C » Topics » Estimated Fair Value of Financial Instruments

This excerpt taken from the C 10-Q filed Aug 7, 2009.

Estimated Fair Value of Financial Instruments

        The table below presents the carrying value and fair value of Citigroup's financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contract-holder fund amounts exclude certain insurance contracts. Also as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup's financial position and the value of its net assets.

        The fair value represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value under SFAS 155(ASC 815-15-25) or SFAS 159(ASC 825-10), as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans not accounted for at fair value under SFAS 155(ASC 815-15-25) or SFAS 159(ASC 825-10), contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value under SFAS 155(ASC 815-15-25) or SFAS 159(ASC 825-10) and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.

 
  June 30, 2009   December 31, 2008  
In billions of dollars   Carrying
value
  Estimated
fair value
  Carrying
value
  Estimated
fair value
 

Assets

                         

Investments

  $ 266.8   $ 261.6   $ 256.0   $ 251.9  

Federal funds sold and securities borrowed or purchased under agreements to resell

    179.5     179.5     184.1     184.1  

Trading account assets

    325.0     325.0     377.6     377.6  

Loans(1)

    602.6     601.3     660.9     642.7  

Other financial assets(2)

    314.4     314.4     316.6     316.6  
                   

 

 
  June 30, 2009   December 31, 2008  
In billions of dollars   Carrying
value
  Estimated
fair value
  Carrying
value
  Estimated
fair value
 

Liabilities

                         

Deposits

  $ 804.7   $ 803.5   $ 774.2   $ 772.9  

Federal funds purchased and securities loaned or sold under agreements to repurchase

    172.0     172.0     205.3     205.3  

Trading account liabilities

    119.3     119.3     167.5     167.5  

Long-term debt

    348.0     315.5     359.6     317.1  

Other financial liabilities(3)

    203.7     203.7     253.9     253.9  
                   

(1)
The carrying value of loans is net of the Allowance for loan losses of $35.9 billion for June 30, 2009 and $29.6 billion for December 31, 2008. In addition, the carrying values exclude $3.2 billion and $3.7 billion of lease finance receivables at June 30, 2009 and December 31, 2008, respectively.

(2)
Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable, mortgage servicing rights, and other financial instruments included in Other assets on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

(3)
Includes brokerage payables, short-term borrowings and other financial instruments included in Other Liabilities on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

        Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.

        The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by the Allowance for loan losses) exceeded the estimated fair values of Citigroup's loans, in aggregate, by $1.3 billion and $18.2 billion at June 30, 2009 and December 31, 2008, respectively. At June 30, 2009, the carrying values net of the allowance exceeded estimated fair value for consumer loans by $2.1 billion, and the estimated fair values exceeded the carrying values net of allowances by $0.8 billion for corporate loans.

        Citigroup has determined that it is not practicable to estimate the fair value on an ongoing basis of the loss sharing program with the United States Government because the program is a unique contract tailored to fit the specific portfolio of assets held by Citigroup, contains various public policy and other non-financial elements, and provides a significant Tier 1 Capital benefit.

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Table of Contents

These excerpts taken from the C 10-K filed Feb 27, 2009.

Estimated Fair Value of Financial Instruments

The table below presents the carrying value and fair value of Citigroup’s financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contractholder fund amounts exclude certain insurance contracts. Also as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup’s financial position and the value of its net assets.

The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value under SFAS 155 or SFAS 159, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans not accounted for at fair value under SFAS 155 or SFAS 159, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value under SFAS 155 or SFAS 159 and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.

For additional information regarding the Company’s determination of fair value, including items accounted for at fair value under SFAS 155, SFAS 156, and SFAS 159, see Note 27 on page 200.

 

     2008    2007
In billions of dollars at year end   Carrying
value
   Estimated
fair value
   Carrying
value
  

Estimated

fair value

Assets

          

Investments

  $ 256.0    $ 251.9    $ 215.0    $ 215.0

Federal funds sold and securities borrowed or purchased under agreements to resell

    184.1      184.1      274.1      274.1

Trading account assets

    377.6      377.6      539.0      539.0

Loans (1)

    660.9      642.7      753.7      769.4

Other financial assets (2)

    316.6      316.6      268.8      269.0
     2008    2007
In billions of dollars at year end   Carrying
value
   Estimated
fair value
   Carrying
value
  

Estimated

fair value

Liabilities

          

Deposits

  $ 774.2    $ 772.9    $ 826.2    $ 826.2

Federal funds purchased and securities loaned or sold under agreements to repurchase

    205.3      205.3      304.2      304.2

Trading account liabilities

    167.5      167.5      182.1      182.1

Long-term debt

    359.6      317.1      427.1      422.6

Other financial liabilities (3)

    253.9      253.9      280.4      280.4

 

(1) The carrying value of loans is net of the Allowance for loan losses of $29.6 billion for 2008 and $16.1 billion for 2007. In addition, the carrying values exclude $3.7 billion and $8.2 billion of lease finance receivables in 2008 and 2007, respectively.
(2) Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable, mortgage servicing rights, separate and variable accounts and other financial instruments included in Other assets on the Consolidated Balance Sheet, all of which the carrying value is a reasonable estimate of fair value.
(3) Includes brokerage payables, separate and variable accounts, short-term borrowings and other financial instruments included in Other Liabilities on the Consolidated Balance Sheet, all of which the carrying value is a reasonable estimate of fair value.

Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.

The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by the Allowance for loan losses) exceeded the estimated fair values of Citigroup’s loans, in aggregate, by $18.2 billion in 2008 while the estimated fair values of Citigroup loans, in aggregate, exceeded the carrying values (reduced by the allowance for loan losses) by $15.7 billion in 2007. Within these totals, carrying values net of allowance exceeded estimated fair value for consumer loans by $15.9 billion, a decrease of $28.6 billion from 2007. The carrying values net of allowance exceeded the estimated fair values by $2.3 billion for corporate loans, a decrease of $5.3 billion from 2007.


 

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Table of Contents

 

Estimated Fair Value of Financial Instruments

The table below presents the carrying value and fair value of Citigroup’s financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contractholder fund amounts exclude certain insurance contracts. Also as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup’s financial position and the value of its net assets.

The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value under SFAS 155 or SFAS 159, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans not accounted for at fair value under SFAS 155 or SFAS 159, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value under SFAS 155 or SFAS 159 and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.

For additional information regarding the Company’s determination of fair value, including items accounted for at fair value under SFAS 155, SFAS 156, and SFAS 159, see Note 27 on page 200.

 

     2008    2007
In billions of dollars at year end   Carrying
value
   Estimated
fair value
   Carrying
value
  

Estimated

fair value

Assets

          

Investments

  $ 256.0    $ 251.9    $ 215.0    $ 215.0

Federal funds sold and securities borrowed or purchased under agreements to resell

    184.1      184.1      274.1      274.1

Trading account assets

    377.6      377.6      539.0      539.0

Loans (1)

    660.9      642.7      753.7      769.4

Other financial assets (2)

    316.6      316.6      268.8      269.0
     2008    2007
In billions of dollars at year end   Carrying
value
   Estimated
fair value
   Carrying
value
  

Estimated

fair value

Liabilities

          

Deposits

  $ 774.2    $ 772.9    $ 826.2    $ 826.2

Federal funds purchased and securities loaned or sold under agreements to repurchase

    205.3      205.3      304.2      304.2

Trading account liabilities

    167.5      167.5      182.1      182.1

Long-term debt

    359.6      317.1      427.1      422.6

Other financial liabilities (3)

    253.9      253.9      280.4      280.4

 

(1) The carrying value of loans is net of the Allowance for loan losses of $29.6 billion for 2008 and $16.1 billion for 2007. In addition, the carrying values exclude $3.7 billion and $8.2 billion of lease finance receivables in 2008 and 2007, respectively.
(2) Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable, mortgage servicing rights, separate and variable accounts and other financial instruments included in Other assets on the Consolidated Balance Sheet, all of which the carrying value is a reasonable estimate of fair value.
(3) Includes brokerage payables, separate and variable accounts, short-term borrowings and other financial instruments included in Other Liabilities on the Consolidated Balance Sheet, all of which the carrying value is a reasonable estimate of fair value.

Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.

The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by the Allowance for loan losses) exceeded the estimated fair values of Citigroup’s loans, in aggregate, by $18.2 billion in 2008 while the estimated fair values of Citigroup loans, in aggregate, exceeded the carrying values (reduced by the allowance for loan losses) by $15.7 billion in 2007. Within these totals, carrying values net of allowance exceeded estimated fair value for consumer loans by $15.9 billion, a decrease of $28.6 billion from 2007. The carrying values net of allowance exceeded the estimated fair values by $2.3 billion for corporate loans, a decrease of $5.3 billion from 2007.


 

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Table of Contents

 

This excerpt taken from the C 10-K filed Feb 22, 2008.

Estimated Fair Value of Financial Instruments

The table below presents the carrying value and fair value of Citigroup’s financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations, and insurance policy claim reserves. In addition, contractholder fund amounts exclude certain insurance contracts. Also as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship, and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup’s financial position and the value of its net assets.

The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value under SFAS 155 or SFAS 159, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used for most investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans not accounted for at fair value under SFAS 155 or SFAS 159, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value under SFAS 155 or SFAS 159 and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.

For additional information regarding the Company’s determination of fair value, including items accounted for at fair value under SFAS 155, SFAS 156, and SFAS 159, see Note 26 on page 167.

 

     2007    2006 (1)
In billions of dollars at year end   Carrying
value
   Estimated
fair value
   Carrying
value
   Estimated
fair value

Assets

          

Investments

  $ 215.0    $ 215.0    $ 273.6    $ 273.6

Federal funds sold and securities borrowed or purchased under agreements to resell

    274.1      274.1      282.8      282.8

Trading account assets

    539.0      539.0      393.9      393.9

Loans (2)

    753.7      769.4      660.5      673.3

Other financial assets (3)

    268.8      269.0      172.8      172.9

Liabilities

          

Deposits

  $ 826.2    $ 826.2    $ 712.0    $ 711.4

Federal funds purchased and securities loaned or sold under agreements to repurchase

    304.2      304.2      349.2      349.2

Trading account liabilities

    182.1      182.1      145.9      145.9

Long-term debt

    427.1      422.6      288.5      289.1

Other financial liabilities (4)

    280.4      280.4      229.1      229.1

 

(1) Reclassified to conform to the current period’s presentation.
(2) The carrying value of loans is net of the allowance for loan losses and also excludes $8.2 billion and $9.8 billion of lease finance receivables in 2007 and 2006, respectively.
(3) Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable, mortgage servicing rights and separate and variable accounts for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of financial instruments included in Other assets on the Consolidated Balance Sheet.
(4) Includes brokerage payables, separate and variable accounts, and short-term borrowings for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of financial instruments included in Other liabilities on the Consolidated Balance Sheet.

Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.

The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The estimated fair values of Citigroup’s loans, in the aggregate, exceeded the carrying values (reduced by the Allowance for loan losses) by $15.7 billion in 2007 and $12.8 billion in 2006. Within these totals, estimated fair values exceeded carrying values for consumer loans net of the allowance by $12.7 billion, an increase of $3.7 billion from 2006. The estimated fair values exceeded the carrying values by $3.0 billion for corporate loans net of the allowance, a decrease of $0.8 billion from 2006.

This excerpt taken from the C 10-K filed Feb 23, 2007.

Estimated Fair Value of Financial Instruments

The table on the next page presents the carrying value and fair value of Citigroup’s financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations, and insurance policy claim reserves. In addition, contractholder fund amounts exclude certain insurance contracts. Also as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship, and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup’s financial position and the value of its net assets.

The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used for most investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities such as long-term debt without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.


 

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Table of Contents

 

     2006    2005 (1)

In billions of dollars

at year end

  Carrying
value
   Estimated
fair value
   Carrying
value
   Estimated
fair value

Assets

          

Investments

  $ 273.6    $ 273.6    $ 180.6    $ 180.6

Federal funds sold and securities borrowed or purchased under agreements to resell

    282.8      282.8      217.5      217.5

Trading account assets

    393.9      393.9      295.8      295.8

Loans (2)

    660.5      673.3      563.8      580.2

Other financial assets (3)

    172.8      172.9      145.2      145.2

Liabilities

          

Deposits

  $ 712.0    $ 711.0    $ 591.8    $ 591.5

Federal funds purchased and securities loaned or sold under agreements to repurchase

    349.2      349.2      242.4      242.4

Trading account liabilities

    145.9      145.9      121.1      121.1

Long-term debt (4)

    288.5      289.1      217.5      218.9

Other financial liabilities (5)

    229.1      229.1      169.0      169.0

 

(1) Reclassified to conform to the current period’s presentation.
(2) The carrying value of loans is net of the allowance for loan losses and also excludes $9.8 billion and $9.9 billion of lease finance receivables in 2006 and 2005, respectively.
(3) Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable, mortgage servicing rights and separate and variable accounts for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of financial instruments included in other assets on the Consolidated Balance Sheet.
(4) Trust preferred securities were deconsolidated during 2004 in accordance with FIN 46-R with the resulting liabilities to the trust companies included as a component of long-term debt. At December 31, 2006 and 2005, the carrying value was $9.8 billion and $6.5 billion, respectively, and the fair value was $9.9 billion and $6.3 billion, respectively. See Note 19 to the Consolidated Financial Statements on page 139.
(5) Includes brokerage payables, separate and variable accounts, and short-term borrowings for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of financial instruments included in other liabilities on the Consolidated Balance Sheet.

Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value, and as existing assets and liabilities run off and new transactions are entered into.

The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The estimated fair values of Citigroup’s loans, in the aggregate, exceeded the carrying values (reduced by the allowance for loan losses) by $12.8 billion in 2006 and $16.4 billion in 2005. Within these totals, estimated fair values exceeded carrying values for consumer loans net of the allowance by $9.0 billion, a decrease of $3.5 billion from 2005, and an increase for corporate loans net of the allowance by $3.8 billion, a decrease of $0.1 billion from 2005.

"Estimated Fair Value of Financial Instruments" elsewhere:

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