the accounting change for ASU 2017-08. See Note 1 to the Consolidated Financial Statements.

Tax Rate

The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income from continuing operations (before noncontrolling interests and the cumulative effect of accounting changes) for each of the periods indicated is as follows:



	2018		2017		2016
Federal statutory rate	21.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	1.8		1.1		1.8
Non-U.S. income tax rate differential	5.3		(1.6	)	(3.6	)
Effect of tax law changes⁽¹⁾	(0.6	)	99.7		—
Basis difference in affiliates	(2.4	)	(2.1	)	(0.1	)
Tax advantaged investments	(2.0	)	(2.2	)	(2.4	)
Other, net	(0.3	)	(0.8	)	(0.7	)
Effective income tax rate	22.8	%	129.1	%	30.0	%


(1)	2018 includes one-time Tax Reform benefits of $94 million for amounts that were considered provisional pursuant to SAB 118. 2017 includes the one-time $22,594 million charge for Tax Reform.

Deferred Income Taxes

Deferred income taxes at December 31 related to the following:



In millions of dollars	2018			2017
Deferred tax assets
Credit loss deduction	$	3,419		$	3,423
Deferred compensation and employee benefits	1,975			1,585
Repositioning and settlement reserves	428			454
U.S. tax on non-U.S. earnings	2,080			2,452
Investment and loan basis differences	4,891			3,384
Cash flow hedges	240			233
Tax credit and net operating loss carry-forwards	20,759			21,575
Fixed assets and leases	1,006			1,090
Other deferred tax assets	2,145			1,988
Gross deferred tax assets	$	36,943		$	36,184
Valuation allowance	$	9,258		$	9,387
Deferred tax assets after valuation allowance	$	27,685		$	26,797
Deferred tax liabilities
Intangibles	$	(975	)	$	(1,247	)
Debt issuances	(530		)	(294		)
Non-U.S. withholding taxes	(1,040		)	(668		)
Interest-related items	(594		)	(562		)
Other deferred tax liabilities	(1,643		)	(1,545		)
Gross deferred tax liabilities	$	(4,782	)	$	(4,316	)
Net deferred tax assets	$	22,903		$	22,481

Unrecognized Tax Benefits

The following is a rollforward of the Company’s unrecognized tax benefits:



In millions of dollars	2018			2017			2016
Total unrecognized tax benefits at January 1	$	1,013		$	1,092		$	1,235
Net amount of increases for current year’s tax positions	40			43			34
Gross amount of increases for prior years’ tax positions	46			324			273
Gross amount of decreases for prior years’ tax positions	(174		)	(246		)	(225		)
Amounts of decreases relating to settlements	(283		)	(199		)	(174		)
Reductions due to lapse of statutes of limitation	(23		)	(11		)	(21		)
Foreign exchange, acquisitions and dispositions	(12		)	10			(30		)
Total unrecognized tax benefits at December 31	$	607		$	1,013		$	1,092

Interest and penalties (not included in “unrecognized tax benefits” above) are a component of Provision for income taxes.



	2018				2017				2016
In millions of dollars	Pretax		Net of tax		Pretax		Net of tax		Pretax		Net of tax
Total interest and penalties on the Consolidated Balance Sheet at January 1	$	121	$	101	$	260	$	164	$	233	$	146
Total interest and penalties in the Consolidated Statement of Income	6		6		5		21		105		68
Total interest and penalties on the Consolidated Balance Sheet at December 31⁽¹⁾	103		85		121		101		260		164


(1)	Includes $2 million, $3 million and $3 million for non-U.S. penalties in 2018, 2017 and 2016. Also includes $1 million, $3 million and $3 million for state penalties in 2018, 2017 and 2016.

The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:



Jurisdiction	Tax year
United States	2014
Mexico	2013
New York State and City	2009
United Kingdom	2015
India	2015
Singapore	2011
Hong Kong	2012
Ireland	2014

Non-U.S. Earnings

Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent that such amounts are distributed in excess of limits prescribed by federal law. At December 31, 2018, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $75 million).

Deferred Tax Assets

As of December 31, 2018, Citi had a valuation allowance of $9.3 billion, composed of valuation allowances of $6.0 billion on its FTC carry-forwards, $1.7 billion on its U.S. residual DTA related to its non-U.S. branches, $1.5 billion on local non-U.S. DTAs and $0.1 billion on state net operating loss carry-forwards. The valuation allowance against FTCs results from the impact of the lower tax rate and the new separate FTC basket for non-U.S. branches, as well as the diminished ability under Tax Reform to generate income from sources outside the U.S. to support FTC utilization. The absolute amount of Citi’s post-Tax Reform-related valuation allowances may change in future years. First, the separate FTC basket for non-U.S. branches will result in additional DTAs (for FTCs) requiring a valuation allowance, given that the local tax rate for these branches exceeds on average the U.S. tax rate of 21%. Second, in Citi’s general basket for FTCs, changes in the forecasted amount of income in U.S. locations derived from sources outside the U.S. could alter the amount of valuation allowance that is needed against such FTCs. The following table summarizes Citi’s DTAs:



In billions of dollars
Jurisdiction/component⁽¹⁾	DTAs balance December 31, 2018		DTAs balance December 31, 2017
U.S. federal⁽²⁾
Net operating losses (NOLs)⁽³⁾	$	2.6	$	2.3
Foreign tax credits (FTCs)	6.8		7.6
General business credits (GBCs)	1.0		1.4
Future tax deductions and credits	6.7		4.8
Total U.S. federal	$	17.1	$	16.1
State and local
New York NOLs	$	2.0	$	2.3
Other state NOLs	0.2		0.2
Future tax deductions	1.4		1.3
Total state and local	$	3.6	$	3.8
Non-U.S.
NOLs	$	0.6	$	0.6
Future tax deductions	1.6		2.0
Total non-U.S.	$	2.2	$	2.6
Total	$	22.9	$	22.5


(1)	All amounts are net of valuation allowances.


(2)	Included in the net U.S. federal DTAs of $17.1 billion as of December 31, 2018 were deferred tax liabilities of $2.8 billion that will reverse in the relevant carry-forward period and may be used to support the DTAs.


(3)	Consists of non-consolidated tax return NOL carry-forwards that are eventually expected to be utilized in Citigroup’s consolidated tax return.

The following table summarizes the amounts of tax carry-forwards and their expiration dates:



In billions of dollars
Year of expiration	December 31, 2018		December 31, 2017
U.S. tax return foreign tax credit carry-forwards⁽¹⁾
2018	$	—	$	0.4
2019	0.9		1.3
2020	2.6		3.2
2021	1.8		2.0
2022	3.3		3.4
2023⁽²⁾	0.4		0.4
2025⁽²⁾	1.4		1.4
2027⁽²⁾	1.1		1.2
2028	1.3		—
Total U.S. tax return foreign tax credit carry-forwards	$	12.8	$	13.3
U.S. tax return general business credit carry-forwards
2032	$	—	$	0.2
2033	—		0.3
2034	—		0.2
2035	—		0.2
2036	0.1		0.2
2037	0.4		0.3
2038	0.5		—
Total U.S. tax return general business credit carry-forwards	$	1.0	$	1.4
U.S. subsidiary separate federal NOL carry-forwards
2027	$	0.2	$	0.2
2028	0.1		0.1
2030	0.3		0.3
2032	0.1		0.1
2033	1.6		1.6
2034	2.1		2.3
2035	3.3		3.3
2036	2.1		2.1
2037	1.0		1.0
Unlimited carry-forward period	1.7		—
Total U.S. subsidiary separate federal NOL carry-forwards⁽³⁾	$	12.5	$	11.0
New York State NOL carry-forwards⁽³⁾
2034	$	11.7	$	13.6
New York City NOL carry-forwards⁽³⁾
2034	$	11.5	$	13.1
Non-U.S. NOL carry-forwards⁽¹⁾
Various	$	2.0	$	2.0


(1)	Before valuation allowance.


(2)	The $2.9 billion in FTC carry-forwards that expire in 2023, 2025 and 2027 are in a non-consolidated tax return entity but will be utilized (net of valuation allowances) in Citigroup’s consolidated tax return.


(3)	Pretax.

The time remaining for utilization of the FTC component has shortened, given the passage of time. Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $22.9 billion at December 31, 2018 is more-likely-than-not, based upon expectations as to future

taxable income in the jurisdictions in which the DTAs arise and consideration of available tax planning strategies (as defined in ASC 740, Income Taxes).

Citi believes the U.S. federal and New York State and City NOL carry-forward period of 20 years provides enough time to fully utilize the DTAs pertaining to the existing NOL carry-forwards. This is due to Citi’s forecast of sufficient U.S. taxable income and the fact that New York State and City continue to tax Citi’s non-U.S. income.

With respect to the FTCs component of the DTAs, the carry-forward period is 10 years. Utilization of FTCs in any year is restricted to 21% of foreign source taxable income in that year. However, overall domestic losses that Citi has incurred of approximately $47 billion as of December 31, 2018 are allowed to be reclassified as foreign source income to the extent of 50%–100% of domestic source income produced in subsequent years. Such resulting foreign source income would cover the FTC carry-forwards after valuation allowance. As noted in the tables above, Citi’s FTC carry-forwards were $6.8 billion ($12.8 billion before valuation allowance) as of December 31, 2018, compared to $7.6 billion as of December 31, 2017. Citi believes that it will generate sufficient U.S. taxable income within the 10-year carry-forward period to be able to utilize the net FTCs after the valuation allowance, after considering any FTCs produced in the tax return for such period, which must be used prior to any carry-forward utilization.

10. EARNINGS PER SHARE

The following table reconciles the income and share data used in the basic and diluted earnings per share (EPS) computations:



In millions, except per share amounts	2018			2017			2016
Income (loss) from continuing operations before attribution of noncontrolling interests	$	18,088		$	(6,627	)	$	15,033
Less: Noncontrolling interests from continuing operations	35			60			63
Net income (loss) from continuing operations (for EPS purposes)	$	18,053		$	(6,687	)	$	14,970
Income (loss) from discontinued operations, net of taxes	(8		)	(111		)	(58		)
Citigroup's net income (loss)	$	18,045		$	(6,798	)	$	14,912
Less: Preferred dividends⁽¹⁾	1,173			1,213			1,077
Net income (loss) available to common shareholders	$	16,872		$	(8,011	)	$	13,835
Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to basic EPS	200			37			195
Net income (loss) allocated to common shareholders for basic and diluted EPS	$	16,672		$	(8,048	)	$	13,640
Weighted-average common shares outstanding applicable to basic EPS (in millions)	2,493.3			2,698.5			2,888.1
Effect of dilutive securities
Options⁽²⁾	0.1			—			0.1
Other employee plans	1.4			—			0.1
Adjusted weighted-average common shares outstanding applicable to diluted EPS⁽³⁾	2,494.8			2,698.5			2,888.3
Basic earnings per share⁽⁴⁾
Income (loss) from continuing operations	$	6.69		$	(2.94	)	$	4.74
Discontinued operations	—			(0.04		)	(0.02		)
Net income (loss)	$	6.69		$	(2.98	)	$	4.72
Diluted earnings per share⁽⁴⁾
Income (loss) from continuing operations	$	6.69		$	(2.94	)	$	4.74
Discontinued operations	—			(0.04		)	(0.02		)
Net income (loss)	$	6.68		$	(2.98	)	$	4.72


(1)	See Note 20 to the Consolidated Financial Statements for the potential future impact of preferred stock dividends.


(2)	During 2018, 2017 and 2016, weighted-average options to purchase 0.5 million, 0.8 million and 4.2 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per share because the weighted-average exercise prices of $145.69, $204.80 and $98.01 per share, respectively, were anti-dilutive.


(3)	Due to rounding, common shares outstanding applicable to basic EPS and the effect of dilutive securities may not sum to common shares outstanding applicable to diluted EPS.


(4)	Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.

11. FEDERAL FUNDS, SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS

Federal funds sold and securities borrowed and purchased under agreements to resell, at their respective carrying values, consisted of the following:



	December 31,		December 31,
In millions of dollars	2018		2017
Federal funds sold	$	—	$	—
Securities purchased under agreements to resell	159,364		130,984
Deposits paid for securities borrowed	111,320		101,494
Total⁽¹⁾	$	270,684	$	232,478

Federal funds purchased and securities loaned and sold under agreements to repurchase, at their respective carrying values, consisted of the following:



	December 31,		December 31,
In millions of dollars	2018		2017
Federal funds purchased	$	—	$	326
Securities sold under agreements to repurchase	166,090		142,646
Deposits received for securities loaned	11,678		13,305
Total⁽¹⁾	$	177,768	$	156,277

(1)

The above tables do not include securities-for-securities lending transactions of $15.9 billion and $14.0 billion at December 31, 2018 and 2017, respectively, where the Company acts as lender and receives securities that can be sold or pledged as collateral. In these transactions, the Company recognizes the securities received at fair value within Other assets and the obligation to return those securities as a liability within Brokerage payables.

To maintain reliable funding under a wide range of market conditions, including under periods of stress, Citi manages these activities by taking into consideration the quality of the underlying collateral and stipulating financing tenor. Citi manages the risks in its collateralized financing transactions by conducting daily stress tests to account for changes in capacity, tenors, haircut, collateral profile and client actions. Additionally, Citi maintains counterparty diversification by establishing concentration triggers and assessing counterparty reliability and stability under stress.

It is the Company’s policy to take possession of the underlying collateral, monitor its market value relative to the amounts due under the agreements and, when necessary,

require prompt transfer of additional collateral in order to maintain contractual margin protection. For resale and repurchase agreements, when necessary, the Company posts additional collateral in order to maintain contractual margin protection.

Collateral typically consists of government and government-agency securities, corporate and municipal bonds, equities and mortgage- and other asset-backed securities.

The resale and repurchase agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other type of default under the relevant master agreement. Events of default generally include (i) failure to deliver cash or securities as required under the transaction, (ii) failure to provide or return cash or securities as used for margining purposes, (iii) breach of representation, (iv) cross-default to another transaction entered into among the parties, or, in some cases, their affiliates and (v) a repudiation of obligations under the agreement. The counterparty that receives the securities in these transactions is generally unrestricted in its use of the securities, with the exception of transactions executed on a tri-party basis, where the collateral is maintained by a custodian and operational limitations may restrict its use of the securities.

posts additional collateral in order to maintain contractual margin protection.

The enforceability of offsetting rights incorporated in the master netting agreements for resale and repurchase agreements, and securities borrowing and lending agreements, is evidenced to the extent that a supportive legal opinion has been obtained from counsel of recognized standing that provides the requisite level of certainty regarding the enforceability of these agreements. Also, the exercise of rights by the non-defaulting party to terminate and close out transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding.

The following tables present the gross and net resale and repurchase agreements and securities borrowing and lending

agreements and the related offsetting amount permitted under ASC 210-20-45. The tables also include amounts related to financial instruments that are not permitted to be offset under ASC 210-20-45, but would be eligible for offsetting to the extent that an event of default occurred and a legal opinion supporting enforceability of the offsetting rights has been obtained. Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtain a legal opinion evidencing enforceability of the offsetting right.



	As of December 31, 2018
In millions of dollars	Gross amounts of recognized assets		Gross amounts offset on the Consolidated Balance Sheet⁽¹⁾		Net amounts of assets included on the Consolidated Balance Sheet⁽²⁾		Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default⁽³⁾		Net amounts⁽⁴⁾
Securities purchased under agreements to resell	$	246,788	$	87,424	$	159,364	$	124,557	$	34,807
Deposits paid for securities borrowed	111,320		—		111,320		35,766		75,554
Total	$	358,108	$	87,424	$	270,684	$	160,323	$	110,361



In millions of dollars	Gross amounts of recognized liabilities		Gross amounts offset on the Consolidated Balance Sheet⁽¹⁾		Net amounts of liabilities included on the Consolidated Balance Sheet⁽²⁾		Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default⁽³⁾		Net amounts⁽⁴⁾
Securities sold under agreements to repurchase	$	253,514	$	87,424	$	166,090	$	82,823	$	83,267
Deposits received for securities loaned	11,678		—		11,678		3,415		8,263
Total	$	265,192	$	87,424	$	177,768	$	86,238	$	91,530



	As of December 31, 2017
In millions of dollars	Gross amounts of recognized assets		Gross amounts offset on the Consolidated Balance Sheet⁽¹⁾		Net amounts of assets included on the Consolidated Balance Sheet⁽²⁾		Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default⁽³⁾		Net amounts⁽⁴⁾
Securities purchased under agreements to resell	$	204,460	$	73,476	$	130,984	$	103,022	$	27,962
Deposits paid for securities borrowed	101,494		—		101,494		22,271		79,223
Total	$	305,954	$	73,476	$	232,478	$	125,293	$	107,185



In millions of dollars	Gross amounts of recognized liabilities		Gross amounts offset on the Consolidated Balance Sheet⁽¹⁾		Net amounts of liabilities included on the Consolidated Balance Sheet⁽²⁾		Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default⁽³⁾		Net amounts⁽⁴⁾
Securities sold under agreements to repurchase	$	216,122	$	73,476	$	142,646	$	73,716	$	68,930
Deposits received for securities loaned	13,305		—		13,305		4,079		9,226
Total	$	229,427	$	73,476	$	155,951	$	77,795	$	78,156


(1)	Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45.


(2)	The total of this column for each period excludes federal funds sold/purchased. See tables above.


(3)	Includes financial instruments subject to enforceable master netting agreements that are not permitted to be offset under ASC 210-20-45, but would be eligible for offsetting to the extent that an event of default has occurred and a legal opinion supporting enforceability of the offsetting right has been obtained.


(4)	Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtain a legal opinion evidencing enforceability of the offsetting right.

The following tables present the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by remaining contractual maturity:



	As of December 31, 2018
In millions of dollars	Open and overnight		Up to 30 days		31–90 days		Greater than 90 days		Total
Securities sold under agreements to repurchase	$	108,405	$	70,850	$	29,898	$	44,361	$	253,514
Deposits received for securities loaned	6,296		774		2,626		1,982		11,678
Total	$	114,701	$	71,624	$	32,524	$	46,343	$	265,192



	As of December 31, 2017
In millions of dollars	Open and overnight		Up to 30 days		31–90 days		Greater than 90 days		Total
Securities sold under agreements to repurchase	$	82,073	$	68,372	$	33,846	$	31,831	$	216,122
Deposits received for securities loaned	9,946		266		1,912		1,181		13,305
Total	$	92,019	$	68,638	$	35,758	$	33,012	$	229,427

The following tables present the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by class of underlying collateral:



	As of December 31, 2018
In millions of dollars	Repurchase agreements		Securities lending agreements		Total
U.S. Treasury and federal agency securities	$	86,785	$	41	$	86,826
State and municipal securities	2,605		—		2,605
Foreign government securities	99,131		179		99,310
Corporate bonds	21,719		749		22,468
Equity securities	12,920		10,664		23,584
Mortgage-backed securities	19,421		—		19,421
Asset-backed securities	6,207		—		6,207
Other	4,726		45		4,771
Total	$	253,514	$	11,678	$	265,192



	As of December 31, 2017
In millions of dollars	Repurchase agreements		Securities lending agreements		Total
U.S. Treasury and federal agency securities	$	58,774	$	—	$	58,774
State and municipal securities	1,605		—		1,605
Foreign government securities	89,576		105		89,681
Corporate bonds	20,194		657		20,851
Equity securities	20,724		11,907		32,631
Mortgage-backed securities	17,791		—		17,791
Asset-backed securities	5,479		—		5,479
Other	1,979		636		2,615
Total	$	216,122	$	13,305	$	229,427

12. BROKERAGE RECEIVABLES AND BROKERAGE

PAYABLES

The Company has receivables and payables for financial instruments sold to and purchased from brokers, dealers and customers, which arise in the ordinary course of business. Citi is exposed to risk of loss from the inability of brokers, dealers or customers to pay for purchases or to deliver the financial instruments sold, in which case Citi would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transaction and replaces the broker, dealer or customer in question.

Brokerage receivables and Brokerage payables consisted of the following:



	December 31,
In millions of dollars	2018		2017
Receivables from customers	$	14,415	$	19,215
Receivables from brokers, dealers and clearing organizations	21,035		19,169
Total brokerage receivables⁽¹⁾	$	35,450	$	38,384
Payables to customers	$	40,273	$	38,741
Payables to brokers, dealers and clearing organizations	24,298		22,601
Total brokerage payables⁽¹⁾	$	64,571	$	61,342


(1)	Includes brokerage receivables and payables recorded by Citi broker-dealer entities that are accounted for in accordance with the AICPA Accounting Guide for Brokers and Dealers in Securities as codified in ASC 940-320.

13. INVESTMENTS

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	December 31, 2018
Debt securities available-for-sale (AFS)	$	288,038
Debt securities held-to-maturity (HTM)⁽¹⁾	63,357
Marketable equity securities carried at fair value⁽²⁾	220
Non-marketable equity securities carried at fair value⁽²⁾	889
Non-marketable equity securities measured using the measurement alternative⁽³⁾	538
Non-marketable equity securities carried at cost⁽⁴⁾	5,565
Total investments	$	358,607



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)	Primarily consists of 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:



In millions of dollars	2018		2017		2016
Taxable interest	$	8,704	$	7,538	$	6,858
Interest exempt from U.S. federal income tax	521		535		549
Dividend income	269		222		175
Total interest and dividend income	$	9,494	$	8,295	$	7,582

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



In millions of dollars	2018			2017			2016
Gross realized investment gains	$	682		$	1,039		$	1,460
Gross realized investment losses	(261		)	(261		)	(511		)
Net realized gains on sale of investments	$	421		$	778		$	949

The Company has sold certain debt securities that were classified as HTM. These sales were in response to significant deterioration in the creditworthiness of the issuers or securities or because the Company has collected a substantial portion (at least 85%) of the principal outstanding at acquisition of the security. In addition, certain other debt securities were reclassified to AFS investments in response to

significant credit deterioration. Because the Company generally intends to sell these reclassified debt securities, Citi recorded OTTI on the securities. The following table presents, for the periods indicated, the carrying value of HTM debt securities sold and reclassified to AFS, as well as the related gain (loss) or the OTTI losses recorded on these securities:



In millions of dollars	2018		2017		2016
Carrying value of HTM debt securities sold	$	61	$	81	$	49
Net realized gain (loss) on sale of HTM debt securities	—		13		14
Carrying value of debt securities reclassified to AFS	8		74		150
OTTI losses on debt securities reclassified to AFS	—		—		(6		)

Securities Available-for-Sale

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



	2018								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	$	43,504	$	241	$	725	$	43,020	$	42,116	$	125	$	500	$	41,741
Prime	—		—		—		—		11		6		—		17
Alt-A	1		—		—		1		26		90		—		116
Non-U.S. residential	1,310		4		2		1,312		2,744		13		6		2,751
Commercial	173		1		2		172		334		—		2		332
Total mortgage-backed securities	$	44,988	$	246	$	729	$	44,505	$	45,231	$	234	$	508	$	44,957
U.S. Treasury and federal agency securities
U.S. Treasury	$	109,376	$	33	$	1,339	$	108,070	$	108,344	$	77	$	971	$	107,450
Agency obligations	9,283		1		132		9,152		10,813		7		124		10,696
Total U.S. Treasury and federal agency securities	$	118,659	$	34	$	1,471	$	117,222	$	119,157	$	84	$	1,095	$	118,146
State and municipal⁽²⁾	$	9,372	$	96	$	262	$	9,206	$	8,870	$	140	$	245	$	8,765
Foreign government	100,872		415		596		100,691		100,615		508		590		100,533
Corporate	11,714		42		157		11,599		14,144		51		86		14,109
Asset-backed securities⁽¹⁾	845		2		4		843		3,906		14		2		3,918
Other debt securities	3,973		—		1		3,972		297		—		—		297
Total debt securities AFS	$	290,423	$	835	$	3,220	$	288,038	$	292,220	$	1,031	$	2,526	$	290,725
Marketable equity securities AFS⁽³⁾	$	—	$	—	$	—	$	—	$	186	$	4	$	1	$	189
Total securities AFS	$	290,423	$	835	$	3,220	$	288,038	$	292,406	$	1,035	$	2,527	$	290,914

(1)

The Company invests in mortgage- and asset-backed securities. These securitization entities 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- and asset-backed securitizations in which the Company has other involvement, see Note 21 to the Consolidated Financial Statements.

(2)

In the second quarter of 2017, Citi early adopted ASU 2017-08, Receivable—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. 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 AFS category was eliminated for equity securities effective January 1, 2018. See Note 1 to the Consolidated Financial Statements for additional details.

At December 31, 2018, the amortized cost of fixed income securities exceeded their fair value by $3,220 million. Of the $3,220 million, $752 million represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for less than a year and, of these, 92% were rated investment grade; and $2,468 million

represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for a year or more and, of these, 98% were rated investment grade. Of the $2,468 million mentioned above, $1,297 million represents U.S. Treasury securities.

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
December 31, 2018
Debt securities AFS⁽¹⁾
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	4,022	$	286	$	13,143	$	439	$	17,165	$	725
Non-U.S. residential	284		2		2		—		286		2
Commercial	79		1		82		1		161		2
Total mortgage-backed securities	$	4,385	$	289	$	13,227	$	440	$	17,612	$	729
U.S. Treasury and federal agency securities
U.S. Treasury	$	8,389	$	42	$	77,883	$	1,297	$	86,272	$	1,339
Agency obligations	277		2		8,660		130		8,937		132
Total U.S. Treasury and federal agency securities	$	8,666	$	44	$	86,543	$	1,427	$	95,209	$	1,471
State and municipal	$	1,614	$	34	$	1,303	$	228	$	2,917	$	262
Foreign government	40,655		265		15,053		331		55,708		596
Corporate	4,547		115		2,077		42		6,624		157
Asset-backed securities	441		4		55		—		496		4
Other debt securities	1,790		1		—		—		1,790		1
Total debt securities AFS	$	62,098	$	752	$	118,258	$	2,468	$	180,356	$	3,220
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 AFS 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:



	December 31,
	2018				2017
In millions of dollars	Amortized cost		Fair value		Amortized cost		Fair value
Mortgage-backed securities⁽¹⁾
Due within 1 year	$	14	$	14	$	45	$	45
After 1 but within 5 years	662		661		1,306		1,304
After 5 but within 10 years	2,779		2,828		1,376		1,369
After 10 years⁽²⁾	41,533		41,002		42,504		42,239
Total	$	44,988	$	44,505	$	45,231	$	44,957
U.S. Treasury and federal agency securities
Due within 1 year	$	41,941	$	41,867	$	4,913	$	4,907
After 1 but within 5 years	76,139		74,800		111,236		110,238
After 5 but within 10 years	489		462		3,008		3,001
After 10 years⁽²⁾	90		93		—		—
Total	$	118,659	$	117,222	$	119,157	$	118,146
State and municipal
Due within 1 year	$	2,586	$	2,586	$	1,792	$	1,792
After 1 but within 5 years	1,676		1,675		2,579		2,576
After 5 but within 10 years	585		602		514		528
After 10 years⁽²⁾	4,525		4,343		3,985		3,869
Total	$	9,372	$	9,206	$	8,870	$	8,765
Foreign government
Due within 1 year	$	39,078	$	39,028	$	32,130	$	32,100
After 1 but within 5 years	50,125		49,962		53,034		53,165
After 5 but within 10 years	10,153		10,149		12,949		12,680
After 10 years⁽²⁾	1,516		1,552		2,502		2,588
Total	$	100,872	$	100,691	$	100,615	$	100,533
All other⁽³⁾
Due within 1 year	$	6,166	$	6,166	$	3,998	$	3,991
After 1 but within 5 years	8,459		8,416		9,047		9,027
After 5 but within 10 years	1,474		1,427		3,415		3,431
After 10 years⁽²⁾	433		405		1,887		1,875
Total	$	16,532	$	16,414	$	18,347	$	18,324
Total debt securities AFS	$	290,423	$	288,038	$	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
December 31, 2018
Debt securities HTM
Mortgage-backed securities⁽¹⁾⁽²⁾
U.S. government agency guaranteed	$	34,239	$	199	$	578	$	33,860
Alt-A	—		—		—		—
Non-U.S. residential	1,339		12		1		1,350
Commercial	368		—		—		368
Total mortgage-backed securities	$	35,946	$	211	$	579	$	35,578
State and municipal	$	7,628	$	167	$	138	$	7,657
Foreign government	1,027		—		24		1,003
Asset-backed securities⁽¹⁾	18,756		8		112		18,652
Total debt securities HTM	$	63,357	$	386	$	853	$	62,890
December 31, 2017
Debt securities HTM
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⁽³⁾	$	8,897	$	378	$	73	$	9,202
Foreign government	740		—		18		722
Asset-backed securities⁽¹⁾	17,584		162		22		17,724
Total debt securities HTM	$	53,320	$	702	$	270	$	53,752

(1)

(2)

In November 2018, Citibank transferred $10 billion of agency residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) from AFS classification to HTM classification in accordance with ASC 320. At the time of transfer, the securities were in an unrealized loss position of $598 million. This amount will remain in AOCI and be amortized over the remaining life of the securities.

(3)

In the second quarter of 2017, Citi early adopted ASU 2017-08.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 that would have been recorded under the ASU on callable state and municipal debt securities. See Note 1 to the Consolidated Financial Statements.

The Company has the positive intent and ability to hold these securities to maturity or, where applicable, to exercise any issuer call options, absent any unforeseen significant changes in circumstances, including deterioration in credit or changes in regulatory capital requirements.

The net unrealized losses classified in AOCI for HTM securities primarily relate to debt securities previously classified as AFS that were transferred to HTM, and include any cumulative fair value hedge adjustments. The net unrealized loss amount also includes any non-credit-related changes in fair value of HTM debt securities that have suffered credit impairment recorded in earnings. The AOCI balance related to HTM debt securities is amortized as an adjustment of yield, in a manner consistent with the accretion of any difference between the carrying value at the transfer date and par value of the same debt securities.

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
December 31, 2018
Debt securities HTM
Mortgage-backed securities	$	2,822	$	20	$	18,086	$	559	$	20,908	$	579
State and municipal	981		34		1,242		104		2,223		138
Foreign government	1,003		24		—		—		1,003		24
Asset-backed securities	13,008		112		—		—		13,008		112
Total debt securities HTM	$	17,814	$	190	$	19,328	$	663	$	37,142	$	853
December 31, 2017
Debt securities HTM
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 HTM	$	9,716	$	76	$	7,322	$	194	$	17,038	$	270

Note: Excluded from the gross unrecognized losses presented in the above table are $(653) million and $(117) million of net unrealized losses recorded in AOCI as of December 31, 2018 and 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 December 31, 2018 and 2017.

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



	December 31,
	2018				2017
In millions of dollars	Carrying value		Fair value		Carrying value		Fair value
Mortgage-backed securities
Due within 1 year	$	3	$	3	$	—	$	—
After 1 but within 5 years	539		540		720		720
After 5 but within 10 years	997		1,011		148		149
After 10 years⁽¹⁾	34,407		34,024		25,231		25,235
Total	$	35,946	$	35,578	$	26,099	$	26,104
State and municipal
Due within 1 year	$	37	$	37	$	407	$	425
After 1 but within 5 years	168		174		259		270
After 5 but within 10 years	540		544		512		524
After 10 years⁽¹⁾	6,883		6,902		7,719		7,983
Total	$	7,628	$	7,657	$	8,897	$	9,202
Foreign government
Due within 1 year	$	60	$	36	$	381	$	381
After 1 but within 5 years	967		967		359		341
After 5 but within 10 years	—		—		—		—
After 10 years⁽¹⁾	—		—		—		—
Total	$	1,027	$	1,003	$	740	$	722
All other⁽²⁾
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	2,535		2,539		1,669		1,680
After 10 years⁽¹⁾	16,221		16,113		15,915		16,044
Total	$	18,756	$	18,652	$	17,584	$	17,724
Total debt securities HTM	$	63,357	$	62,890	$	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. These reviews apply 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 ~~the adjusted~~ 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 ~~adjusted~~ 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 ~~the present value of~~management does not expect to receive contractual principal and interest cash flows ~~management expects to receive is not~~ 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 ~~considers~~considered the various factors described above, including its intent and ability to hold ~~the~~an equity security for a period of time sufficient for recovery to cost, or whether it iswas more-likely-than-not that the Company ~~will be~~would have been required to sell the security prior to recovery of its cost basis. Where management ~~lacks~~lacked that intent or ability, the security’s decline in fair value iswas deemed to be other-than-temporary and iswas recorded in earnings. Effective January 1, 2018, the AFS category has been eliminated for equity securities ~~deemed~~and, therefore, OTTI review is not required for those securities. See Note 1 to ~~be other-than-temporarily impaired are written down to fair value, with~~ the ~~full difference between fair value and cost recognized in earnings.~~Consolidated Financial Statements for additional details.

Management also 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 24 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, regardless of the time and extent of impairment:~~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 December 31, ~~2017.~~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, ~~(for AFS only) or that will be subject to an issuer call deemed probable of exercise prior to the expected recovery of its amortized cost basis (for AFS and HTM),~~ the full impairment is recognized in ~~earnings as OTTI.~~earnings.

Recognition and Measurement of OTTI

The following tables present total OTTI recognized in earnings:


OTTI on Investments and Other Assets	Year ended December 31, 2017								Year ended December 31, 2018
In millions of dollars	AFS⁽¹⁾		HTM		Other assets		Total		AFS⁽¹⁾		HTM		Other assets		Total
Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell:
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	$	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
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	59		2		—		61
Total impairment losses recognized in earnings	$	61	$	2	$	—	$	63
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									125		—		—		125
Total OTTI losses recognized in earnings									$	125	$	—	$	—	$	125


(1)	For the year ended December 31, 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 and Other Assets	Year ended December 31, 2017
In millions of dollars	AFS⁽¹⁾		HTM		Other assets		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
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
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	59		2		—		61
Total OTTI losses recognized in earnings	$	61	$	2	$	—	$	63


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


OTTI on Investments and Other Assets	Year ended December 31, 2016								Year ended December 31, 2016
In millions of dollars	AFS⁽¹⁾⁽²⁾		HTM		Other assets⁽³⁾		Total		AFS⁽¹⁾⁽²⁾		HTM		Other assets⁽³⁾		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	$	3	$	1	$	—	$	4	$	3	$	1	$	—	$	4
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	$	3	$	1	$	—	$	4	$	3	$	1	$	—	$	4
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	246		38		332		616
Total impairment losses recognized in earnings	$	249	$	39	$	332	$	620
Impairment losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery									246		38		332		616
Total OTTI losses recognized in earnings									$	249	$	39	$	332	$	620


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


(2)	Includes a $160 million impairment related to AFS securities affected by changes in the Venezuela exchange rate during ~~the year ended December 31,~~ 2016.


(3)	The impairment charge is related to the carrying value of an equity investment ~~which was~~ sold in 2016.

OTTI on Investments and Other Assets
Year ended
December 31, 2015
In millions of dollars
AFS⁽¹⁾
HTM Other
assets 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 $ 33
$ 1
$ —
$ 34
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 $ 33
$ 1
$ —
$ 34
Impairment losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery 182
43
6
231
Total impairment losses recognized in earnings $ 215
$ 44
$ 6
$ 265


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

The following are 12-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 securities still held
In millions of dollars Dec. 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⁽¹⁾

Dec. 31, 2017 balance
AFS debt securities
Mortgage-backed securities⁽¹⁾⁽²⁾
$ —
$ —
$ —
$ 38
$ 38
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
$ 15
$ 48
HTM debt securities
Mortgage-backed securities⁽¹⁾⁽³⁾
$ 101
$ —
$ —
$ (47 ) $ 54
State and municipal 3
—
—
—
3
Total OTTI credit losses recognized for HTM debt securities $ 104
$ —
$ —
$ (47 ) $ 57

~~(1) Includes $38 million in cumulative OTTI reclassified from HTM to AFS due to the transfer of the related securities from HTM to AFS.~~

~~(2) Primarily consists of Prime securities.~~

~~(3) Primarily consists of Alt-A securities.~~


	Cumulative OTTI credit losses recognized in earnings on securities still held											Cumulative OTTI credit losses recognized in earnings on debt securities still held
In millions of dollars	Dec. 31, 2015 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			Dec. 31, 2016 balance		Dec. 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		Reductions due to credit-impaired securities sold, transferred or matured⁽¹⁾			Dec. 31, 2018 balance
AFS debt securities
Mortgage-backed securities(2)	$	—	$	1	$	—	$	(1	)	$	—	$	38	$	—	$	—	$	(37	)	$	1
State and municipal	12		—		—		(8		)	4		4		—		—		(4		)	—
Foreign government securities	5		—		—		(5		)	—		—		—		—		—			—
Corporate	9		1		1		(6		)	5		4		—		—		—			4
All other debt securities	47		—		—		(25		)	22		2		—		—		(2		)	—
Total OTTI credit losses recognized for AFS debt securities	$	73	$	2	$	1	$	(45	)	$	31	$	48	$	—	$	—	$	(43	)	$	5
HTM debt securities
Mortgage-backed securities⁽¹⁾⁽³⁾	$	132	$	—	$	—	$	(31	)	$	101	$	54	$	—	$	—	$	(54	)	$	—
State and municipal	4		1		—		(2		)	3		3		—		—		(3		)	—
Total OTTI credit losses recognized for HTM debt securities	$	136	$	1	$	—	$	(33	)	$	104	$	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 Hedging 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	Dec. 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⁽¹⁾			Dec. 31, 2017 balance
AFS debt securities
Mortgage-backed securities ⁽¹⁾⁽²⁾	$	—	$	—	$	—	$	38		$	38
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	$	15		$	48
HTM debt securities
Mortgage-backed securities^{(1) (3)}	$	101	$	—	$	—	$	(47	)	$	54
State and municipal	3		—		—		—			3
Total OTTI credit losses recognized for HTM debt securities	$	104	$	—	$	—	$	(47	)	$	57


(1)	Includes $38 million in cumulative OTTI reclassified from HTM to AFS due to the transfer of the related securities from HTM to AFS.


(2)	Primarily consists of Prime securities.


(3)	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 December 31, 2018, and amounts recognized in earnings for the year ended December 31, 2018:



In millions of dollars	Year Ended December 31, 2018
Measurement alternative:
Balance as of December 31, 2018	$	538
Impairment losses⁽¹⁾	7
Downward changes for observable prices⁽¹⁾	18
Upward changes for observable prices⁽¹⁾	219


(1)	See Note 24 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 year ended December 31, 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. This allows~~approved, allowing the Company to hold such investments until the earlier of 5five years from the July 21, 2017 ~~(expiration~~expiration date of the general conformance ~~period),~~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	Fair value				Unfunded commitments				Redemption frequency (if currently eligible) monthly, quarterly, annually	Redemption notice period
In millions of dollars	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016				December 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
Hedge funds	$	1	$	4	$	—	$	—	Generally quarterly	10–95 days	$	—	$	1	$	—	$	—	Generally quarterly	10–95 days
Private equity funds⁽²⁾⁽¹⁾	372		348		62		82		—		168		372		62		62		—
Real estate funds⁽³⁾⁽²⁾	31		56		20		20		—		14		31		19		20		—
Mutual/collective investment funds											25		—		—		—
Total	$	404	$	408	$	82	$	102	—		$	207	$	404	$	81	$	82	—



Delaware (State or other jurisdiction of incorporation or organization)		52-1568099 (I.R.S. Employer Identification No.)
388 Greenwich Street, New York, NY (Address of principal executive offices)		10013 (Zip code)
(212) 559-1000 (Registrant's telephone number, including area code)



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o ~~(Do not check if a smaller reporting company)~~	Smaller reporting company o Emerging growth company o




Item Number		Page

Part I

1.	Business	4–~~30, 121–125,~~28, 113–116,
		~~128, 153,~~120, 146,
		~~303–304~~294–295

1A.	Risk Factors	~~56–64~~48–57

1B.	Unresolved Staff Comments	Not Applicable

2.	Properties	~~303–304~~294–295

3.	Legal Proceedings—See Note 27 to the Consolidated Financial Statements	~~283–290~~276–282

4.	Mine Safety Disclosures	Not Applicable

Part II

5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	~~136–137, 157–159, 305–306~~128–129, 152–154, 296–297

6.	Selected Financial Data	~~10–11~~9–10

7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6–~~32, 66–120~~30, 59–112

7A.	Quantitative and Qualitative Disclosures About Market Risk	~~66–120, 154–156, 178–215, 222–275~~59–112, 147–151, 172–209, 216–268

8.	Financial Statements and Supplementary Data	~~132–302~~124–293

9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	Not Applicable

9A.	Controls and Procedures	~~126–127~~118–119

9B.	Other Information	Not Applicable







Part III

10.	Directors, Executive Officers and Corporate Governance	307–309298–300

11.	Executive Compensation	**

12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	***

13.	Certain Relationships and Related Transactions and Director Independence	****

14.	Principal Accountant Fees and Services	*****


Part IV

15.	Exhibits and Financial Statement Schedules	~~310–314~~



*	For additional information regarding Citigroup’s Directors, see “Corporate Governance,” “Proposal 1: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for Citigroup’s Annual Meeting of Stockholders scheduled to be held on April ~~24, 2018,~~16, 2019, to be filed with the SEC (the Proxy Statement), incorporated herein by reference.
**	See “Compensation Discussion and Analysis,” “The Personnel and Compensation Committee Report,” ~~“2017~~“2018 Summary Compensation Table and Compensation Information” and “CEO Pay Ratio” in the Proxy Statement, incorporated herein by reference.
***	See “About the Annual Meeting,” “Stock Ownership” and “Equity Compensation Plan Information” in the Proxy Statement, incorporated herein by reference.
****	See “Corporate Governance—Director Independence,” “—Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation” and “—Indebtedness” in the Proxy Statement, incorporated herein by reference.
*****	See “Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm” in the Proxy Statement, incorporated herein by reference.



OVERVIEW	4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	6
Executive Summary	6
~~Impact of Tax Reform~~	9
Summary of Selected Financial Data	109
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES	1211
SEGMENT BALANCE SHEET	1413
Global Consumer Banking	1614
North America GCB	1816
Latin America GCB	2018
Asia GCB	2220
Institutional Clients Group	2422
Corporate/Other	2927
OFF-BALANCE SHEET ARRANGEMENTS	3129
CONTRACTUAL OBLIGATIONS	3230
CAPITAL RESOURCES	3331
RISK FACTORS	5648
Managing Global Risk Table of Contents	6558
MANAGING GLOBAL RISK	6659
SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES	~~121~~113
FUTURE APPLICATION OF ACCOUNTING STANDARDS	~~124~~117
DISCLOSURE CONTROLS AND PROCEDURES	~~126~~118
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING	~~127~~119
FORWARD-LOOKING STATEMENTS	~~128~~120
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM—INTERNAL CONTROL OVER FINANCIAL REPORTING	~~129~~121
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM— CONSOLIDATED FINANCIAL STATEMENTS	~~130~~122
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS	~~131~~123
CONSOLIDATED FINANCIAL STATEMENTS	~~132~~124
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	~~140~~132
FINANCIAL DATA SUPPLEMENT	~~301~~293
SUPERVISION, REGULATION AND OTHER	~~302~~294
CORPORATE INFORMATION	~~306~~298
Citigroup Executive Officers	~~306~~298
Citigroup Board of Directors	~~307~~299


(1)	Latin America GCB consists of Citi’s consumer banking business in Mexico.


(2)	Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.


(3)	North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan.



In millions of dollars, except per share amounts, and as otherwise noted	2017 as reported			Impact of Tax Reform				2017 adjusted results⁽¹⁾			2016 as reported			2017 Ex-Tax Reform increase/(decrease) vs. 2016
														$ Change			% Change
Net income (loss)	$	(6,798	)	$	(22,594	)		$	15,796		$	14,912		$	884		6	%
Diluted earnings per share:
Income (loss) from continuing operations	(2.94		)	(8.31		)		5.37			4.74			0.63			13
Net income (loss)	(2.98		)	(8.31		)		5.33			4.72			0.61			13
Effective tax rate	129.1		%	(9,930		)	bps	29.8		%	30.0		%				(20	)	bps
Global Consumer Banking—Net income	$	3,884		$	(750	)		$	4,634		$	4,947		$	(313	)	(6	)%
North America GCB—Net income	2,044			(750		)		2,794			3,240			(446		)	(14	)
Institutional Clients Group—Net income	9,009			(2,000		)		11,009			9,467			1,542			16
Corporate/Other—Net income (loss)	(19,691		)	(19,844		)		153			498			(345		)	(69	)

Performance and other metrics:
Return on average assets	(0.36		)%	(120		)	bps	0.84		%	0.82		%				2		bps
Return on average common stockholders’ equity	(3.9		)	(1,090		)		7.0			6.6						40
Return on average total stockholders’ equity	(3.0		)	(1,000		)		7.0			6.5						50
Return on average tangible common equity	(4.6		)	(1,270		)		8.1			7.6						50
Dividend payout ratio	(32.2		)	(5,020		)		18.0			8.9						910
Total payout ratio	(213.9		)	(33,140		)		117.5			77.1						404


In millions of dollars, except per-share amounts and ratios	2017			2016			2015			2014			2013
In millions of dollars, except per share amounts and ratios															2018			2017			2016			2015			2014
Net interest revenue	$	44,687		$	45,104		$	46,630		$	47,993		$	46,793	$	46,562		$	45,061		$	45,476		$	47,093		$	48,445
Non-interest revenue	26,762			24,771			29,724			29,226			29,931		26,292			27,383			25,321			30,184			29,731
Revenues, net of interest expense	$	71,449		$	69,875		$	76,354		$	77,219		$	76,724	$	72,854		$	72,444		$	70,797		$	77,277		$	78,176
Operating expenses	41,237			41,416			43,615			55,051			48,408		41,841			42,232			42,338			44,538			56,008
Provisions for credit losses and for benefits and claims	7,451			6,982			7,913			7,467			8,514		7,568			7,451			6,982			7,913			7,467
Income from continuing operations before income taxes	$	22,761		$	21,477		$	24,826		$	14,701		$	19,802	$	23,445		$	22,761		$	21,477		$	24,826		$	14,701
Income taxes⁽¹⁾	29,388			6,444			7,440			7,197			6,186		5,357			29,388			6,444			7,440			7,197
Income (loss) from continuing operations	$	(6,627	)	$	15,033		$	17,386		$	7,504		$	13,616	$	18,088		$	(6,627	)	$	15,033		$	17,386		$	7,504
Income (loss) from discontinued operations, net of taxes⁽²⁾	(111		)	(58		)	(54		)	(2		)	270		(8		)	(111		)	(58		)	(54		)	(2		)
Net income (loss) before attribution of noncontrolling interests	$	(6,738	)	$	14,975		$	17,332		$	7,502		$	13,886	$	18,080		$	(6,738	)	$	14,975		$	17,332		$	7,502
Net income attributable to noncontrolling interests	60			63			90			192			227		35			60			63			90			192
Citigroup’s net income (loss)⁽¹⁾	$	(6,798	)	$	14,912		$	17,242		$	7,310		$	13,659	$	18,045		$	(6,798	)	$	14,912		$	17,242		$	7,310
Less:
Preferred dividends—Basic	$	1,213		$	1,077		$	769		$	511		$	194	$	1,173		$	1,213		$	1,077		$	769		$	511
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS	37			195			224			111			263		200			37			195			224			110
Income (loss) allocated to unrestricted common shareholders for basic EPS	$	(8,048	)	$	13,640		$	16,249		$	6,688		$	13,202
Add: Other adjustments to income	—			—			—			1			1
Income (loss) allocated to unrestricted common shareholders for diluted EPS	$	(8,048	)	$	13,640		$	16,249		$	6,689		$	13,203
Income (loss) allocated to unrestricted common shareholders for basic and diluted EPS															$	16,672		$	(8,048	)	$	13,640		$	16,249		$	6,689
Earnings per share
Basic
Income (loss) from continuing operations	$	(2.94	)	$	4.74		$	5.43		$	2.21		$	4.26	$	6.69		$	(2.94	)	$	4.74		$	5.43		$	2.21
Net income (loss)	(2.98		)	4.72			5.41			2.21			4.35		6.69			(2.98		)	4.72			5.41			2.21
Diluted
Income (loss) from continuing operations	$	(2.94	)	$	4.74		$	5.42		$	2.20		$	4.25	$	6.69		$	(2.94	)	$	4.74		$	5.42		$	2.20
Net income (loss)	(2.98		)	4.72			5.40			2.20			4.34		6.68			(2.98		)	4.72			5.40			2.20
Dividends declared per common share	0.96			0.42			0.16			0.04			0.04		1.54			0.96			0.42			0.16			0.04


	Citigroup Inc. and Consolidated Subsidiaries
In millions of dollars, except per-share amounts, ratios and direct staff	2017			2016			2015			2014			2013
In millions of dollars, except per share amounts, ratios and direct staff																2018			2017			2016			2015			2014
At December 31:
Total assets	$	1,842,465		$	1,792,077		$	1,731,210		$	1,842,181		$	1,880,035		$	1,917,383		$	1,842,465		$	1,792,077		$	1,731,210		$	1,842,181
Total deposits	959,822			929,406			907,887			899,332			968,273			1,013,170			959,822			929,406			907,887			899,332
Long-term debt	236,709			206,178			201,275			223,080			221,116			231,999			236,709			206,178			201,275			223,080
Citigroup common stockholders’ equity(1)	181,487			205,867			205,139			199,717			197,254			177,760			181,487			205,867			205,139			199,717
Total Citigroup stockholders’ equity(1)	200,740			225,120			221,857			210,185			203,992			196,220			200,740			225,120			221,857			210,185
Direct staff (in thousands)	209			219			231			241			251			204			209			219			231			241
Performance metrics
Return on average assets	(0.36		)%	0.82		%	0.95		%	0.39		%	0.73		%	0.94		%	(0.36		)%	0.82		%	0.95		%	0.39		%
Return on average common stockholders’ equity⁽³⁾	(3.9		)	6.6			8.1			3.4			7.0
Return on average total stockholders’ equity⁽³⁾	(3.0		)	6.5			7.9			3.5			6.9
Return on average common stockholders’ equity⁽¹⁾⁽³⁾																9.4			(3.9		)	6.6			8.1			3.4
Return on average total stockholders’ equity⁽¹⁾⁽³⁾																9.1			(3.0		)	6.5			7.9			3.5
Efficiency ratio (total operating expenses/total revenues)	58			59			57			71			63			57.4			58.3			59.8			57.6			71.6
Basel III ratios—full implementation(4)
Common Equity Tier 1 Capital⁽⁴⁾⁽⁵⁾	12.36		%	12.57		%	12.07		%	10.57		%	10.57		%	11.86		%	12.36		%	12.57		%	12.07		%	10.57		%
Tier 1 Capital⁽⁴⁾⁽⁵⁾	14.06			14.24			13.49			11.45			11.23			13.46			14.06			14.24			13.49			11.45
Total Capital⁽⁴⁾⁽⁵⁾	16.30			16.24			15.30			12.80			12.64			16.18			16.30			16.24			15.30			12.80
Supplementary Leverage ratio⁽⁵⁾	6.68			7.22			7.08			5.94			5.42			6.41			6.68			7.22			7.08			5.94
Citigroup common stockholders’ equity to assets(1)	9.85		%	11.49		%	11.85		%	10.84		%	10.49		%	9.27		%	9.85		%	11.49		%	11.85		%	10.84		%
Total Citigroup stockholders’ equity to assets(1)	10.90			12.56			12.82			11.41			10.85			10.23			10.90			12.56			12.82			11.41
Dividend payout ratio⁽⁶⁾	NM			8.9			3.0			1.8			0.9			23.1			NM			8.9			3.0			1.8
Total payout ratio⁽⁷⁾	NM			77.1			36.0			19.9			7.1			109.1			NM			77.1			36.0			19.9
Book value per common share(1)	$	70.62		$	74.26		$	69.46		$	66.05		$	65.12		$	75.05		$	70.62		$	74.26		$	69.46		$	66.05
Tangible book value (TBV) per share⁽⁸⁾	60.16			64.57			60.61			56.71			55.19
Ratio of earnings to fixed charges and preferred stock dividends	2.26x			2.54x			2.89x			2.00x			2.18x
Tangible book value (TBV) per share⁽¹⁾⁽⁸⁾																63.79			60.16			64.57			60.61			56.71


(1)	2017 includes the one-time impact related to the enactment of Tax Reform. ~~See “Impact of~~2018 reflects the tax rate structure under Tax ~~Reform” above.~~Reform. For additional information, see “Significant Accounting Policies and Estimates—Income Taxes” below.


(2)	See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations.


(3)	The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity.


Foreign currency (FX) translation impact
Total revenue—as reported	$	32,697	$	31,519		$	32,251		4	%	(2	)%	$	33,777	$	32,838		$	31,624		3	%	4	%
Impact of FX translation⁽²⁾	—		66			(924		)					—		(132		)	(54		)
Total revenues—ex-FX⁽³⁾	$	32,697	$	31,585		$	31,327		4	%	1	%	$	33,777	$	32,706		$	31,570		3	%	4	%
Total operating expenses—as reported	$	17,843	$	17,483		$	17,199		2	%	2	%	$	18,590	$	18,003		$	17,627		3	%	2	%
Impact of FX translation⁽²⁾	—		54			(401		)					—		(54		)	7
Total operating expenses—ex-FX⁽³⁾	$	17,843	$	17,537		$	16,798		2	%	4	%	$	18,590	$	17,949		$	17,634		4	%	2	%
Total provisions for LLR & PBC—as reported	$	7,641	$	6,427		$	5,469		19	%	18	%	$	7,586	$	7,641		$	6,427		(1	)%	19	%
Impact of FX translation⁽²⁾	—		(1		)	(214		)					—		(32		)	(31		)
Total provisions for LLR & PBC—ex-FX⁽³⁾	$	7,641	$	6,426		$	5,255		19	%	22	%	$	7,586	$	7,609		$	6,396		—	%	19	%
Net income—as reported	$	3,884	$	4,947		$	6,204		(21	)%	(20	)%	$	5,755	$	3,869		$	4,924		49	%	(21	)%
Impact of FX translation⁽²⁾	—		7			(236		)					—		(28		)	(19		)
Net income—ex-FX⁽³⁾	$	3,884	$	4,954		$	5,968		(22	)%	(17	)%	$	5,755	$	3,841		$	4,905		50	%	(22	)%


(4)	Citi’s ~~regulatory~~risk-based capital and leverage ratios for 2017 and prior years are non-GAAP financial measures, which reflect full implementation of regulatory capital adjustments and deductions prior to the ~~U.S. Basel III rules.~~ effective date of January 1, 2018.


~~(5)~~(6)	~~Citi’s Supplementary Leverage ratio reflects full implementation~~Dividends declared per common share as a percentage of ~~the U.S. Basel III rules.~~net income per diluted share.


(7)	Total common dividends declared plus common stock repurchases as a percentage of net income available to common shareholders. See “Consolidated Statement of Changes in Stockholders’ Equity,” Note 10 to the Consolidated Financial Statements and “Equity Security Repurchases” below for the component details.


(8)	For information on TBV, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity” below.


In millions of dollars	2017⁽¹⁾			2016			2015			% Change 2017 vs. 2016		% Change 2016 vs. 2015		2018			2017⁽¹⁾			2016			% Change 2018 vs. 2017		% Change 2017 vs. 2016
Income (loss) from continuing operations
Global Consumer Banking
North America	$	2,043		$	3,238		$	4,188		(37	)%	(23	)%	$	3,340		$	1,990		$	3,239		68	%	(39	)%
Latin America	590			633			826			(7	)	(23	)	928			610			633			52		(4	)
Asia⁽²⁾	1,260			1,083			1,200			16		(10	)	1,494			1,278			1,059			17		21
Total	$	3,893		$	4,954		$	6,214		(21	)%	(20	)%	$	5,762		$	3,878		$	4,931		49	%	(21	)%
Institutional Clients Group
North America	$	2,449		$	3,495		$	3,316		(30	)%	5	%	$	3,500		$	2,355		$	3,515		49	%	(33	)%
EMEA	2,804			2,365			2,230			19		6		3,891			2,832			2,345			37		21
Latin America	1,513			1,454			1,351			4		8		1,889			1,544			1,454			22		6
Asia	2,300			2,211			2,213			4		—		2,920			2,335			2,211			25		6
Total	$	9,066		$	9,525		$	9,110		(5	)%	5	%	$	12,200		$	9,066		$	9,525		35	%	(5	)%
Corporate/Other	$	(19,586	)	$	554		$	2,062		NM		(73	)%	$	126		$	(19,571	)	$	577		NM		NM
Income (loss) from continuing operations	$	(6,627	)	$	15,033		$	17,386		NM		(14	)%	$	18,088		$	(6,627	)	$	15,033		NM		NM
Discontinued operations	$	(111	)	$	(58	)	$	(54	)	(91	)%	(7	)%	$	(8	)	$	(111	)	$	(58	)	93	%	(91	)%
Net income (loss) attributable to noncontrolling interests	60			63			90			(5	)	(30	)
Net income attributable to noncontrolling interests														35			60			63			(42	)	(5	)
Citigroup’s net income (loss)	$	(6,798	)	$	14,912		$	17,242		NM		(14	)%	$	18,045		$	(6,798	)	$	14,912		NM		NM


(2)	~~(2)~~ Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.


In millions of dollars	Global Consumer Banking		Institutional Clients Group		Corporate/Other and consolidating eliminations⁽²⁾			Citigroup parent company- issued long-term debt and stockholders’ equity⁽³⁾			Total Citigroup consolidated		Global Consumer Banking		Institutional Clients Group		Corporate/Other and consolidating eliminations⁽²⁾			Citigroup parent company- issued long-term debt and stockholders’ equity⁽³⁾			Total Citigroup consolidated
Assets
Cash and deposits with banks	$	11,446	$	65,916	$	103,154		$	—		$	180,516	$	8,338	$	66,963	$	112,804		$	—		$	188,105
Federal funds sold and securities borrowed or purchased under agreements to resell	242		231,806		430			—			232,478
Federal funds sold and securities borrowed and purchased under agreements to resell													140		270,322		222			—			270,684
Trading account assets	5,885		243,916		1,755			—			251,556		949		245,521		9,647			—			256,117
Investments	10,786		109,231		232,273			—			352,290		1,152		116,006		241,449			—			358,607
Loans, net of unearned income and
allowance for loan losses	301,729		330,826		22,124			—			654,679
Loans, net of unearned income and allowance for loan losses													305,631		351,333		14,917			—			671,881
Other assets	38,037		96,266		36,643			—			170,946		37,551		99,638		34,800			—			171,989
Liquidity assets⁽⁴⁾	60,755		258,342		(319,097		)	—			—
Net inter-segment liquid assets⁽⁴⁾													78,378		244,387		(322,765		)	—			—
Total assets	$	428,880	$	1,336,303	$	77,282		$	—		$	1,842,465	$	432,139	$	1,394,170	$	91,074		$	—		$	1,917,383
Liabilities and equity
Total deposits	$	307,244	$	639,487	$	13,091		$	—		$	959,822	$	308,106	$	689,983	$	15,081		$	—		$	1,013,170
Federal funds purchased and securities loaned or sold under agreements to repurchase	4,705		151,563		9			—			156,277
Federal funds purchased and securities loaned and sold under agreements to repurchase													4,459		173,302		7			—			177,768
Trading account liabilities	20		123,933		94			—			124,047		140		143,751		414			—			144,305
Short-term borrowings	576		20,075		23,801			—			44,452		491		22,381		9,474			—			32,346
Long-term debt⁽³⁾	2,143		35,297		47,106			152,163			236,709		1,865		42,557		43,809			143,768			231,999
Other liabilities	19,745		80,383		19,358			—			119,486		18,854		88,036		13,831			—			120,721
Net inter-segment funding (lending)⁽³⁾	94,447		285,565		(27,109		)	(352,903		)	—		98,224		234,160		7,604			(339,988		)	—
Total liabilities	$	428,880	$	1,336,303	$	76,350		$	(200,740	)	$	1,640,793	$	432,139	$	1,394,170	$	90,220		$	(196,220	)	$	1,720,309
Total equity⁽⁵⁾	—		—		932			200,740			201,672
Total stockholders’ equity⁽⁵⁾													—		—		854			196,220			197,074
Total liabilities and equity	$	428,880	$	1,336,303	$	77,282		$	—		$	1,842,465	$	432,139	$	1,394,170	$	91,074		$	—		$	1,917,383


(1)	The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of December 31, ~~2017.~~2018. The respective segment information depicts the assets and liabilities managed by each segment as of such date.


(2)	Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within ~~Corporate/Other.~~ ~~The impact of Tax Reform is included in~~ ~~North America GCB, ICG~~ ~~and~~Corporate/Other.


(3)	The total stockholders’ equity and the majority of long-term debt of Citigroup reside in the Citigroup parent company Consolidated Balance Sheet. Citigroup allocates stockholders’ equity and long-term debt to its businesses through inter-segment allocations as shown above.


(4)	Represents the attribution of Citigroup’s liquidity assets (primarily consisting of cash, marketable equity securities and available-for-sale debt securities) to the various businesses based on Liquidity Coverage Ratio (LCR) assumptions.


(5)	Corporate/Other equity represents noncontrolling interests.


In millions of dollars except as otherwise noted	2017			2016			2015			% Change 2017 vs. 2016		% Change 2016 vs. 2015
In millions of dollars, except as otherwise noted														2018			2017			2016			% Change 2018 vs. 2017		% Change 2017 vs. 2016
Net interest revenue	$	27,187		$	26,025		$	25,752		4	%	1	%	$	28,583		$	27,425		$	26,232		4	%	5	%
Non-interest revenue	5,510			5,494			6,499			—		(15	)	5,194			5,413			5,392			(4	)	—
Total revenues, net of interest expense	$	32,697		$	31,519		$	32,251		4	%	(2	)%	$	33,777		$	32,838		$	31,624		3	%	4	%
Total operating expenses	$	17,843		$	17,483		$	17,199		2	%	2	%	$	18,590		$	18,003		$	17,627		3	%	2	%
Net credit losses	$	6,562		$	5,610		$	5,752		17	%	(2	)%	$	6,920		$	6,562		$	5,610		5	%	17	%
Credit reserve build (release)	965			708			(395		)	36		NM		563			965			708			(42	)	36
Provision (release) for unfunded lending commitments	(2		)	3			4			NM		(25	)	—			(2		)	3			100		NM
Provision for benefits and claims	116			106			108			9		(2	)	103			116			106			(11	)	9
Provisions for credit losses and for benefits and claims	$	7,641		$	6,427		$	5,469		19	%	18	%
Provisions for credit losses and for benefits and claims (LLR & PBC)														$	7,586		$	7,641		$	6,427		(1	)%	19	%
Income from continuing operations before taxes	$	7,213		$	7,609		$	9,583		(5	)%	(21	)%	$	7,601		$	7,194		$	7,570		6	%	(5	)%
Income taxes	3,320			2,655			3,369			25		(21	)	1,839			3,316			2,639			(45	)	26
Income from continuing operations	$	3,893		$	4,954		$	6,214		(21	)%	(20	)%	$	5,762		$	3,878		$	4,931		49	%	(21	)%
Noncontrolling interests	$	9		$	7		$	10		29	%	(30	)%	7			9			7			(22	)	29
Net income	$	3,884		$	4,947		$	6,204		(21	)%	(20	)%	$	5,755		$	3,869		$	4,924		49	%	(21	)%
Balance Sheet data (in billions of dollars)
Balance Sheet data and ratios (in billions of dollars)
Total EOP assets	$	429		$	412		$	381		4	%	8	%	$	432		$	428		$	411		1	%	4	%
Average assets	418			396			378			6		5		423			417			395			1		6
Return on average assets	0.93		%	1.25		%	1.64		%					1.36		%	0.93		%	1.25		%
Efficiency ratio	55			55			53							55			55			56
Average deposits	$	306		$	298		$	295		3		1		$	307		$	306		$	298		—		3
Net credit losses as a percentage of average loans	2.21		%	2.01		%	2.12		%					2.26		%	2.21		%	2.01		%
Revenue by business
Retail banking	$	13,378		$	12,916		$	13,654		4	%	(5	)%	$	14,065		$	13,481		$	12,990		4	%	4	%
Cards⁽¹⁾	19,319			18,603			18,597			4		—		19,712			19,357			18,634			2		4
Total	$	32,697		$	31,519		$	32,251		4	%	(2	)%	$	33,777		$	32,838		$	31,624		3	%	4	%
Income from continuing operations by business
Retail banking	$	1,673		$	1,566		$	1,875		7	%	(16	)%	$	2,304		$	1,656		$	1,538		39	%	8	%
Cards⁽¹⁾	2,220			3,388			4,339			(34	)	(22	)	3,458			2,222			3,393			56		(35	)
Total	$	3,893		$	4,954		$	6,214		(21	)%	(20	)%	$	5,762		$	3,878		$	4,931		49	%	(21	)%


(1)	Includes both Citi-branded cards and Citi retail services.


(2)	Reflects the impact of FX translation into U.S. dollars at the ~~2017~~2018 average exchange rates for all periods presented.


(3)	Presentation of this metric excluding FX translation is a non-GAAP financial measure.


(1)	2018 includes an approximate $250 million gain on the sale of an asset management business. See Note 2 to the Consolidated Financial Statements.


~~(2)~~(3)	Presentation of this metric excluding FX translation is a non-GAAP financial measure.


FX translation impact
Total revenues—as reported	$	7,283	$	6,838	$	7,014		7	%	(3	)%	$	7,473	$	7,346		$	6,889	2	%	7	%
Impact of FX translation⁽²⁾	—		111		(18		)					—		(27		)	91
Total revenues—ex-FX⁽³⁾	$	7,283	$	6,949	$	6,996		5	%	(1	)%	$	7,473	$	7,319		$	6,980	2	%	5	%
Total operating expenses—as reported	$	4,763	$	4,587	$	4,579		4	%	—	%	$	4,803	$	4,799		$	4,675	—	%	3	%
Impact of FX translation⁽²⁾	—		75		(25		)					—		(4		)	73
Total operating expenses—ex-FX⁽³⁾	$	4,763	$	4,662	$	4,554		2	%	2	%	$	4,803	$	4,795		$	4,748	—	%	1	%
Provisions for credit losses—as reported	$	615	$	619	$	630		(1	)%	(2	)%	$	712	$	615		$	619	16	%	(1	)%
Impact of FX translation⁽²⁾	—		9		(3		)					—		(5		)	3
Provisions for credit losses—ex-FX⁽³⁾	$	615	$	628	$	627		(2	)%	—	%	$	712	$	610		$	622	17	%	(2	)%
Net income—as reported	$	1,255	$	1,079	$	1,196		16	%	(10	)%	$	1,487	$	1,273		$	1,055	17	%	21	%
Impact of FX translation⁽²⁾	—		17		8							—		(9		)	11
Net income—ex-FX⁽³⁾	$	1,255	$	1,096	$	1,204		15	%	(9	)%	$	1,487	$	1,264		$	1,066	18	%	19	%


(1)	2017 includes the approximate $580 million gain on the sale of a fixed income analytics business. 2016 includes a charge of approximately $180 million, primarily reflecting the write-down of Citi’s net investment in Venezuela ~~as a result of~~due to changes in the exchange rate.